House of Commons Science and Technology Committee Inquiry Into Technology Innovation Centres (TIC)

S&T Committee: Memoranda TIC 00 - 85 Written evidence: Technology Innovation Centres

TIC Author TIC Author 00 BIS 23 University of Lancaster 01 Loughborough University 24 University of Liverpool 02 Edinburgh Instruments Ltd 25 University of Strathclyde 03 University of Bath 26 University of Warwick 04 Birmingham City University 27 Professor Andy Hopper 05 University of Leeds 28 Centre for Process Innovation Ltd 05a Supplementary 06 Durham University 29 Research Councils UK (RCUK) 07 Scottish Agricultural College 30 UK Computing Research Committee (UKCRC) 08 Heriot-Watt University, Edinburgh 31 Prof Gladden Cambridge and Prof Begg Imperial 09 Manchester Business School, 32 University of Edinburgh University of Manchester 10 Manufacturing Technology Centre Uni 33 Brunel University of Nottingham 11 National Physical Laboratory 34 CBI 12 Association of Independent Research 35 Advanced Manufacturing Research and Technology Organisations Centre, University of Sheffield (AIRTO) 13 National Nuclear Laboratory and 36 University of the Arts London Dalton Nuclear Institute, University of Manchester 14 National Renewable Energy Centre Ltd (Narec) 15 Professor Lord Bhattacharyya 38 Universities Scotland 16 UK Business Incubation 39 University Alliance 17 DREM Ventures Ltd, Optropreneurs 40 University of Sheffield and University Ltd, Pinacl Solutions UK Ltd of Sheffield’s AMRC with Boeing and Grounded Innovation Ltd 18 Professor Peter J Dobson 41 HDR Architecture 19 Centre for Business Research, Judge 42 Imperial College London Business School, University of Cambridge 20 Smith Institute for Industrial 43 University of Bristol Mathematics and System Engineering 21 University College London 44 PraxisUnico 22 Kingston University 45 N8 Research Partnership

46 Maddison Product Design 81 Institution of Chemical Engineers (IChemE) 47 Royal Society of Chemistry 82 Rolls-Royce plc 48 Health Protection Agency 83 C-Tech Innovation Ltd 49 National Composites Centre (NCC) 84 Business and Innovation and Science Boards, Institute of Physics 50 Food and Environment Research 85 Barclays Agency 51 Bristol and Bath Systems Centre 52 Chemistry Innovation Knowledge Transfer Network (CIKTN) 53 United Kingdom Science Park Association (UKSPA) 54 The British Private Equity and Venture Capital Association (BVCA) 55 The Media Institute 56 The Work Foundation 57 TWI Ltd 58 Harper Adams University College, Newport 59 University of Leicester 60 Surrey Research Park, University of Surrey 61 LGC Ltd 62 University of Plymouth 63 One North East 64 Society of Motor Manufacturers and Traders (SMMT) 65 Cancer Research UK 66 SEEDA/RDAs 67 Technology Strategy Board (TSB) 68 Loughborough University 69 The Russell Group 70 The Biochemical Society 71 Fraunhofer-Gesellschaft 72 General Electric (GE) 73 Cambridge 100 Group 74 Plastic Electronics leadership Group (PELG) 75 Sciovis Ltd 76 The Knowledge Centre for Materials Chemistry 77 Universities UK- AURIL joint submission 78 BIA Regenerative Medicine Industry Group (BIA RIG) 79 Technical Strategy Advisory Group (TSAG) 80 Design Council

Written evidence submitted by the Department for Business, Innovation and Skills (TIC 00)

TECHNOLOGY AND INNOVATION CENTRES

Background

1. Public investment in R&D is required because the results of research are difficult for any one firm or organisation to fully appropriate, and firms may not be able to mitigate the substantial technical and commercial risks involved in innovation projects entirely through market mechanisms.

2. Government support for R&D enables the private sector to undertake projects with significant overall benefits for the economy that it would not be able to fund or manage itself.

3. Direct, targeted, government incentives for business led R&D and knowledge transfer is currently provided primarily via the BIS sponsored Technology Strategy Board, through a wide range of economically robust business support interventions including Collaborative R&D, Knowledge Transfer Networks, Knowledge Transfer Partnerships and the Small Business Research Initiative (SBRI).

4. Technology and Innovation Centres (TICs) will complement these approaches, by providing a business led, capital intensive infrastructure, that enables business to exploit new and emerging technologies, by providing a capability that primarily operates, at Technology Readiness Levels 4 to 7, bridging research and technology commercialisation, de- risking the process for business.

Industry

TICs

Universities

1 2 3 4 5 6 7 9 8

Basic Demonstration Prototype principles in a laboratory demonstration in observed environment operational environment

Figure 1 - Technology Readiness Levels

5. TICs will perform tasks that business and universities, left to their own devices, often cannot or will not perform in sufficient quantity and/or quality. This helps make new technologies investment ready and able to attract VC or other forms of investment, shortening the time to market. The role of the TICs is to support business activity focused on the development and commercialisation of new technologies that originate in the research base and for which there is business demand. This is achieved through: conducting in house R&D; providing access to skills and equipment which might not otherwise be within their reach; helping scale up manufacturing processes and producing technology demonstrators; and helping develop value/supply chains. They inform businesses about the potential of new technologies and help early-stage SMEs. In some cases, these centres also act as the focal point for clusters of companies in particular sectors.

6. Other countries have powerful capabilities such as these, and this has had a transformative effect on their industrial base including ITRI creating the electronic display screen industry in Taiwan, and ETRI establishing South Korea as a major semiconductor producer. The most famous network of centres, the Fraunhofer Gesellschaft in Germany, has for example developed the MP3 licence, which alone generated €100m of revenue in 2005 (the network received total licensing income of €83m in 2008). ETRI in South Korea received £134.8m in licensing revenues between 2004 and 2008.

7. The Spending Review announced the provision of over £200m of funding for TICs over the next four years, with the overall network of centres to be established and overseen by the Technology Strategy Board.

What is the Fraunhofer model and would it be applicable to the UK?

8. The Fraunhofer Society (FhG) is one of Germany’s four non-university research organisations and focuses on applied research. They undertake contract research for the public sector, government, and industry, including small and medium-sized enterprises (SMEs), which lack the critical mass to carry out their own R&D.

9. In terms of research strategy, the Fraunhofer Society directs its efforts toward as-yet-undeveloped markets for products that might take over five years to mature. Institutional funding is provided by the federal and state (Länder) governments. This funding leverages additional public-sector project grants from federal and states sources and the EU, alongside industry funding from contract research.

10. The German Fraunhofer model is not unique however as the innovation systems of all of the OECD economies are characterised by a variety of non-university research organisations that perform tasks that business and universities, left to their own devices, often cannot or will not perform in sufficient quantity and/or quality.

11. The UK is amongst those who have established such structures beginning in the 1930s and 1940s, when the UK Government encouraged the establishment of Research Associations that served the needs of specific industrial sectors.

12. More recently, the Regional Development Agencies in particular, have established a number of these intermediate institutes, focused on driving regional economic growth.

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

13. In the UK, a range of public sector bodies have invested in research centres to address objectives aligned with their core remit.

14. Research Councils have established centres primarily aimed at supporting excellent academic research, often with a clear requirement to address business or societal needs or opportunities. Examples include the Innovative Manufacturing Research Centres (IMRCs) and more recently UKCMRI at St Pancras. These are however distinct from the TIC model and operate at earlier TRL levels.

15. The UK also has a number of independent, Research and Technology Organisations (RTOs) that fulfil a similar function – these organisations trace their origins to the Research Associations established in the 1930s and 1940s, and operate on both a commercial and not-for-profit basis with a focus on more routine and commercially lucrative laboratory and technical consultancy services, as a result of a gradual withdrawal of public funding from Research Associations.

16. Furthermore, as noted above, the Regional Development Agencies have also funded over 60 centres focused on driving regional economic growth during the current spending review period (CSR07).

17. The effectiveness of these centres with a range of objectives cannot be easily compared, but where these are primarily about delivering to business needs and requirements (i.e. the RDA funded centres and independent RTOs that fulfil a similar function), examples of success include:

o The Advanced Manufacturing Research Centre (AMRC) in Sheffield, which is a £100m partnership between academia, government and industry. o The New and Renewable Energy Centre (NAREC), which is recognised in the renewable energy industry as one of the lead centres of excellence worldwide for offshore wind technology development o TWI, which has 157 granted patents on its books, with its income from licensing activities exceeding £1.8m in 2008, and o The Centre for Process Innovation (CPI) which has resulted in 11 spin-out companies and 14 filed patents since its establishment

18. As highlighted in the Hauser review however, the approach taken to date in the UK to establish and support business focused centres has not had the clear prioritisation, long-term strategic vision, or coordination at a national level that is needed. The mechanisms for identifying the sectors or technologies which would benefit from such support has had no formal role for Technology Strategy Board despite its role to develop and deliver a national technology strategy.

19. The current UK approach has therefore often resulted in sub-optimal and dispersed investments with the lack of long-term funding certainty damaging the ability of the established centres to: engage with business; realise the full potential of their assets; invest in long-term capability; recruit and retain the best staff; and commercialise leading edge research.

20. A review commissioned by the Technology Strategy Board and the RDA and Devolved Administrations on the Micro and Nanotechnology (MNT) programme for example concluded that while the development of open access facilities for business was undoubtedly beneficial, the investment was thinly spread across a number of centres, resulting in “sub-critical” activity that compromised the ability of the centres to achieve world-class capability.

21. This compromises the ability of the UK to establish or build on existing capabilities, and make the best use of potential synergies with industrial partners located in existing manufacturing clusters. It also makes it difficult to provide business with information about the centres which exist, assure them of the quality of their service and enable access.

What other models are there for research centres oriented toward applications and results?

22. Most countries studied in the Hauser review identified the need for an ‘intermediate sector’ as a critical element to deliver governmental, or wider public sector, policies and strategies to promote innovation.

23. The specific role of TICs varies according to the innovation system and economic and social landscape of the countries in which they operate.

24. Centres in many countries frequently focus on a sector or technology rather than have a wider spread of investments in many technology or sectoral fields which, whilst being highly successful for the Fraunhofer Institutes in Germany, is less common.

25. ITRI in Taiwan is credited with helping to create the electronic display screen industry there, ETRI in establishing South Korea as a major semiconductor producer, while the Inter-University Micro Electronics Centre (IMEC) in Belgium was established with a view to operating 3 to 10 years ahead of industrial needs and to foster the development of the local industrial base through the creation of spin-out companies, promoting R&D collaboration and developing technology skills with business.

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

26. The Technology Strategy Board is a BIS sponsored, business-led non departmental public body that plays a cross-Government leadership role in delivering a national technology strategy and advising on polices which relate to technology innovation and knowledge transfer.

27. Joint working between the Technology Strategy Board and the Regional Development Agencies and partners across Government, has to date, enabled businesses to utilise the centres currently in existence when undertaking projects funded by the Technology Strategy Board.

28. However, as highlighted in the Hauser review, the dispersed approach taken to establishing and funding these centres has resulted in there being no formal process for oversight, coordination, promotion and prioritisation of investment in centres at a national level to ensure alignment with national technology priorities or strengths. Furthermore, it was also noted that in establishing centres, the prospect of competitively tendered project- based funding from the Technology Strategy Board and the EU was often envisaged, but the plans for such activity beyond the period of the initial investment had not taken account of the level of funding required to develop and maintain the capability of the TIC, or its role within the long term technology priorities of organisations such as the Technology Strategy Board for which it was critical.

29. Having the Technology Strategy Board establish and prioritise investments in centres in the context of its wider programme of work will address the key issues highlighted in the Hauser review and ensure that the TICs can engage with business; realise the full potential of their assets; invest in long-term capability; recruit and retain the best staff; and commercialise leading edge research.

30. Individual centres within the network will operate with a high level of autonomy, to give them the flexibility to respond to business needs and market opportunities.

31. However, the overall network of centres will therefore be established and overseen by the Technology Strategy Board who will develop a national strategy for managing these centres as part of the UK’s innovation system, linking these with other institutions, programmes and funding streams.

32. The Technology Strategy Board has begun the process of identifying, with a view to developing, existing RDA funded centres which are excellent, and will also look to establish new centres in the context of its overall programme of work.

33. It will publish a strategy and implementation plan for TICs by April 2011, and have created a network of TICs by April 2012 as highlighted in the BIS Business Plan.

34. TICs are business focused, mission-driven organisations that are focused on the exploitation of new technologies, through an infrastructure which bridges the spectrum of activities between research and technology commercialisation.

35. Typical activities and outputs of the new TICs therefore include the development and scaling up of manufacturing processes, and the production of technology and application demonstrators (see Figure 1)

36. They are therefore distinct from, though complementary to, University and Research Council funded centres and Public Sector Research Establishments (PSREs), which are funded through a separate funding stream (the Science budget and Departmental R&D budgets) and already co-exist with the over 60 business focused TICs that received funding during the current spending review period.

37. Close working between these parties is however critical and we will incentivise the centres to link with, and draw upon, the outputs of the research base and PSREs where appropriate.

38. Such models of cooperation already exist – examples include the involvement of the University of Sheffield in the Advanced Manufacturing Research Centre, and the memorandum of understanding between the Printable Electronics Technology Centre and four university based centres (Welsh Centre for Printing and Coating, part of the School of Engineering at the University of Swansea; Cambridge Integrated Knowledge Centre; Organic Materials Innovation Centre in the School of Chemistry at the University of Manchester; and the Imperial College Centre for Plastic Electronics) to provide a focused cluster for technology development and prototyping, aiming to translate UK strengths into the industries of the future

39. This is also consistent with the broader model of collaboration and alignment of activity between the Technology Strategy Board and the Research Councils that seeks to enable increased economic benefit for the UK, by ensuring investments in research are more closely informed by business challenges, and businesses are more able to exploit the outputs of leading academic research.

Department for Business, Innovation and Skills 01 December 2010 Written evidence submitted by Loughborough University (TIC 01)

Declaration of Interest

I am Head of the Wolfson School of Mechanical and Manufacturing Engineering at Loughborough University. We lead the Manufacturing Technology Centre’s (MTC) strand in Intelligent Automation, and have recently submitted a bid for an EPSRC Centre for Innovative Manufacturing in the field of Intelligent Automation.

We are keen to pursue a Fraunhofer-type TIC (‘Maxwell Centre’), either alone, or in partnership with Fraunhofer IPA, with whom we have had a partnership exploration for the past two years, seeking a funding model. We have worked with IPA several times in EU Framework programmes. We see TICs as having a more SME-focused and multi-sectoral impact when compared to the MTC, especially for relatively young or start-up companies. We believe there would be synergy and complementarities between a Loughborough-based TIC in Advanced Manufacturing, and the MTC.

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 As I understand it the Fraunhofer centres are not-for-profit organisations with permanent staff, offering applied research and development services. The funding model is (nominally) 1/3 from direct government funding, 1/3 from RTD projects (grant from government or EU under peer review) and 1/3 commercial activity (direct industry funding). The proportions sometimes vary (e.g. 40%, 20%, 40%); the essential key feature being that government funding is more than matched by industry funding. Thus government funding complements success in gaining contracts from industry.

1.2 I see no reason why this model would not be viable in the UK. The major stumbling block is the absence of long-term (>5 years) government funding to underpin applied R&D in key sectors, i.e. funding akin to QR in universities, but focused on topics of interest to industry. Without such funding it may be difficult to survive, especially during a ‘start-up’ phase. The core difference between TICs and university-led technology transfer is that universities secure projects and then recruit research staff; TICs would have core staff seeking projects, and thus one can keep the key skills in place. As noted by Hermann Hauser, there is potentially great synergy in coupling TICs with leading university research groups, which would channel new TRL 1-3 ideas into the TIC. Within the TIC, TRL 4-6 activity (TSB or EU-funded projects) would develop key technologies for TRL 7-9 adaptation (industry funded) and exploitation by individual companies, i.e. a direct route for research impacts to industry. 2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 To the best of my knowledge there are no comparable centres. Universities generally have some sort of Technology Transfer activity, but project-based rather than key staff driven. There are also organisations like TWI and PERA, but they tend to be entirely commercially driven (hence may be too expensive for some young companies). There is certainly nothing with a comparable level of industrial impact and success.

3. What other models are there for research centres oriented towards applications and results?

3.1 KTA accounts at universities, but they do not have their own dedicated staff (i.e. the researchers are employed only for the project duration) and frequently use the Ph.D. student or Research Associate who was employed on an earlier EPSRC-funded research programme. Such staff are frequently more keen on the research rather than the application, and thus the scheme does not always match industry needs (of course, the quality of these schemes varies across universities, and from project to project). Another model would be the direct commercial business model. These can prove too expensive for some fledgling companies. Such companies are the seedcorn of future GDP and there is a lack of support at crucial times.

4. Whose role should it be to co-ordinate research in a UK-wide network of innovation centres?

4.1 Given that there is some activity in the TRL4-6 area and the majority in the TRL7-9 area, the most appropriate body for funding and co-ordination would be the TSB.

5.1 I do not feel that there would be a detrimental impact on PSREs. In my experience, the majority of researchers in universities and PSREs are keen on following the next line of research, not on transferring their ideas to industry (there are, of course, some exceptions). Given that they were attracted to research for the novelty, they are ill-equipped to move to the next stage. Additionally, many academics feel that engaging in technology transfer activities does not help progress their career in the same way as winning grants, generating Ph.D.s and publishing research papers. It is normally the research students who are best at transferring the technology and many do not want an academic career, but to work on interesting projects. Time in a Fraunhofer-type centre, gaining understanding of several/many industrial applications makes them highly attractive to industry (and thus a good pool of highly skilled staff). I feel that the effect would be to strengthen the flow of ideas to industry and academics/researchers would be able to do more of what they are best at doing, whilst having an association with a Fraunhofer- type centre. There would also (in many cases) be an opportunity to identify TRL1-3 “holes” in knowledge, which the academic would be well placed to work up and apply for grant funding.

Modus Operandi

We have been in discussion with Fraunhofer (IPA) for some time and would be keen to collaborate on a long term basis. The Centre would be located on the Loughborough Science Park, with good access to the University. A strong partnership would confer significant benefits in:-

• Direct access to advice on operating the Fraunhofer Model • Opportunities fo secondment of staff in both directions • Opportunities for PhD students to gain more commercial awareness before entering industry (following a Post Doctoral placement in the FH Centre) • Access to both sides for complementary skills – enabling a wider commercial portfolio • Access to overlapping skills – enabling enhanced capacity in the short term

Professor Robert M Parkin

Loughborough University

8 November 2010 Written evidence submitted by Edinburgh Instruments Ltd (TIC 02)

Technology Innovation Centres

1. Declaration of Support

I am writing to offer my support for the establishment of “Technology and Innovation Centres” in the UK to act as bridges between research and commercialisation in areas where British universities and industry have established technological excellence and with a significant global market.

I believe such TICs should be based on the successful model of German Fraunhofer Institutes for interfacing between University research and industry needs.

While my support is entirely generic, I believe a strong candidate for one of the first TICs would specialise in photonics devices and applications based on the strong opto-electronics knowledge base in Scotland.

Such a Photonics Centre could be crucial for combining excellence in academia (Heriot Watt University, St Andrews University, Strathclyde University, Edinburgh University and others), industry (particularly defence oriented companies like SELEX Galileo and a plethora of specialist SME’s, including my own company, Edinburgh Instruments) and medical institutes in Scotland.

2. Fraunhofer Institutes

The Fraunhofer Gesselschaft is Europe’s largest application oriented research organisation primarily located in 59 specialist institutes around Germany. It has a budget of €1.6B of which €1.3B is for contract research where two-thirds of the revenue comes from industry and publically funded research projects and only one-third from German Federal sources.

For those of us involved in photonics and modern opto-electronics it is not surprising that the organisation takes its name from Joseph von Fraunhofer, a pioneer in optics two centuries ago who developed a spectrometer and a diffraction grid (precursor of a diffraction grating) which he used to analyse the spectrum of the sun and identify the dark lines named after him.

Fraunhofer Institutes have played a great part in initiating economic growth for both German companies and Germany. The strength of the Fraunhofer Institute model can be clearly seen in the leading technologies emerging from the establishment of Fraunhofer Institutes in the earlier eastern Länder following the reunification of Germany.

While acknowledging that there are significant linkages between higher education and industry in the UK (from earlier DTI funded LINK programmes to current TSB variations, with contributions from EPSRC, BBSRC, MRC, Knowledge Transfer Networks and others) the UK has no body like specialist Fraunhofer Institutes to provide the focus for collaborative projects.

3. Photonics

Scotland has an enviable position of having a successful opto-electronics industry making and exporting cutting edge products backed up by a strong university base.

The recent LaserFest in Glasgow celebrated 50 years of lasers in Scotland and noted that the Scottish laser industry alone contributed some £600M to our nation’s economy in 2009. Over the history of the laser some 10,000 person years have been logged in academic research and some 90,000 person years employment have been created in laser enabled photonics alone.

How can this position be maintained and even enhanced in the face of the “explosion” in scientist training particularly in China and the Far East? The answer can only be found in pushing the boundaries of science further and building on the historical strength that already exists. It is indicative that Scotland’s laser companies already invest on average over 5% in R&D.

It is my opinion that the establishment of a TIC in photonics would harness, focus and intensify such investment in R&D and lead to greater future prosperity.

Such TIC’s can complement and work with Public Sector Research Establishments and other existing research centres that undertake Government sponsored research and be instrumental in bringing UK R&D into the centre of European planning and implementation.

It is important that each specialist TIC has a renowned leader in their field as figure head who is an inspirational visionary with energy and ambition for the role of their institute.

Success breeds…. and it would be my expectation that successful TIC’s will lead to dynamic growth in new technology and business.

4. Declaration of Interests

My career has spanned experience in innovative research in academia at Heriot Watt University which spun out into the first UK on-campus industrial company, Edinburgh Instruments Ltd, in 1971. As the company grew to cover a wide range of opto-electronics products from lasers, analytical fluorescence based spectrometers and gas sensors, I became Managing Director for over a quarter of a century, during which time the company won many awards for technological expertise and export achievements. The company remains a SME with currently 62 employees and a turnover in excess of £6M p.a. of which >85% is exported globally. I am also a Director of the UK Consortium for Photonics and Optics which led the first TSB funded KTN in Photonics.

My involvement with lasers started in 1968 when collaborating at Albert-Ludwigs-Universität Freiburg with an early carbon dioxide laser. I was awarded a Fellowship by the Alexander von Humboldt Foundation to work at the Ludwig-Maximilians Universität München.

I have collaborated closely with universities and companies in Germany ever since and I currently project manage the Edinburgh Instruments involvement in a FP-7 funded (>4M€) project for “Quantum Dot-Based Highly Sensitive Immunoassays for Multiplexed Diagnostics of Alzheimer's Disease” (Nanognostics) headed by the Fraunhofer Institut für Angewandte Polymerforschung- NanoPolyPhotonik – in Potsdam.

Dr Richard Dennis Director Edinburgh Instruments Ltd

11 November 2010

Written evidence submitted by University of Bath (TIC 03)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK?

The University of Bath welcomes the Government decision to adopt proposals made by Dr Herman Hauser in his report outlining Technology Innovation Centres in the UK. We have strong commercial relationships both in learning and teaching as well as research and the Fraunhofer model would be highly applicable to providing a means of building strong academic-commercial partnerships and focus them on developing skills and applications as directed by business consortia. A further attraction, and one that Bath is particularly suited to, is the need to combine technology strengths with those of social sciences and in so doing create an environment that can not only make important technology developments but one that addresses the acceptance of these changes in society.

The challenge from the dynamic economies of China, India and the Far East, initially was seen as undermining our manufacturing base, but is now threatening our role as knowledge generators and exploiters. In order to preserve the UK’s knowledge base in engineering and technology, both academia and industry need to work together effectively to create a multidisciplinary knowledge hub. It was, and remains, our contention, that this would be engendered by research projects which, when combined with advanced education and training programmes, would attract internationally mobile R&D investment together with personnel from multinational companies and overseas research institutes.

The i4 Concept The University of Bath has long been an advocate of the need for a Fraunhofer model in the UK. Our working title for the equivalent model, suitably adapted to the UK environment, was entitled the Institute for Integrated Industrial Innovation (i4).

The i4 concept focused on the delivery of cross-industry relevant research and innovation as a national exemplar of a new sort of university facility. The i4 concept:

• involved co-located industrial/academic teams bringing together a complete state-of- the-art view for projects conducted in a 'Knowledge Sharing Environment' • was truly multidisciplinary drawing from engineering, management, social sciences, life sciences, and mathematics, in addition to digital information management. • envisaged projects would analyse the factors that affect productivity, not just in manufacturing industry but also in service provision whether private or public sector. • was planned as an inter-university collaboration including the Universities of Bath, Bristol, Southampton and Surrey (the SETsquared partnership that has been an effective relationship for over 10 years), Exeter and the University of the West of England (UWE).

• aimed to become a large (circa 250 people) community comprising researchers, industrial secondments, academics, and research students with a single focus for endeavour: innovative design and productivity enhancement. • planned to provide education and qualifications at the Professional Doctorate level. Working within a team of cross-disciplinary researchers and secondments, students would work under academic supervision on industry-led projects at the interface between academia and business.

In the mid 2000s we actively sought support for this concept from many areas including EPSRC, CBI, DTI (as it then was), SWRDA, GOSW, Dyson and commercial partners (Honda, Motorola, Ford Motor Company, BMW, Airbus, BAE Systems, Vestas Wind Systems, Bailey of Bristol, Eli Lilly, Bank of England, Rotork, Renishaw and Instron) to name but a few. We were unable to gain the financial support we needed at that time, but we believe that the current focus on the Fraunhofer model reinforces the value of what we were seeking to achieve.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

There are some research centres in the UK that could be developed into a true Fraunhofer type environment, including for example Warwick, Cardiff and Bath. The EPSRC has also established a small number of Integrated Knowledge Centres and over time these may grow to become contenders for additional TICs, or be consumed by an existing TIC, subject to them meeting business requirements.

However to fully achieve Fraunhofer status there is need for further investment and we therefore welcome the recent announcement by the Coalitional Government to put aside £200 million for this purpose. Our concern would be the sustainability of a UK Fraunhofer-type centres based on a model of initial Governmental investment coupled with further funding through alternative mechanisms, we would rather encourage Government to see the importance of long term investment in developing these Centres and earmark ongoing funding for part of their budgets.

3. What other models are there for research centres oriented toward applications and results?

MIT - Manufacturing Institute This was established through funding from the National Science Foundation to provide a bridge between the traditional approach of academia and the requirements of industry. It goes beyond the scope of most academic research facilities by developing and deploying cost-effective, market-driven working technologies up to and including installation on the factory floor. This is achieved by drawing upon MIT’s expertise and academic research base and working closely with industry, government agencies and other universities.

MIT – The Center for Innovation in Product Development (CIPD) CIPD was founded in 1996 as a National Science Foundation Engineering Research Center. It unites industry representatives with leading researchers to investigate both the theory and practice of the end-to-end product development process, specialising in

complex systems and focusing on custom-built projects designed to solve sponsor- defined problems. The Institute currently has 30 staff and 30 PhD Students.

Stanford University – Center for Design Research (CDR) CDR promotes design and manufacturing through facilitating an understanding of the team design process and the development of advanced tools and methods. Corporate staff from research, development, manufacturing and management sectors work with CDR staff and PhD students at the interface between product-driven corporate R&D and process-driven academic research.

University of Illinois at Urbana-Champaign Manufacturing Research Center The Center focuses on leveraging the investments of industrial members and its own resources to improve manufacturing competitiveness in the world economy. It conducts collaborative research projects with its member companies, educates students in the problems and issues of manufacturing and provides a broader access to the laboratories and programs of the University of Illinois.

Georgia Institute of Technology – Manufacturing Research Center The Center has more than 60 researchers. It brings together a multidisciplinary faculty and student body to form a forward-thinking research and educational program that targets specific industrial needs in long- and near-term research. The industrial partners play an important role in driving the program to produce results that are readily implemented into the manufacturing process. The Center’s 120,000 square foot facility was opened in 1991 and was designed to be readily adaptable to the strategic research agendas facing industry and academia.

Aalborg University, Denmark – Centre for Industrial Production (CIP) CIP was established in 1999 as a national centre of excellence in industrial manufacturing. It is committed to initiating and coordinating research in this area and to developing the capability necessary to increase the future competitiveness of Danish industry. Industrial partners support the research undertaken by providing opportunities for case studies and field experiments and by suggesting potential directions for future research relevant to their needs.

These examples show that there are various models available. However, no international groups have been identified that have the breadth of cross- disciplinarity envisaged for the University of Bath’s Institute of Integrated Industrial Innovation (i4).

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

The University of Bath believes that the Technology Strategy Board (TSB) is the appropriate body to coordinate a UK wide network on Technology Innovation Centres. Not only has the TSB a strong strategic vision of business needs in the UK but has successful established and run collaborative research mechanisms and Networks to ensure appropriate, innovative university research activities are embedded into businesses.

We would not expect TSB to run individual TICs, rather that they be hosted by an appropriate body that has a strong track record in working at the academic-commercial interface.

The University of Bath, ranked 9th in the UK by the Sunday Times Good University Guide 2009 has particular strengths in Science, Technology, Engineering and Mathematics (STEM) subjects plus expertise in Social Sciences (for the human implementation process). Bath would therefore be highly suited to take the lead on a TIC such as our proposed Institute for Integrated Industrial Innovation (i4). We have strong commercial partners who would lead and guide i4 and would be supported by the SETsquared partnership comprising the Universities of Bath, Bristol, Southampton and Surrey which has an established reputation for business incubation and delivering economic and societal impact.

We do not believe the introduction of Fraunhofer institutes would necessarily affect the work of existing Government sponsored research. The new institutes would be of specific business focus and complement existing centres, calling on their capabilities as needed to undertake activities on their behalf. It would be important to ensure that proposed Fraunhofer institutes play a key role in integrating existing research establishments and University research centres. The institutes would be key drivers of competitiveness through the training and education of engineers, managers and social scientists with regards to innovation across industrial sectors. By conducting research in a multidisciplinary, cross-industry environment, involving team members drawn from a variety of industrial and academic disciplines, they would significantly enhance the impact of business-higher education collaboration.

Professor Kevin Edge Deputy Vice Chancellor University of Bath

November 2010

Written evidence submitted by Birmingham City University (TIC 04)

Introduction

1. The Fraunhofer Model established 1949 appears to have worked well in Germany within the German context. The key questions for the UK are: a. Germany and UK strengths are not the same, is the Fraunhofer Model appropriate to support the UK strengths? b. Is the model that has worked well for the last 50 years appropriate for the next 20 years? These are considered below.

Germany and UK strengths are not the same, is the Fraunhofer Model appropriate to support the UK strengths?

2. The Fraunhofer Model seems to have worked well in R&D led sectors of the economy. In the UK these are represented by such sectors as aerospace, biotechnology and pharmaceuticals. Companies in these sectors are well networked into universities, the Research Councils and the Technology Strategy Board already. We have missed this boat. 3. However, the UK has strengths in non R&D led sectors such as the finance and creative industries sectors. Both use new technology as enablers but the innovation is generally not captured by traditional R&D metrics. 4. A key challenge that Birmingham City University has experienced is that of sufficient absorptive capacity in organisations ‐ which is a particular challenge for SMEs in the West Midlands. This is one of the reasons why the Knowledge Transfer Programme works so well. SMEs require support available locally/regionally. It is not clear how this issue will be addressed.

Is the model that has worked well for the last 50 years appropriate for the next 20 years?

5. On a recent Design Council led trip to South Korea and China, it was apparent that the governments there see the fusion of digital, technology and design as key to successful innovation. The Design Council’s Multi‐disciplinary Design Network: Asia Report (2010) says that “… both South Korea and China are rapidly developing their design capability, learning from the ‘best of the west’ as well as building on their own significant creative and cultural backgrounds. Technology is a huge driver of innovation in Asia and design is clearly perceived as a key translator of science and technology1, and increasingly too as a means of meeting social needs.” 6. In general in the UK, the universities that are strong in science and technology research are not the same as those universities that are strong in design and the use of digital technologies (e.g. social media). This is an untapped opportunity. 7. Increasingly people are becoming more design aware such that excellent design can override a better technical solution. When combined with excellent branding which plays into

1 My underlining

people’s emotions, straightforward technology will not be enough. The iPhone is a classic example. 8. The Fraunhofer Model has worked well for last 50 years in Germany but our competitor nations are now changing the ground rules by incorporating design‐thinking into the heart of their innovation policies. 9. The Design Council report Innovate for Universities2 describes pilot activities involving professional designers with Technology Transfer Officers in research intensive universities strong in science and technology. This demonstrates how professional designers working with potential and actual high technology spin‐outs can improve the translation from the lab to the marketplace. In discussions with the Design Council, it appears that an unexpected benefit was identifying those developments for which there was not a viable opportunity at that time. 10. Therefore this is an ideal opportunity to bridge that gap and create a space for science and technology researchers, design and digital media researchers, and professional designers to work together with industry, as well as the public sector, on emerging technologies and their applications. Thus we would enhance the UK’s competitiveness in meeting the key challenges facing the world (e.g. ageing population, security, energy) by exploiting the combination of our acknowledged scientific, technological and design capability. 11. A radical solution would be to create regional institutes between the universities, industry and the public sector. These institutes would ensure collaboration between science and technology research intensive universities with post‐92 universities strong in design and the use of digital technologies. Each regional institute could major on two or three key areas of regional strength. Virtual national institutes around a key theme e.g. ageing could be created which brings together all those regional institutes active in addressing a specific theme. These could be real institutes or virtual institutes.

Declaration of interests

12. Birmingham City University is a post‐92 university strong in design and use of digital technologies.

Michele Mooney Director, Research, Innovation & Enterprise Services Birmingham City University

18 November 2010

2 http://www.designcouncil.org.uk/our‐work/Support/Innovate‐for‐Universities/

Written evidence submitted by the University of Leeds (TIC 05)

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 The German Fraunhofer Society is a research organisation with 59 institutes; each focusing on different areas of applied science (for example, applied polymer research, digital media technology, applied solid state physics, inter alia). Around 17,000 scientists and engineers are employed in total. The annual research budget is €1.6 billion, which at an institute level comprises elements of core state funding (one third), publicly funded (national or EU) competitive research contracts (one third) and private sector research contracts (one third), as well as Intellectual Property (IP) licensing revenue.

1.2 It should also be recognised that other countries have analogous Technology and Innovation Centres (TICs), e.g., the Carnot Institutes in France, and ETRI in South Korea (the latter establishing the country as a major international semiconductor producer), although the funding and business models vary according to the local innovation system and the economic/social landscape.

1.3 It is common for Fraunhofer institutes to be focused on sectors or technologies that capitalise on local and national strengths, rather than having a wide spread of institutes targeting many fields, and have a workforce recruited from the academic and private sector possessing research, technology development and commercialisation skills. Most benefit from long-term, sustained and predictable flows of public funding, which is supplemented by winning additional income from public and private sector contract research, and through the commercialisation of IP. Strong governance structures are in place in many to provide strategic direction and ensure the quality of services provided to business, but almost all operate with a high degree of autonomy. International collaborations are widely undertaken, with many in the EU leveraging significant funding from the Framework Programme.

1.4 The UK research and innovation landscape is very different from that in Germany. In the UK, world-class research-intensive universities undertake a much broader range of research activities than in Germany, including basic research, applied R&D, research translation and innovation as well as technology development services. Complementary R&D activities are undertaken in independent research institutes which often partner with universities to further their research and innovation activities. These include the Research Council Institutes, Government laboratories, technology intermediaries, R&D consultancies and in company R&D laboratories.

1.5 The research and innovation funding landscapes, composition of research intensive businesses, and nature of university-business relationships also differ significantly between the UK and Germany. In the UK, world-class universities have strong and established relationships with business, whereas in Germany it is the Fraunhofer institutes which have strong links to business. Indeed the Fraunhofer institutes could be seen as a barrier to university research making an impact in Germany

1.6 By 2015 research in most Universities will become more differentiated and more focused in specific areas. National funding bodies will focus on national centres of excellence in specific research areas, (shaping capability and greater selectivity) and larger programmes will result from “best with best” collaborations (often in form of complementary groups of world leading excellence). Each University will develop its own distinctive and more highly differentiated research strategy, with collaborative ventures nationally and internationally in a global market place. In this new environment, the creation of Technology and Innovation Centres provides a significant opportunity to further enhance the capability and capacity of world-leading innovation groups within the universities to support the commercial development of new technologies that will underpin GDP growth in the UK. However to do this there has to be strong alignment between TICs and substantial investment in existing centres of excellence in research and innovation in Universities

1.7 Given the differences between the research landscapes in the UK and Germany it is unlikely that replicating the Fraunhofer model as it operates in Germany is likely to meet the innovation needs of the UK. Successful innovation requires taking into account the context and environment within which research is undertaken, generated, and exploited.

1.8 The Government has announced that a network of Technology and Innovation Centres to enable industry to exploit new and emerging technologies, by closing this gap through the provision of a business-focussed capability that bridges research and technology commercialisation. Successful implementation of this programme will require integrating the new TICs with existing infrastructure that currently supports the commercial exploitation of new knowledge and capability in key sectors.

1.9 The Hauser review1 identified that TICs should focus on platform technologies only where: there are large global markets; where the UK has technical leadership; there is a defensible technology position; and, there is a capacity to anchor a significant part of the value chain from research to manufacturing in the UK. Key sectors that offer potential under these criteria included regenerative medicine, plastic electronics, renewable technologies and advanced manufacturing.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 Research-intensive universities in the UK host a number of research centres which have attributes of the Fraunhofer institutes. These centres typically undertake applied and collaborative research with companies, support the commercial exploitation of knowledge and capability and also provide incubation and professional support for new business star ups companies.

2.2 The most similar parallel at the University of Leeds is the nationally funded Innovation and Knowledge Centre in Regenerative Therapies and Devices - IKCRTD (www.ikcrtd.leeds.ac.uk). This creates a significant research and innovation platform for the exploitation of new medical technologies and regenerative therapies in partnership with companies and clinical partners. The IKC also benefits from close alignment with significant underpinning research activity (currently valued at £100m over the next 5 years) that helps sustain and refresh the knowledge base for further exploitation.

2.3 Experience at Leeds has shown that successful exploitation of knowledge and capability requires close interaction with and support from the University’s Commercialisation Services team alongside professional innovation support. This integrated support structure enables companies to develop new partnerships with academic research that are established and cemented through robust contractual frameworks and support to ensure delivery to time and to budget. This is further

1 The Current and future role of Technology and Innovation Centres in the UK, a report by Hermann Hauser for the Department for Business Innovation and Skills, 2010. reinforced through the Commercialisation Services team where businesses wish to exploit the IP generated from research through licence arrangements. This requires robust support for commercial negotiation and contract support to ensure the business partner receives a satisfactory outcome that meets the true commercial value of the IP to be exploited outside of the university.

2.4 Furthermore, the University has an excellent relationship with a Venture Capital partner, the IP Group that jointly develop IP and commercial opportunities with the University through investment and professional support to enable new companies to be generated from academic IP. The University has good facilities available for business incubation, both in the form of office accommodation and state-of-the-art laboratory accommodation to house new university start up businesses as well as external companies that wish to co-locate alongside research capability. (www.leedsinnovationcentre.co.uk).

2.5 A portfolio analysis of investment profile in research technology innovation and commercialisation in the medical technology sector shows a substantial gap in investment in technology readiness levels 3 and 4, which has deepened and widened since 2008. It is important that this gap is addressed through the TIC agenda, which means integrating with existing investment in research in universities and investment in commercial development in industry.

3. What other models are there for research centres oriented toward applications and results?

3.1 Impact and innovation will have to address specific sectors and sub sectors. Generic innovation capability which crosses many sectors is unlikely to be effective, as each sector has specific and differentiated needs. While the innovation funding will predominantly move nationally, there will be a regional focus for specific industry sectors and sub sectors. Indeed regional industry clusters are well recognised vehicles for emerging industry sub sectors. However, the regional infrastructure to support this has now disappeared with the demise of the Regional Development Agencies. In the new more highly differentiated market, innovation in a specific sector will need to draw upon research excellence from more than one university, and in addition specialist capabilities to translate technology will need to be developed. This may be delivered by a group of universities or alternatively a single university may act as a hub to provide support for innovation in a specific sector to enable access to a cluster of universities.

3.2 Innovation is to be funded nationally and programmes will involve portfolios of individual projects. There will be constraints on management resources and delivery mechanisms nationally. National networks such as KTNs may remain, but they will not drive innovation, only support innovation driven by others. TICs are likely to be targeted to support specific sub sectors and emerging industries. Universities have a role to play in these centres, as suppliers of knowledge, technology and capability, and in providing infrastructure for effective translation. This will be an important collaborative function and requires universities to work more effectively right across the innovation pathway. The progress of a new product or service along this pathway is typically described through Technology Readiness Levels (TRLs) that indicate the progression from initial ideas and knowledge creation (TRL 1-2) to providing the commercial and technical concept (TRL 3-4) to a business having the confidence to make commercial investment in further progressing the product or service (TRL 5) through to regulation, clinical trials and finally product launch (TRL 6-9). This model is being actively developed through the Innovation and knowledge centre at Leeds, which integrates technology and innovation in industry, universities and NHS in medical technologies.

3.3 The UK is recognised as a world leader in life sciences and the sector offers significant potential for high technology-led growth that will contribute to building a stronger Britain for the future, driving growth and prosperity as well as stimulating improvements in healthcare delivery and meeting future challenges such as an aging population and obesity2. The medical technology sector of life sciences is growing rapidly in the UK with around 2,800 companies, the majority of which are small and medium enterprises (SMEs), employing 52,000 people and generating around £10.6 billion of turnover. In addition, around 25% of all European medical technology companies are based in the UK.

3.4 Regenerative medicine is a maturing scientific area, but remains an immature technology which has not yet demonstrated effective exploitation or commercialisation. There are significant barriers to translation and overcoming these remains the primary focus for developing a vibrant regenerative therapy commercial base across the UK and beyond. Regenerative medicine remains on the TSB priority area list, however, it needs to be recognised that regenerative medicine remains a high risk technology area and does not yet have sufficient critical mass or markets to sustain large scale investment in innovation. However it has significant potential to grow from a world leading base in medical technologies and medical biotechnology.

3.5 At the University of Leeds we have significant national and global capability in medical technologies innovation which provides an excellent platform to grow an emerging market in regenerative therapies and devices. This capability is currently housed within the IKCRTD. It also leads the N8 centre for translational regenerative medicine, RegeNer8, a collaboration across 8 universities, with a supply chain of 100 companies

3.6 Therapies and devices which facilitate the regeneration of body tissues offer the potential to revolutionise healthcare across all sectors and patient groups and be a catalyst for economic growth, creating a new business sector within healthcare technology. The forces driving the growth of the regenerative medicine market are compelling. This shift will potentially disrupt the entire healthcare value chain affecting pharmaceutical and medical devices industries as well as routine medical practice. This rapidly growing multidisciplinary area requires innovative scientists and engineers who can cross discipline boundaries, work in broader systems based projects and work flexibly and collaboratively with industry and clinicians at different stages of the innovation pathway.

3.7 IKCRTD is founded around Europe’s largest integrated multi-disciplinary and internationally leading medical engineering centre based at the University of Leeds. This provides an integrated academic research base that includes 50 academic staff and over 200 researchers working across 10 Departments. The centre hosts national capability, expertise and intellectual assets for innovation in medical technologies that will grow UK and global companies within this high growth sector and also in supply chain companies that can also contribute to the development of this sector. The capability is determined by a core platform of over £100m research and innovation investment over the next five years (2010-2015). This centre is unique in that it operates across the medical technology spectrum from implantable devices through to regenerative therapies which can be enhanced with autologous

2 Life Sciences Blue Print, a Statement of the Office of Life Sciences, July 2009. stem cells. This means that the centre focuses upon developing new technologies and devices that have viable and feasible routes to commercialisation that reduce late failure and cost. This integrated research and innovation centre aims to improve the quality of life of the population who expect 50 active years after 50.

3.8 IKCRTD focuses upon early validation of technical concept and commercial feasibility to reduce late failure and cost and accelerate innovation opportunities with a higher probability of commercial success. Through this approach it is possible to integrate the medical and regenerative technologies business base, address emerging markets and challenges, deliver improved patient well being and significant economic growth.

3.9 The successful launch of a new medical technology product or service depends on successful progression through an innovation pathway – from identifying a need through to product launch. Our experience has shown that companies are focussing on projects with shorter term returns at higher TRLs. As such the gulf between fundamental research and industrial investment is widening. Within the IKCRTD we aim to bridge that gap by:

3.9.1 Identify needs and collaborate to develop solutions 3.9.2 Validate concepts (technical, commercial, clinical and market) 3.9.3 Undertake preclinical testing and simulation 3.9.4 Design and deliver robust, effective clinical trials 3.9.5 Evaluate the health economics of a new product or service

3.10 IKCRTD seeks to work in partnership with companies to accelerate the commercial development of their technologies by helping them access knowledge, capability and people resources alongside close clinical collaboration.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1 The Government has announced that the Technology Strategy Board (TSB) will establish and oversee the network of TICs. The TSB is well placed to take on this role, given their established relationships with business and universities. Furthermore, the TSB has played a strong role in supporting the Innovation and Knowledge Centres that have helped better connect companies to national innovation and research strengths within the universities.

4.2 In coordinating the network of TICs it will be essential that opportunities are seized to support the TICs to work together and share good practice for the benefit of UK companies and other organisations that can benefit from the outcomes from TIC activity.

4.3 The strategic leadership and development of the TICs over time will need careful management to ensure that they continue to align with current and future national strengths and opportunities and continue to be founded around clear platform technologies with potential for further development.

4.4 The Government has also announced that that individual TICs will have a high degree of autonomy so they can respond to business needs. The ability to respond flexibly and rapidly will be a significant factor in the success of a TIC. However, it is evident that TICs will also need to respond to emerging developments in research and innovation as well as business needs. As such they should be closely aligned with and connected to world-leading academic researchers who can help the TIC develop and adapt to meet changes in the research and innovation landscape.

4.5 As TICs need to be founded on integrated research and innovation activity it is likely that the governance and management of individual TICs should be through a Board with members from both business and academia.

5.1 There are a number of existing centres that are working on aspects relating to regenerative medicine, plastic electronics and high value manufacturing. These centres are partially funded or sponsored by Government. As such it is imperative that the TICs work with relevant existing centres and public sector research establishments to avoid duplication and ensure synergies can be optimised. This approach will also maximise the commercial exploitation of nationally funded research to effect translation and utilisation by users.

5.2 In the current changing public sector funded landscape it is important that TICs are able to build upon established relationships with businesses and other partners and do not displace existing and productive relationships.

Declaration of interest

The author of this response is Professor of Mechanical Engineering in the Faculty of Engineering, who is active in research and dependent on Research Council and other sources of Government funding. He has drawn on the views of colleagues across the University, many of whom serve on Research Council and funding body committees and panels.

Professor John Fisher Director of the Institute of Medical and Biological Engineering Faculty of Engineering The University of Leeds

November 2010 Further written evidence submitted by University of Leeds (TIC 05a)

Thank you for hosting the Parliamentary and Scientific Committee meeting on medical engineering and your kind letter. As we discussed I would be grateful if I could share with you a few thoughts on technology and innovation in this sector, in response to current consultation on TICs.

Technology development and innovation is part of a process that starts in knowledge creation and ends in commercial products. It is important that this process is fully integrated.

Our evidence has shown that there is currently a strategic gap (capability and resources) in translation of knowledge to commercial products at technology readiness levels 3, 4 and 5, and in some existing technology areas, a gap in capability to support commercial development at higher technology levels (TRL 5-9).

Universities working closely with, and being led by, industry needs is essential to fill these gaps at all TRLs and as such a partnership approach is needed. In addition integrated knowledge creation is needed for long term sustainability. Furthermore, to ensure better utilisation of these assets by companies it is important to utilise and provide better routes to access existing investments and assets.

Simply lifting the Fraunhofer model into UK may not work. Different sectors/sub sectors will need different solutions. Some emergent technology areas may grow from existing technology areas, evolution rather than revolution, and through utilisation of existing strengths and capabilities.

In the case of medical technologies it provides a significant platform for a key sector that offers capability to grow an emerging sector - regenerative medicine. In this technology space translation pathways are long, 10 years or more. Medical technology is already a substantial market and with an ageing population will continue to grow as a global market. Current UK industry sector £10b of which regenerative medicine is less than 1 %.

Investment to support growth is needed in existing technologies as well as emergent technologies such as regenerative medicine. Existing technologies will deliver economic growth in 1 to 10 year time scale.

Regenerative medicine derived from the bioscience and pharma base likely to deliver economic benefit in a 10 to 20 year time scale. Regenerative medicine delivered from a medical technology base (using patients own stem cells) gives earlier economic returns in 5 to 10 years. The latter is a stepping stone to the former, as it provides earlier economic return for future investment.

The University of Leeds has an existing centre of excellence in medical technologies (largest in Europe) on which to build medical technologies for regenerative medicine TIC. Our existing MTIC medical technology Innovation Centre in Leeds has a turnover of £10m/year, has a network of over 100 industry partners and the potential to grow with partners and existing assets in emergent areas such as regenerative therapies. We have already established a network of 250 members in RegNer8 across the North of England and are actively engaged in discussions with potential partners in Scotland and East Midlands. We support an approach that draws together national assets in regenerative medicine, and have the capability through our existing Medical Technology Innovation Centre to bring these together in an integrated approach to benefit UK nationally.

University of Leeds

26 November 2010

Written evidence submitted by Durham University (TIC 06)

Technology Innovation Centres

What is the Fraunhofer model and would it be applicable to the UK?

1. Our understanding of the Fraunhofer model, both from direct experience of our staff in working with Fraunhofer Institutes and from our contacts with Directors of Fraunhofer Institutes, is that they were originally envisaged as applied versions of the Max Plank Institutes. However, the distinction is becoming blurred as the Max Plank Institutes seek more third party money.

2. The operational model is mostly bilateral between the Fraunhofer Institute and industry. It is not principally a three-way collaboration between the Fraunhofer Institute, a university and industry, nor is it a mechanism whereby the Fraunhofer Institutes acts as a bridge between university IP and industry. The Fraunhofer Institutes act as independent principals in their own right.

3. Universities may be indirectly involved through the personal roles of the Fraunhofer Directors, who are often also Dozents or Professors at a University. They tend to have minor duties (and here we quote an ex-Fraunhofer Institute Director) “for example, 2 hours of specialist lectures per week”.

4. The overall funding scheme is 1/3rd state funding, 1/3rd direct industrial contracts and 1/3rd collaborative public-private projects (e.g. Framework 7 funded). For example, for one institute, there is basic state funding of typically 10-20%, which is dependent on Industrial turnover, between 35% and 60 % funding via direct industrial contracts, and the rest federal or regional funding via collaborative projects with the industry partners. (In most cases the projects are not 100% funded). There are university collaborations mostly via collaborative projects with industry and other partners (e.g. other universities) but this represents a small fraction of activity.

5. In our view, the Fraunhofer Institutes model, as it works in practice, would not achieve the outcomes set out in the Hauser Report. This model is not likely to solve the problems associated with translation of scientific research undertaken in universities into the commercial sector. Nor is it likely to supply the vital flow of ideas and challenges from industry into universities. In some sectors it could actually risk distancing industry and universities (an expensive way of having the opposite effect as that desired!), by interposing an additional organisational layer. A further disadvantage of the Fraunhofer model is that it can promote the poorly-connected “hub and spoke” model of collaborative networks, which suffers from poor and slow communication and is unfit for the necessary rate of communication across science and technology areas, and the rapid building and reforming of multidisciplinary teams that the emerging science based technologies demand.

It could work well in delivering an industry focused research and development facility which would, through provision of specialist skills and facilities, enable companies to accelerate the transition from demonstrator and product. We do not see it acting as the bridge between technology readiness levels 1-4 in universities and 6-9 associated with prototype demonstration in an operational environment onwards. (Hauser Report p 5).

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

6. There are existing research centres which approximate to the Fraunhofer model as it operates in practice. In the North East region, both the PeTeC printable electonics centre at NETPark in Sedgefield, Co Durham and the National Renewable Energy Centre in Blyth, Northumberland have a mixture of public funding (via the RDA and other routes), collaborative public-private research and development projects and direct industrial contracts. These are extremely effective in their industry facing operations. However, they do not presently act as the bridge between university IP and industry.

We believe that the Fraunhofer model was to some degree behind the motivation for the Interdisciplinary Research Centres (IRCs) set up by the EPSRC (with some DTI support) in the 1980s and 1990s. These were designed as vehicles to create shared research projects between industry and university, though they did not address directly the intermediate TRLs. They exhibited various degrees of success, largely depending on effective engagement with industry. They also suffered from finite-timescale, and little or no thinking went into the requirement to become self-sufficient after a 10 or 6 year period.

Some IRCs, such as the Polymer IRC successfully developed a sustainable model by attracting a large industrial “Club” and spawning other externally funded projects. Its success was also based on recognising the fluidity of the UK academic “map” and responding to it. It also exemplified best practice by building interdisciplinary research teams across different university groups and linking those entire teams to industrial consortia, rather than promoting a poorly-connected “hub and spoke” model which has slow technology transfer.

What other models are there for research centres oriented toward applications and results?

7. The TICs need to determine whether they wish to focus on a bilateral relationship with industry, occasionally using university research groups as partners and using joint university- TIC positions to provide strong collaborative links or to focus on providing the bridge between university research and industry. The two processes and activities are very different and the funding models therefore need to differ. In the former model, a funding structure not hugely dissimilar to that operated by the TSB would work well. [There is presently a disincentive to collaborations funded by the Technology Strategy Board to involve significant numbers of university partners, due to the match funding requirements. (Universities must be funded in full from project costs.) This needs to be addressed in developing a genuinely collaborative project model within the TIC framework. The old LINK scheme provided an excellent model, which might be rolled out across the science and technology sectors linked to individual TICs.] In the latter, early stage venture funding must play a role as industry is loath to invest significantly in technologies at readiness level 4. Most importantly, the TICs must not try and fulfil both functions using a single funding methodology.

We believe that the UK is faced with a real opportunity to develop a fresh approach to the national “innovation pipeline”. An effective TIC must do the following:

• work in partnership with the entire UK top-tier academic knowledge base in a given area, including a built-in responsiveness to its fluidity and evolution, and exploiting international expertise through the academic network. • Facilitate knowledge-transfer to and from industry in a highly-connected way, moving on from the inadequate “hub-and-spoke” model. Both UK and international industry should be “customers” of the TIC. • Contribute where necessary the infrastructure to smooth transfer through intermediate technology levels. • Able to draw down matched funding from industrial, UK, EU and international sources depending on the readiness level of a specific technology. (an interesting model here is the Dutch NWO scheme where industrial-financial and university-in-kind resource is automatically matched by the government scheme). • Be equipped to handle different levels of IP so that both generic (consortium) and industry-specific IP can be developed at the appropriate level and speed. • Promote effective practice in human resource, often located in individuals who spend significant time in both university and industrial environments. • Be able to handle both long-term and medium-term industrial challenges (so moving into the space vacated by the demise of many industrial research units). • Coordinate effectively with downstream commercial enterprises, in some sectors dominated by SMEs, so that the economic advantage of new technologies is not retained only by large companies.

An organisation that does the above for sectors such as personal care, sustainable chemistry, renewable energy, etc. does not look like a Fraunhofer Institute, but would be much more effective in the UK context.

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

8. We believe that the Technology Strategy Board is the only body that has a sufficiently wide remit to coordinate this activity. Individual research councils do not have complete coverage and also lack expertise in the commercial sector. The task should not be given to a unit in BIS.

9. Care should be taken in establishing new TICs. We agree that they should be focused on specific technologies where the UK has a good chance of competing significantly on a global scale. Wherever possible, the existing TICs and RTOs should be restructured to achieve these objectives rather than establishing new institutes on top of the existing framework. Where necessary, some existing TICs and RTOs may have to be closed in order to avoid duplication of resource and effort. We note that in a number of sectors existing RTOs have not effectively engaged with the relevant academic community nationally or internationally and are in consequence not competitive in addressing industrial need either.

Dr Tim Hammond Director Durham Business & Innovation Services Durham University

November 2010

Written evidence submitted by Scottish Agricultural College (TIC 07)

TECHNOLOGY INNOVATION CENTRES

Initial thoughts on the House Of Commons Select Committee - Enquiry On Technology Centres response request, with responses numbered as per the original questions:

1. What is the Fraunhofer model and would it be applicable to the UK?

While none of us in SAC is very familiar with the Fraunhofer model, our ethos in SAC is all about research, consulting and learning that are focused on application and results. Hence, we think the model is well worth further exploration in a UK context. The basic idea of learning from others (abroad) seems to be really sensible and commendable provided that it is (a) evidence based, (b) lacking dogma and (c) followed through in all respects.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

We would argue that SAC has similarities with what we understand a Fraunhofer-type research centre to be. Our focus is on goal-orientated research, and making a difference in practice. We aim to do this though a unique (in our sector within the UK at least) integrated set of research, consulting and learning activities, which our stakeholders appear to value. (Our £20m p.a. consulting business is partly based on our in-house R&D, and of course other research in the public domain, as well as providing business consultancy.) Within the agri-food sector – which has a huge number of micro-businesses, which presents particular challenges - this is mainly about new knowledge/practices, evidence for policy makers or new services rather than about new (e.g. patentable) technologies – an apparent difference in emphasis from the Fraunhofer model.

3. What is the Fraunhofer model and would it be applicable to the UK?

As identified in the Hauser report – many Public Sector Research Establishments were set up to have a greater focus on application than in HEIs. In Scotland there is a concentration of these in the environmental and agri-food sector. As well as having individual strategies to engage with users, www.knowledgescotland.org was established as a hub for information (especially for policy makers) from research undertaken by the RERAD Main Research Providers. This model could be extended easily to include greater emphasis on technical information/support. LINK schemes in the agri-food sector aimed to promote collaborative research with industry and to encourage uptake, and many did so very successfully. Their recent demise is of concern, especially for promoting bottom-up collaborative research with SMEs involved. The creation of a new Sustainable Agri-food Research Platform in TSB is commendable, but TSB do not see this as a direct replacement of LINK and experience so far in this sector is that it is larger companies that are engaging with TSB, so there is still a gap left by LINK.

4. What role should it be to coordinate research in a UK-wide network of innovation centres?

TSB is the obvious choice to co-ordinate, but there would need to be strong representation from key players in relevant sectors. (Food and Drink and Low Carbon would appear to be strong sectors in which to consider Scottish TICs, built around existing centres/clusters.)

If managed effectively it could help co-ordinate/galvanise KE from PRSEs, but it would be vital that structures recognize/complement them, rather than compete with them. To consider the introduction of ‘elite TIC’s see p24 Hauser’ would require a fundamental overhaul of the existing system. For example, the Enterprise networks in Scotland and dozens of other academic/business facilitation organisations that exist need consideration. The target beneficiaries to generate economic growth are presently met by a landscape of disparate and confusing KTE initiatives. Few have clear branding and their adoption and uptake is limited. To create compelling ‘mother brands’ of national significance is a worthy goal but without some serious rationalisation of existing structures will be hard to implement.

Professor Geoff Simm Academic Director and Vice Principal Research

26 November 2010 Written evidence submitted by Professor Marc Desmulliez (TIC 08)

Technology Innovation Centres

Declaration of interest:

Please note that this document reflects only my personal view and does not necessarily reflect the views of my University. I have been involved for over two years in the preparation of a “Fraunhofer-UK Centre in Agile Micro- Manufacturing” in collaboration with the following Fraunhofer Institutes: ILT (Aachen), IPK (Berlin), IPA (Stuttgart) and IMS (Druisburg). I am to be the future Director of the James Watt Institute for High Value Manufacturing, the only EPSRC funded Innovative Manufacturing Research Centre in Scotland and North of England.

Answers to Committee’s questions:

1. What is the Fraunhofer model and would it be applicable to the UK?

1. The Fraunhofer model can be summarised by the simple funding formula:”1/3,1/3,1/3”. In its steady state of funding, the Institute receives 1/3 of its turnover in terms of funding devoted to core research funding. This funding comes from institutional funding, which is, in this model, the Headquarters of the Fraunhofer Gesellschaft in Muenich. This funding ensures that the various Fraunhofer Institutes stay at the cutting edge of the technology and provide novelty to industry with an horizon of five years before productisation. The second third comes from European grants or other national grants obtained competitively to allow research with an horizon of 2 to 3 years before translation into products. The last third comes directly from industry, especially SMEs, for rapid (less than one year) translation of knowledge into industry with foreground Intellectual Property (IP) belonging in general to the industry for the particular applications paid by the SMES. Institutional funding obeys a non linear relation with respect to the income received from industrial funding: too much or too little funding from industry will see a decrease of the amount of institutional fundin to force stakeholders to re-adjust their strategy. Surplus generated by the Institute goes back to the Headquarters.

2. There is close collaboration between Universities and Fraunhofer institutes with academic staff members of a University. These members of staff are contracted in and out the Institutes in a seamless fashion depending on the research to be translated. No wall exists therefore between research and commercialisation of knowledge. Note that members of Fraunhofer Institutes are not obliged to publish and are not subject to research assessment exercise.

3. The fact that discussions are underway to establish Fraunhofer-type Institutes between some Fraunhofer Institutes in Germany and chosen Universities in the UK bode well to the applicability of the model that could satisfy Universities priorities whilst fulfilling the ethos of the Fraunhofer vision.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

4. There are no Fraunhofer-type Research Centres in the UK. Carnot Institutes have been created in France to work on a project basis with some dedicated Fraunhofer Institutes such that these French organisations can learn from their German counterparts without having to necessarily embrace the full philosophy of the Fraunhofer Institutes.

5. Various Research Institutes or Research & Trade Organisations in the UK (NPL, TWI, AFRC, MTC, etc.) would like to claim such status but their business model is radically different from the Fraunhofer one. The various Research Institutes in the UK have proved to be wasteful, defective and inefficient: they have little interaction with Universities, have a greater than wise reliance on state type funding (EPSRC, TSB) and do not interact effectively with SMEs for short term projects. Overheads associated with projects from these institutes are also far too high for the technical work actually achieved. These institutes also do not translate research outputs originated from universities.

3. What other models are there for research centres oriented toward applications and results?

6. I cannot think of any other model which has proven so efficient and effective than the Fraunhofer Institute. By blurring the boundaries between Universities and Research Centres, these Institutes have managed to create over the last decades an effective pipeline of knowledge exchange which has put German academe and Deutschland Gesellschaft at the forefront of European manufacturing and applied research. The feedback control loop in terms of institutional funding has also ensured that these Institutes do not become too dependent on state funding or dedicated laboratories of specific companies.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

7. It should be the role of TSB but its remit is far too broad. An independent legal entity similar to Fraunhofer GmBH would be the best vehicle.

8. The impact would be of immense with applied research finding a clear path into industry and industry rallying around such institutes that can satisfy their demands on a short time scale. The other Research Centres would have to adjust their business model to justify their state funding, provide real value for money and serve SMEs efficiently.

Prof. Marc Desmulliez CEng, MInstP, CPhys, MIET, MIEEE EECE Research Co-ordinator Head of MIcrosystems Engineering Centre (MISEC) Heriot-Watt University MIcroSystems Engineering Centre

29 November 2010

Written evidence submitted by Manchester Institute of Innovation Research, Manchester Business School, University of Manchester (TIC 09)

1. The Science and Technology Committee announced its inquiry into the Fraunhofer model as a blueprint for Technology Innovation Centres in the UK. This is in response to the concern that, although the UK has a strong science base, it faces challenges in the ability to commercialise science. The argument is that this gap between research findings and their subsequent commercialisation can only be closed by making new technologies ready for the market through a ‘translational infrastructure’ that bridges research and technology commercialisation, such as the adoption of Fraunhofer institutes (Hauser 2010).

2. In what follows, we argue that Fraunhofer-type institutes can only be a very partial solution. The Fraunhofer institutes are part of the specific institutional framework of the German innovation system, based on a model that has grown over 60 years, and they are successful in tackling the specific system failures of the German system. While the UK innovation system would benefit from a better ‘translational infrastructure’, this has to be devised with an understanding of the UK institutional framework. Indeed, any translational infrastructure needs to be devised carefully to fit the specific opportunities offered by the science and knowledge base. Thus, while Fraunhofer-type institutes might play a role in carefully selected areas, they are not a mechanism to improve the commercialisation of the knowledge base in the UK across the board.

What are the Fraunhofer institutes? 3. The Fraunhofer institutes are organised within the Fraunhofer Society. The Society was set up in Germany in 1949 and by 2010 has grown into a large organisation of 59 institutes, 17000 staff and an annual research budget of Euro 1.6 billion. The mission is to carry out applied research for industry and public bodies. The budget has, with minor exceptions, grown steadily in recent years, indicating demand for their activity. The number of institutes experienced a boost in growth after re-unification, when a range of institutes were set up in Eastern Germany. In general, the rationale for setting up new institutes is that demand for contract research in a given field will support an institute after a start-up period. The Fraunhofer institutes are active in ICT, life sciences, microelectronics, materials and components, production, surface technologies and photonics and defense and security (Fraunhofer Society 2010, Meyer- Krahmer 2001, Mina et al. 2010).

4. The safeguard of the Fraunhofer’s industry-oriented mission is the funding model: two thirds of the income stems from research contracts (mainly from industry) and one third is institutional funding (of which 90% comes from the Federal Government and 10% from the state or (länder) in which the institute is located in order to establish local buy-in). This applies to the Society and to (most of) the individual institutes and thus ensures incentives to acquire commissioned research from third parties. Provided they meet their financial targets and serve their industrial and public costumers satisfactorily, the institutes have considerable autonomy in terms of research topics and directions. The headquarter interferes mainly at the formation stage (deciding which topics to tackle), in response to crises and offers support with central services. It also supports cooperation across clusters of institutes in areas of strategic importance.

What role do Fraunhofer institutes play in the research and technology system and what are the potential shortcomings? 5. The institutional context of the Fraunhofer model is illustrated in figure 1 below. Fraunhofer institutes occupy a specific role in a very elaborate division of labour within the German system of research. The universities, still performing by far the bulk of public research, have, for many years, experienced structural challenges, but new initiatives, such as the Excellence Initiative, have increased their strategic performance orientation. Closely linked to universities are the research activities of the Max Planck Society which focus entirely on basic research, particularly in natural sciences, and which are fully institutionally funded. The Helmholtz Institutes are traditionally oriented towards “big science”, that is, those activities considered too large for university departments to carry out (e.g. nuclear research). In general, Fraunhofer institutes are the most application- oriented publicly-funded research organisations and have the highest share of industrial funding. This is also confirmed by patent and publication analysis, showing Fraunhofer leading in patents per staff, but trailing in publication per staff (Heinze and Kuhlmann 2006). Accordingly, Fraunhofer institutes have the lowest share of institutional funding in the German public research system. Thus, the German Fraunhofer institutes fill a gap between basic and strategy research, on the one hand, and industry research and development, on the other hand. They operate in areas in which German industry has a demand for external research, and in which the generation of research results from universities and other more basic-oriented organisations is not sufficient.

Figure 1: The German system of research

Source: BMBF (2010), p. 21

6. Two main qualifications regarding the nature and performance of the research and technology system in Germany need to be made. First, the great degree of institutional fragmentation in Germany (which is regarded as conducive for reinforcing existing technological strengths) is argued to hinder the flexibility and reaction of the system and hamper the take-up of innovative fields of research that need more integrated approaches (Internationale Kommission 1999). This has led to calls for more open and coordinated structures, which may be important especially in knowledge-intensive technological areas, i.e. where the development of technological solutions for industry necessitates direct input from leading edge science or in new areas where findings in basic science have immediate application potential.

7. Second, the Fraunhofer institutes do not so much transfer knowledge from university to industry (here next to traditional means such as licences or start-ups, the German system has a range of other solutions, such as the Steinbeis Centres). Rather, Fraunhofer institutes generate relevant application-oriented knowledge themselves on demand from their clients. While this may often be strongly linked to research in universities (many leading scientists at Fraunhofer institutes are active also in universities), it nevertheless constitute a knowledge creation sub-system of its own.

8. Thus, when borrowing the Fraunhofer approach with its funding model, policymakers needs to keep in mind that the Fraunhofer only work in areas with clear industrial demand, a willingness to pay and an ability to absorb advanced technological knowledge, and that Fraunhofer institutes in Germany tend to reinforce industrial strengths rather than build up entire new technologies and that they transfer knowledge form the university science base only very indirectly.

Fraunhofer institutes in the specific German industrial landscape 9. In order to understand the contemporary role of Fraunhofer institutes, it in necessary to place them in their wider country context. Germany was the pioneer of two institutions that are today taken for granted in most advanced innovation systems: the research- oriented university combining education with science advancement and the science-based firms with an in-house R&D department (Keck 1982). But Germany also has a high degree of heterogeneity in industrial governance structures. Not only is it a country of the well-known large vertically integrated enterprises with close ties to universal banks but also has a parallel sector of decentralised highly specialised small- and especially medium-size producers with supporting institutions (Herrigel 1996). The bulk of small and medium-sized firms are not new entrepreneurial ventures, but well established organisations that, over decades, have been successful in driving and adopting technological change, most often in traditional sectors. Those companies have been the breeding ground for the German Mittelstand, a characteristic of the German industrial landscape for centuries. It is this sector of highly specialised and flexible small and medium-sized firms, with technological capability in industries where Germany has a very long tradition of technological strength, that cooperate closely with the Fraunhofer institutes.

Fraunhofer institutes and the UK science and technology system 10. The innovation and production systems of the UK and Germany are very different. Different institutional frameworks have different advantages to solve the organisation problems of different national innovation strategies. Germany has a decentralised innovation system which has traditionally been described as ‘diffusion oriented’ (Ergas 1987), in contrast to the ‘mission-oriented’ system of the UK (although these characterisations may be blurring in the last twenty years, with German policy now increasingly investing in dedicated high-tech areas). In general, Germany has strength in ‘deepening’ rather than ‘shifting’ the research frontier. Firms (including small and medium-sized ones) in Germany traditionally develop complex innovations along known trajectories (many involving R&D-intensive sectors) in the automobile manufacturing, mechanical engineering and the chemical industry. Germany has more difficulties to enter fundamentally new trajectories in the sectors of IT, biotechnology and new materials (except for its celebrated success in IT with SAP and the more recent development of high-tech ventures, mainly as a result of special measures encouraging high-tech entrepreneurship).

11. Furthermore, the German innovation system is based on long-term capital, highly cooperative unions and powerful employer associations and effective vocational training systems (Soskice 1997). Strong collaboration between firms, business associations, state agencies and public and private research organisations aid in the development and diffusion of new technological knowledge. Since the 1970s, the major policy orientation especially at Federal level was to support research in thematic programmes mainly through funding cooperation between public research organisation and firms (Verbundforschung) to strengthen collaboration and the flow of information and staff between organisations. By underwriting a lot of the costs of technological research, and involving industry associations in its management, the states encourage the involvement of firms in the public science system. It is this environment, with tradition in cooperation, high absorptive capacity within firms, consensus-based standard-setting, stable shareholding, long term funding and low product market competition, that enables firms to invest in incremental innovation in high quality science-based products especially in engineering and chemicals.

12. The UK, instead, has a centralised innovation system which supports radical innovation in newly emerging technology (e.g. biotechnology and new materials), knowledge intensive tradable services and large complex systems where technology is changing rapidly (defense, software and aircraft production). The UK has a very strong science base, second only to the USA in sectors such as medical and life sciences, mathematics and physics (and this is what the UK science and technology system needs to exploit). As in France and the USA, the institutional set up of the UK makes it suitable for policy with definite ‘missions’. But the ‘mission-oriented’ system of the UK has yielded fewer benefits than those of the USA and France and also possibly crowded out a share of private sector R&D. Indirect spin-offs from public procurement have been low (Ergas 1987, Georghiou 2000). Aside from this general characterisation, the UK has a different kind of knowledge and industry structure, investment patterns and trajectories than Germany. This, it appears, leaves Fraunhofer-type models with a much smaller space to fill.

13. Indeed, in contrast to the German system, the UK system is capital market-dominated, where priority is given to short run profit maximisation and asset trading, which leads to growth of firms through mergers and less investment in fixed capital, R&D and long term incremental innovation. It lags behind countries like Germany in engineering. R&D is concentrated in a few leading firms in leading industries (such as pharmaceuticals) and a large proportion of R&D is funded by foreign firms. Furthermore, not only the number of government institutes has been severely reduced in the last twenty years but also their aim has changed from producing science as a public good, freely available to potential social and economic users to a mode of knowledge creation involving commodification of science and direct relationship with users (Boden et al. 2004). The major challenge in this institutional environment is to support the commercialisation of science-based inventions arising from the very productive UK university system, which is inherently a very risky endeavour. Although venture capital is substantial in the UK, it is not focused on early- stage firms, it is prone to herding trends and seeks an early exit. In this context, and because of deep uncertainty surrounding science-based innovation, it may be unwise to leave the responsibility of financing the commercialisation of this research entirely to venture capitalists. Although a good ‘translational infrastructure’ would benefit the commercialisation of research, a comprehensive analysis of how institutional arrangements of science and the links between these institutions and business influence the ability of science-based firms to manage risk, achieve integration and facilitate learning is necessary.

Conclusions: intelligent investment and need for institutional fit 14. The starting point for improving commercialisation of science is to keep a high level of funding for universities. It has been shown for the USA (the institutional arrangements of science and technology of which are more similar to the UK than those of Germany) that greater investment in science in university (including basic science) have the potential to increase the attractiveness of downstream R&D by reducing risk (Nelson 1982, Pisano 2006). Thus, investing more in the UK universities (which are the most productive in the world, in terms of journal articles produced per millions of pounds spent), would result in greater commercialisation of innovation. Indeed, universities have been shown to be a key contributor to technical progress in industry (Mowery et al. 2004). A central challenge for policymakers is the intelligent and adequate design of licensing policies for universities engaged in innovation financed by public funds to ensure greater societal benefits. Broad dissemination of scientific research by universities and encouragement of more inter-disciplinary research and training (typically constrained by the system of grant getting, which supports narrow specialisation) can facilitate the diffusion and commercial application of knowledge. A good example of support for cross-disciplinary research is the development of the Eli and Edythe L. Broad Institute of Harvard and MIT in the USA that brings together scientists from biology, chemistry, mathematics, computer science, physics, engineering and medicine.

15. Fraunhofer institutes as institutionalised in Germany fit a specific institutional framework and have had a particular history. They are not university centres, but self- standing knowledge and solution producing institutes, with structural incentives to work with and for industry with a strong core funding and an overall supporting structure through a strong headquarter. They cannot simply be interpreted as models to transfer existing knowledge form universities into industry, but rather fill a gap in the ability of public research to respond to immediate needs of strong, largely traditional industry used to working with and financing public research and capable of absorbing that knowledge. The Fraunhofer model is highly successful in this German context, but even in that context there are challenges of potential compartmentalisation and of lack of support for newly emerging technologies.

16. Thus, to solve the commercialisation challenge in the UK system, it is of limited use to ‘transplant’ these institutes. A set of clearly defined institutes with a long-term mission and with firms that express long-term interest and willingness to engage can be sensible. However, to invest the bulk of scarce resources into the Fraunhofer model might result in high opportunity costs. There are a range of alternatives that fit better the UK research and technology landscape. For example, there seems to be more scope for mid- and long- term collaborative competence centres with mid to long-term financing provided jointly by a set of firms and universities. Those centres may allow flexible arrangements, ranging from long term strategic research agendas shared by all participants to bi-lateral, confidential contracts. They have been introduced successfully in a whole range of countries, including Northern Ireland (www.competence-research-centres.eu). For concrete contract research and problem solving, another German model, the Steinbeis institutes (www.stw.de/en) is much better suited, as it has clear personal and institutional links with the universities, but operates more autonomously and flexibly than a university department.

References BMBF (Federal Ministry for Reserach and Education) (2010) Federal Report on Research and Innovation 2010. Berlin: BMBF. Boden, R., Cox, D., Nedeva, M. And Barker, K. (2004) Scrutinising Science: the Changing UK Government of Science, New York: Palgrave. Ergas, H. (1987) Does technology policy matter?, in B.R. Guile and H. Brooks (eds.), Technology and Global Industries: Companies and Nations in the World Economy, Washington DC: National Academic Press. Fraunhofer Society (2009) Annual Report 2009. München. Georghiou, L. (2001) The United Kingdom national system of research, technology and innovation, in Larédo, P. and Mustar, P (eds.) Research and Innovation Policies in the New Global Economy: An International Comparative Analysis, Cheltenham: Edward Elgar. Hauser, H. (2009) The Current and Future Role of Technology and Innovation Centres in the UK, Report for Lord Mandelson, Secretary of State, Department for Business Innovation and Skills. Heinze, T.; Kuhlmann, S. (2006) Analysis of Heterogeneous Collaboration in the German Research System with a Focus on Nanotechnology. Fraunhofer ISI Discussion Papers Innovation and Policy Analysis 6/2006 Herrigel, G. (1996) Industrial Constructions: The Sources of German Industrial Power, Cambridge: Cambridge University Press. Internationale Kommission (1999) Forschungsförderung in Deutschland. Bericht der Internationalen Kommission zur Systemevaluation der Deutschen Forschungsgemeinschaft und der Max Planck Gesellschaft. Hannover: Volkswagen- Stiftung. Keck, O. (1993) The national system for technical innovation in Germany, in Nelson, R. (ed.) National Innovation Systems, Oxford: Oxford University Press. Meyer-Krahmer, F. (2001) The German innovation system, in Laredo, P. And Mustar, P. (eds.) Research and Innovation Policies in the New Global Economy, Cheltenham: Edward Elgar. Mina, A., Connell, D. and Hughes, A. (2009) Models of Technology Development in Intermediate Research Organisations, CBR Working Paper Series Paper No. 396, Centre for Business Research, University of Cambridge, Cambridge. Miozzo, M. and Walsh, V. (2006) International Competitiveness and Technological Change, Oxford: Oxford University Press. Mowery, D.C., Nelson, R.R., Sampat, B. N. and Ziedonis, A.A. (2004) The Ivory Tower and Industrial Innovation: University-Industry Technology Transfer Before and after the Bayh-Dole Act, Stanford, California: Stanford University Press. Nelson, R. (1982) The role of knowledge in R&D efficiency, Quarterly Journal of Economics, 97 (3), 453-470. Pisano, G. (2006) Science Business, Boston: Harvard Business School Press. Soskice, D. (1997) German technology policy, innovation and national institutional frameworks, Industry and Innovation, 4 (1), 75-96.

Professor Jakob Edler and Professor Marcela Miozzo Manchester Institute of Innovation Research Manchester Business School University of Manchester

November 2010 Written evidence submitted by the

Manufacturing Technology Centre (TIC 10)

1. The Fraunhofer model would provide a good starting point for the development of the Technology Innovation Centres (TIC) model, but it must be recognised that the Fraunhofer model has been designed to suit the requirements of Germany. Individual Fraunhofer Institutes have general similarities and adopt the same guidelines and operating principles, with a common brand and with a level of shared governance, but each Institute is unique. It has been recognised that Fraunhofer would be less successful if all Institutes were identical in structure and research delivery. It is neither possible nor desirable that each one should be identical.

1.1 It should be noted that the Fraunhofer Institutes cover the full TRL range in the continuum from 1 to 9; however for the UK the role of TIC is in the range 4-6 of the TRL continuum, as envisaged in the Hauser report [1]. The range 4-6 of the TRL continuum is a clear area where the UK has problems in translating the good research ideas generated by the universities (in the range 1-3 of the TRL continuum) into sound commercial practice (levels 7-9 of the TRL continuum). Levels 4-6 of the TRL continuum is also the area where some level of capital investment is needed from Government for investment in industrial scale equipment to validate the university research: it is not clear that Fraunhofer Institutes are particularly strong in this area of validation.

1.2 It should be noted that the TRL continuum is not necessarily linear and that there are instances where some part of the process could be at TRL 8 but a vital element remains at TRL 3. As a consequence the links created by the TIC between academia and industry are vital. In some instances the best of the Fraunhofer are able to manage this element well.

1.3 The TIC model must be designed to meet the requirements of the UK and not try to replicate a solution that has been designed for Germany, which could lead to unnecessary constraints and may not be successful in a UK environment. One area where the Fraunhofer Institutes do offer good direction for the TIC model is the funding model: Fraunhofer Institutes rely on one third directly from the State, one third from publicly funded programmes (e.g. FP7) and one third from industry. This model should be adopted for TIC. Recommendations for UK TIC model are outlined in paragraph 3.

2. There are a number of research centres in UK that aim to bridge the gap between academia and industry; some are more successful than others. Some are profit distributing, some are limited by guarantee and some are extensions to university schools. The profit distributing organisations tend to focus on delivering shareholder benefit to the detriment of a research focus. Those which are extensions to university schools have a tendency to focus on securing funding for basic research rather than the applied research which bridges the gap between academia and industry. Those that appear to create the most successful bridges between industry and academia are those that have retained an industrial membership philosophy, such as TWI, and which are limited by guarantee, rather than the profit distributing organisations or the extensions to the university schools. It is thought that this phenomenon could be a consequence of appropriate governance, and as with all generalisations there are exceptions to this hypothesis.

3. The model that appears to be most successful and therefore most suitable for UK is described in the following paragraphs:

3.1 The TRL continuum from pure research to industrial implementation can be considered on a scale of 1 to 9. Academia works in the continuum from level 1 to level 3: basic idea generation through to proof of concept. Industry works in the continuum from level 7 to level 9: capability validated on economic volumes through to capability validation on a range of products over a long period of time. The role of the TIC is to fill the void in the continuum from level 4 to level 6: processes validated in laboratory conditions to processes validated on industrial scale equipment.

3.2 The TIC will be most successful when there is a clear link between academia, the TIC and industry. The most successful Fraunhofer institutes have maintained good working relationships with academia through student and staff secondment. The TIC will be particularly successful if the link is with several universities and with several industry partners across several business sectors.

3.3 The most successful TIC will have good governance: this might be best achieved when the TIC is a company limited by guarantee and not profit distributing. This was clearly demonstrated by the Research Associations, set up by the Government after the Second World War, to stimulate growth. These Research Associations were established by the Department of Scientific and Industrial Research using the dowry from the Million Fund [2]. However these Research Associations became less effective as links between academia and industry when they transitioned from associations and their focus changed from research to profit generation.

3.4. The TIC must have the following characteristics:

3.4.1. Clear links with academia and industry: this is necessary to ensure a viable and sustainable bridge between TRL3 and TRL7 is created.

3.4.2. Multidisciplinary approach, not limited to one research activity: this is necessary to ensure that the TIC is sustainable and able to respond to the new research findings in new environments by academia.

3.4.3. Cross sector research, not limited to one industrial sector: if the TIC is limited to one industrial sector the opportunity for cross sector learning and technology transfer and migration would be lost.

3.4.4. Offer opportunities for professional training, such as a Doctoral Training Centres: if a TIC is not able to demonstrate research learning through doctoral training the value of the applied research could be questionable.

3.4.5. Offer opportunities for vocational training, such as apprenticeships: the full benefit of the TIC would not be realised if the opportunity for vocational training was overlooked.

3.4.6. Work closely with other TIC to ensure effort is not duplicated and to ensure effective dissemination of results and IPR: This could be achieved by ensuring a network of TIC for specific activities, such as manufacturing, with responsibility for coordinating the activities of smaller centres to ensure adequate depth and coverage across the UK. There should be a strong governance structure across each TIC network and this would be best achieved if the TIC governance comprised multi-academic institution, multi- industrial and multi-sector partnerships.

3.4.7 A strong image, brand and profile: this is necessary to attract participation from industry. Unless the TIC is able to demonstrate the continued ability to create sound commercial practice from academic research, participation by industrial partners will be limited.

3.4.8 Provide a natural hub for KTN: this is particularly true for manufacturing where currently there is no KTN.

3.4.9 There is a clear need for the TIC to disseminate knowledge to SMEs and not only large organisations: this could be achieved by offering support to collective groups of SMEs in particular business sectors through organisations such as MAA or MAS. This is a strong point for Fraunhofer, where they provide consultancy services to SMEs on an ad-hoc basis.

3.5. There should be a central steering group to manage the network of TIC: this would help to ensure adequate and effective dissemination of results and IPR. The steering body should be led by TSB and might have representation from the professional institutions and trade associations. This steering group would determine how the TIC are nominated: this might be by some form of bidding process, linked with some pre-qualification documentation.

4. The Technology Strategy Board (TSB) is ideally placed to coordinate research in a UK network of innovation centres: there should be a council of TIC chaired by TSB to ensure effective dissemination of activities and IPR from the TIC. There should also be stronger links to the professional Institutions (IMechE, IET, RAE) and to the trade associations (CBI, MAS, SMMT).

5. The UK TIC should be structured to make maximum advantage of the existing public sector and private sector research establishments. This might best be achieved by creating a network of organisations forming one of the TIC, but care must be taken to ensure the value of the initiative is not unduly diluted.

6. Declaration of interest: This submission has been prepared by The Manufacturing Technology Centre (MTC).

6.1 MTC is a company limited by guarantee. MTC was established in 2009 and has been awarded a capital grant of £40m for investment in equipment and machinery for manufacturing research, building from academic research and leading to industrial implementation of advanced and innovative manufacturing processes.

6.2 MTC is in the process of recruiting industry membership initially from the following sectors: aerospace, electronics, automotive, rail and renewable energy. Other sectors such as medical and food processing would be added once the MTC has developed critical mass and strengths in these fields.

6.3 MTC is developing a wide range of advanced and innovative manufacturing technologies, including rotary friction welding, intelligent automation, net shape manufacturing, high integrity fabrication and advanced electronics assembly.

6.4 MTC has been awarded Doctoral Training Centre status and is developing plans for apprenticeship training.

6.5 MTC is governed by a board of directors comprising non-executive directors from industry, government and academia. Industry is represented by Rolls Royce and TWI, and the independent Chairman is a senior industry figure from Cross Rail. Academia is represented by The University of Birmingham, The University of Nottingham and Loughborough University. Appropriate governance is important for the success of MTC, and this is achieved by the complementary, multi-university partnership that underpins MTC, coupled with the multi-industrial and multi-sector partnerships that are unique to MTC.

6.6 MTC is ideally suited to be part of the manufacturing TIC network for the UK, and has strong links with the Advanced Machining Research Centre (AMRC) in Sheffield and the Advanced Forming Research Centre (AFRC) in Strathclyde.

6.7 Industry discussions are being held with TSB regarding the potential formation of a National Systems Validation Centre. The centre would link product design stage experimentation with the downstream needs of the manufacturing community regarding end of line production acceptance testing as well as redefining the development cycle process for complex integrated systems. The capabilities of the MTC and its four major academic research partners are closely aligned with the operational and strategic needs of such a centre and there are indications that this centre could become a sub-set of MTC.

6.8 The MTC is specifically mentioned in the Hauser report and the MTC business model was viewed by Hauser as being robust. Therefore the MTC is ideally placed and well structured to be a well branded high profile UK advanced manufacturing TIC. From a national manufacturing perspective, MTC networking with AMRC Sheffield, AFRC Strathclyde, the National Composites Centre (NCC) and the proposed Nuclear Centre provide excellent cover across the UK: the requirement for any other manufacturing entity beyond this group would be costly and would offer limited if any additional value.

References:

[1] The Current and Future Role of Technology and Innovation in the UK, Dr

Herman Hauser, March 2010. BIS/Pub/Xk/03/10.NP. URN 10/843

[2] First formalised research, R E Stirley, Fifty Years of Research, pages 24- 30, MIRA 1996

The Chief Executive’s Office

The Manufacturing Technology Centre

29.11.10 Written evidence submitted by the National Physical Laboratory (NPL) (TIC 11)

Technology Innovation Centres

Summary of our key points

1. We welcome this inquiry and would like to make the following key points:

i. We welcome the recognition from both the Hauser and Dyson reviews of the importance of Applied or Translational Research work, as this area (typically covering Technology Readiness Levels 4 to 61) has received little investment in the UK.

ii. The Fraunhofer Institutes have evolved to fulfil a particular role in Germany and we believe it is neither sensible nor affordable to suppose that the concept can be imported directly into the UK. Rather, consideration needs to be given to how the applied research infrastructure that is already in place in the UK might be utilised more fully for Fraunhofer-type purposes.

iii. The UK infrastructure of public sector research establishments (PSREs) and technology centres is not effectively coordinated: each PSRE and technology centre develops a forward strategy in partnership with its parent department or agency, but this is done largely in isolation from other centres. There are inefficiencies, duplication and gaps in the UK system in terms of investment in specialist facilities and expert manpower. This has resulted in inefficient utilisation and inconsistent achievement of economic and scientific impact. A review – to include the purpose and scope of the PSREs and their relationship to the broader community of independent research and technology organisations (RTOs) and technology centres – is long overdue.

iv. The review should consider whether the UK’s existing infrastructure of publicly-funded centres could be condensed into a smaller number of national laboratories, exploiting more fully their unique facilities, expertise and reputations.

v. The UK must make the most of its existing national technology assets which means: ¾ The government considering PSREs and technology centres as part of a collective national infrastructure, requiring strategic management; ¾ This national infrastructure providing industry with access to an essential range of world- leading specialist facilities, expertise, advice and skills training; ¾ That effective collaboration is realised with academia, industry (notably small and medium sized enterprises);

1 Technology Readiness Levels (TRLs) were initially adopted by NASA and are now increasingly used to describe research from pure (TRLs 1-3) to industrial (TRLs 7-9). The applied research (TRLs 4-6) historically championed by government laboratories and research institutions has suffered in the last two decades as recognised in the Royal Society’s report “The Scientific Century” published in March 2010.

¾ Ensuring that the ring fence around Research Council budgets does not create a barrier to collaboration with and exploitation through other government-sponsored R&D programmes; ¾ PSREs, RTOs and technology centres are incentivised, like the Fraunhofer Institutes, to attract income from industry; ¾ Government working with PSREs, RTOs and technology centres to make it easier for SMEs to access these assets;

¾ PSREs such as NPL, with a horizontally-themed enabling capability (advanced measurement and standards in the case of NPL) funded appropriately to support the new Technology and Innovation Centres.

About NPL 2. The National Physical Laboratory (NPL) is a leading UK research establishment with an annual turnover of £71m and a staff of 620. It is the largest science asset directly owned by BIS and occupies a unique position as the UK's national measurement institute sitting at the intersection between scientific discovery and real world application. Although sponsored by BIS, NPL undertakes work for nearly half the government departments, notably Defra, DECC, MoD, DH. As such its purpose and function have many of the characteristics of the German Fraunhofer model. Its expertise and original research underpin the quality of life, innovation and competitiveness for UK citizens and business:

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

• NPL expertise and services are crucial in a wide range of social applications - helping to save lives, protect the environment and enable citizens to feel safe and secure. Support in areas such as the development of advanced medical treatments and environmental monitoring helps secure a better quality of life for all;

• NPL develops and maintains the nation’s primary measurement standards, supporting an infrastructure of traceable measurement throughout the UK and the world, to ensure accuracy and consistency;

• NPL has a world-class reputation for the quality of its science and an unparalleled record in demonstrating innovation and industrial relevance (the value of its measurement work to UK GDP has been estimated at £2B pa);

• Whilst a key strategic asset for government, NPL is operated by Serco through a “government-owned, contractor-operated” (GoCo) model. This has realised both significant efficiencies of operation and improved outputs and impact (with non-core revenue secured competitively in commercial markets tripling since 2004).

Question 1. What is the Fraunhofer model and would it be applicable to the UK? 3. The Fraunhofer Institutes are a network of application-oriented research institutes which, in the German science and technology support infrastructure, bridge the development gap between university-based research and industrial exploitation. Their mission is to “promote and undertake applied research in an international context, of direct utility to private and public enterprise and of wide benefit to society as a whole”. They “help to reinforce the competitive strength of the economy in their region, throughout Germany and in Europe”. 4. Data published on their own website show that there are 59 institutes with 17,000 staff and a €1,600m annual research budget. One-third of this budget is institutional funding from the German federal and Länder governments (not tied to specific research objectives) and the other two-thirds is contract research income from a mix of private and public sector sources.

5. The Fraunhofer Institutes have evolved to fulfil a particular role in Germany and we believe it is neither sensible nor affordable to suppose that the concept can be imported directly into the UK. Rather, consideration needs to be given to how the applied research infrastructure that is already in place in the UK might be utilised more fully for Fraunhofer-type purposes.

Question 2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 6. In the UK the role of the Fraunhofer Institutes (intermediate, translational research) is fulfilled, in part, by a range of organisations including:

• Public sector research establishments (PSREs) – variously underpinned by funding from government departments, agencies and research councils – and with different statuses including executive agency, trading fund, NDPB and GoCo;

• The broader community of RTOs – underpinned to a greater or lesser extent by government contracts – and with profit-distributing and non-profit (including member-based) statuses;

• Technology centres – founded and underpinned by funding from public sources including, principally, the Regional Development Agencies;

• Centres linked closely with universities and involving a number of industrial partners. 7. These organisations have diverse missions that may include elements of curiosity-led research and large-scale process demonstration and prototype evaluation, as well as intermediate Fraunhofer-type activities. All derive additional income, to some extent, from the private and public sectors through the supply of services and contract research and participation in collaborative R&D. 8. The GoCo model at NPL has been particularly effective at leveraging benefit from government- sponsored R&D programmes into UK business. NPL has seen significant growth in the uptake of knowledge generated from these government programmes evidenced through a tripling of NPL non- core revenue over the last 6 years (from £8M in 2004 to £24M in 2010). 9. What is notable about the UK system is that is uncoordinated: each PSRE and technology centre develops a forward strategy in partnership with its parent department or agency, but this is done largely in isolation from other centres. Furthermore, such core parts of the nation’s technical infrastructure are rarely considered as strategic assets with long management chains between Ministers and the organisation often in place. The only common influence is the Technology Strategy Board through its widely-disseminated strategy documents and its directed Calls for Proposals for collaborative R&D. There are undoubtedly inefficiencies, duplication and gaps in the UK system, in terms of investment in specialist facilities and expert manpower. There has been no strategic review of PSREs since the 1970s when the Rothschild customer-contractor principle was introduced, and such a review – to include the purpose and scope of the PSREs and their relationship to the broader community of RTOs and technology centres – is long overdue. 10. The ring fence around Research Council grants can be a barrier to collaboration with academic research and its exploitation through PRSEs and RTOs. For example it hinders the alignment of the government-sponsored programmes delivered by NPL with those of the Research Councils.

Question 3. What other models are there for research centres oriented toward applications and results? 9. The United States supports a range of “national laboratories” underpinned by funding from federal sources, notably the Departments of Energy and Defense. The National Physical Laboratory’s US counterpart is the National Institute of Standards and Technology (NIST) which is an agency of the Department of Commerce. These national laboratories have broad remits in nuclear technology, renewable energy, health, defence, security, etc., including a major commitment to application- oriented research, and are variously managed by public and private sector consortia or as government agencies. They are networked into universities, companies and government. The US model has its own inefficiencies but, like the Fraunhofer network, recognises the strategic value of institutions with

specialised (often nationally unique) facilities and deep expertise, sustained and deployed on long- term programmes on which both government and business can rely. 10. A review of UK PSREs should consider whether the UK’s existing infrastructure of publicly- funded centres could be condensed into a smaller number of national laboratories, exploiting more fully their unique facilities, expertise and reputations.

Question 4. Whose role should it be to coordinate research in a UK-wide network of innovation centres? 11. At the strategic level, the Government Office for Science has a key role to play, in ensuring that the broader needs of government are served as well as the needs of business. The network of Departmental Chief Scientific Advisors under Professor Sir John Beddington’s co-ordination, has been increasingly successful in examining cross-cutting Departmental issues. The Department of Business, Innovation and Skills (BIS) is clearly well placed to oversee the co-ordination of research across the network of innovation centres. However, it is important that these activities are seen at the heart of government. For example, the Director of NPL’s sister institute in the US – NIST – reports directly into the Secretary for Commerce; NPL’s Director reports through six extra layers with its capabilities to meet the needs of government rarely at the forefront of Department’s thinking. 12. The Technology Strategy Board is the only organisation currently positioned to undertake this role, through its links across government and into the devolved administrations, regional development agencies and research councils and as the principal channel of government funding for innovation- related R&D.

Question 5. What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 12. Currently the government plans to invest £200m over four years in “a network of elite Technology and Innovation Centres to drive growth in the UK’s most high-tech industries” which will “bridge the gap between universities and businesses, helping to commercialise the outputs of Britain’s world-class research base”. Our expectation is that there may be a dozen or so (at most) of these centres. 13. Clearly this will not compete with the scale and scope of the Fraunhofer Institutes and there will be a major continuing role for the work of the PSREs, RTOs and other existing centres, especially in application-oriented, translational research. The new centres should not replicate the work of the PSREs and RTOs. There may be a case for recognising some of the work conducted by existing PSREs as Fraunhofer-type institutes. Thus, NPL (along with its academic and industrial partners) is promoting its Centre for Carbon Measurement as a key enabler to support the low carbon economy and the continuation of London as the centre of the global Carbon market (>£100B in 2009 and predicted to be >£1,000B by 2020); such a Centre would build on the world-class applied science, governance and technical infrastructure already in place and is ideally placed to maximise the impact of additional funding as a Technology Innovation Centre. 14. We believe that the UK must make the most of its existing national technology assets which means:

• The government considering PSREs and technology centres as part of a collective national infrastructure, requiring strategic management;

• This national infrastructure providing industry with access to an essential range of world- leading specialist facilities, expertise, advice and skills training;

• PSREs, RTOs and technology centres incentivised, like the Fraunhofer Institutes, to attract income from industry;

• Government working with PSREs, RTOs and technology centres to make it easier for SMEs to access these assets;

• PSREs such as NPL, with their horizontally-themed capability (measurement and standards in the case of NPL) funded to support the new Technology and Innovation Centres;

• Stronger co-ordination and rationalisation of technology centres to achieve significant efficiencies and critical masses of world-leading applied research capabilities.

Declaration of Interest 15. NPL is managed on behalf of the Department of Business, Innovation & Skills (BIS) under the GoCo model by NPL Management Limited, a wholly-owned subsidiary of Serco Group plc. NPL receives approximately two-thirds of its funding through the National Measurement System sponsored by BIS.

Dr Brian R Bowsher Managing Director National Physical Laboratory

30 November 2010

Written evidence submitted by the Association of Independent Research and Technology Organisations (AIRTO Ltd) (TIC 12)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1. The Fraunhofer model is used by 59 institutes operating in Germany under the umbrella of the Fraunhofer Gestellshaft. These institutes have an annual budget of €1.6 billion and employ 17,000 staff.

1.2. The funding of these institutes is ⅔ from industry and publicly funded projects, and ⅓ core funding from federal and state sources. The core funding allows the institutes to invest in infrastructure in the form of facilities, capital equipment, and underlying technology. This allows the institutes to support the strategic aims of the region or overall nation, and also to make significant changes in technical focus where this is required by regional/national strategy or the needs of industry. This core funding also allows Fraunhofer Institutes to participate in EU Framework research projects, where the level of funding from the EU project is a percentage of the full cost and the remainder must be met by the institutes’ own resources.

1.3. Fraunhofer Institutes claim to work at every Technology Readiness Level1 (TRL) from 1 to 9, but their main area of interest is between the academic work of universities and the production activities of industry - ie TRL 3 to 7.

1.4. Fraunhofer Institutes have a clear focus on delivering to an industry agenda, with project timescales and outputs that are specifically and carefully designed to be readily assimilated by industry.

1.5. Each Fraunhofer Institute has a specific technology focus, but operates across a range of industrial sectors.

1.6. Each Fraunhofer Institute is aligned with a specific university that has strength in the technology focus of the Institute. The head of the Fraunhofer Institute is a professor at the university, although the majority of their time is spent at the Institute.

1.7. The core, permanent staff are a minority at the institute (typically 20 - 25%) with the majority of researchers being PhD students or post-docs. The normal expectation for these latter researchers is to stay at the institute for ~ 5 years, and then move into industry. This has advantages in that there is a flow of qualified researchers into industry, but does limit the long-term core continuity and competences of an institute.

1 Technology Readiness Level - a classification system devised by NASA, see http://www.nasa.gov/topics/aeronautics/features/trl_demystified.html

1.8. The overall Fraunhofer Gestellschaft has an independent institutional status, and provides cores services and interacts with the federal government. However, each Fraunhofer Institute has a significant level of autonomy. This can lead to overlapping of technical focus between institutes, but this is controlled and minimised by liaison between individual institutes and groups of institutes, and can be beneficial where specific institutes are serving their local or regional industry.

1.9. The “Fraunhofer” brand is strongly promoted. This has not always been the case, and the parallel Helmholtz Institutes in Germany do not have an equivalent strong branding.

1.10. The Fraunhofer model does require a major, continuing investment of public funds at both the state and federal level.

1.11. Attempts have been made to set up Fraunhofer Institutes or centres outside of Germany (in France and the USA for example). These have not achieved the success of the institutes in Germany.

1.12. There is a significant level of collaboration between UK research organisations and Fraunhofer Institutes, particularly through working together on EU Framework projects.

1.13. Adopting the Fraunhofer model in its entirety in the UK is not appropriate, as it would replicate an already existing, successful infrastructure of applied research organisations.

1.14. What is needed is a set of measures to increase the effectiveness of existing UK applied research resources to meet the strategic aims of the UK and its industry. This will be achieved by implanting the core funding component of the Fraunhofer business model and the activities that it entails with the best of the existing UK applied research organisations. In these instances, access to a core funding stream will significantly increase the impact which these existing bodies can make on industry, wealth creation and economic growth.

1.15. Public investment in the best of the existing UK applied research organisations will be far more cost effective than introducing a new network of Fraunhofer type institutes. Furthermore, the highly organised and strongly branded German model is not appropriate in the UK, where industry needs for applied research vary from sector to sector, and no “one size fits all” model will give optimum efficiency.

1.16. However, there are already some elements of the Fraunhofer model that are the same as those used in UK applied research organisations, and some Fraunhofer Institutes did consult with UK research organisations early in their development to understand how to work with industry. Common elements are effective collaboration with industry and working with relevant universities for the provision of underpinning academic research. The missing component in the UK applied research organisations is the ⅓ core funding, which in Germany comes from federal and state sources.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1. There are no direct equivalents of the Fraunhofer institutes in the UK, but there is a network of applied research organisations that undertake a similar role.

2.2. This UK network comprises organisations based on a range of business models:

• Public Sector Research Establishments (eg NPL). • University “spin offs” (eg Warwick Manufacturing Group, AMRC). • Independent Research and Technology Organisations configured as companies limited by guarantee or charities, governed by industry (eg BRE, Campden BRI, TWI). • Privately owned, commercial research and development organisations (eg QinetiQ, Cambridge Consultants, PA Technology). • Corporate research functions and laboratories (eg ARUP, Tata, IBM, GSK).

2.3. The first three categories are driven by an overall mission to support their specific technology or technologies, and to work to the long-term benefit of industry in general. They also maintain a strong symbiotic relationship with UK academia.

2.4. Many of these organisations are extremely successful, working with industry worldwide. A report from Oxford Economics commissioned by AIRTO2 demonstrated the economic impact of these organisations on the UK. It concluded that they contribute at least £3 billion per annum to UK GDP. They are particularly good at linking up supply chains from which the aforementioned report and earlier reports show that much of industry’s innovation is derived.

2.5. Where they differ from the Fraunhofer Institutes is the lack of core funding from government. This limits their ability to:

• Liaise with academia. • Renew core knowledge. • Invest in new facilities and equipment. • Address the evolving strategic needs of the UK and UK industry.

2.6. None of these necessary and very important activities can be fully financed from margins on collaborative and single client industry projects alone. By their very nature, applied research organisations do not have product businesses from which profits can be taken to fund such core activities.

2.7. Some public sector research organisations do receive core funding from government, but this funding is not targeted at the strategic needs of industry. Rather it is to perform a national service, such as the responsibility for standards

2 “Study of the Impact of the Intermediate Research and Technology Sector on the UK Economy”, Oxford Economics, May 2008, see http://www.airto.co.uk/oxfordeconomics.pdf

and measurement performed by NPL.

2.8. It is worth noting that the UK began to explore an equivalent of the Fraunhofer model with Faraday Partnerships in the 1990s. However, with a piecemeal approach and a variety of governance models, the initiative was not uniformly successful and was replaced by the more limited knowledge exchange focused activities of the Knowledge Transfer Networks (KTNs) from 2004. KTNs are now administered by the Technology Strategy Board, and have a very different mission from that of the Faraday Partnerships. Therefore, they are of limited relevance to the current debate on Technology Innovation Centres and the Fraunhofer model.

3. What other models are there for research centres oriented toward applications and results?

3.1. As discussed above in 2.2, there are a number of existing models for applied research centres in the UK. The generic term used for such centres in the UK (and particularly in Europe) is Research and Technology Organisations (RTOs).

3.2. A number of the independent research and technology organisations were originally formed as Research Associations in the 1920s and 1940s. As discussed above, they are now generally companies limited by guarantee or charities with specific constituencies of industrial interest. These are successful institutions operating in a commercial world, often with clients worldwide. Their involvement in research to support the needs of UK national strategy has declined over the last twenty years, with the move to concentrate core public funding for research on the universities. However, they are equipped and willing to resume this “national” role.

3.3. Industry owned research centres have been in decline, and many have been closed in favour of contracting with universities. An example of the latter is the Rolls Royce University Technology Centre (UTC) network. However, Rolls Royce has realised that this network does not fill its need for applied research, and has recently been developing organisations specifically to bridge the gap between academia and industry.

3.4. A number of new organisations have come into existence to address the need for applied research and for bridging the gap between academia and industry. These organisations have a similar role to the existing organisations discussed in 3.2, and are based mainly on new technologies or application domains. The setting up of many of these has been supported by the Regional Development Agencies (RDAs), but they are also often compromised in their strategic work by the lack of a core funding stream. Examples of these organisations are the Institute for Sustainability (London), the International Space Innovation Centre (Harwell), the Advanced Manufacturing Research Centre (Sheffield), the Manufacturing Technology Centre (Midlands), the National Composites Centre (Bristol), and TWI regional centres (Middlesbrough, Sheffield and Port Talbot).

3.5. There are also the commercial research and development organisations and consultancies. These are generally targeted at high TRL development projects directly for industry, and are not structured to operate as open research and application centres. They are therefore of limited or no relevance to this current debate on TICs and the Fraunhofer model.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1. The logical organisation to undertake this role is the Technology Strategy Board (TSB). This would be congruent with government policy and the current role of the TSB.

4.2. This coordination could be undertaken by the Department of Business, Innovation and Skills, but this would represent a u-turn in policy and potentially cause a conflict in roles with the TSB.

4.3. A third party organisation could be set up to administer a UK-wide network of innovation centres, but again this would seem to duplicate and conflict with the role of TSB.

5.1. There will be little or no effect on PSREs and other existing research establishments if the proposed investment in such institutes is based on the existing infrastructure to enhance the activities of organisations with an already proven track record of excellence. New organisations would only be required where there is no current provision.

5.2. The development of such centres based on the existing infrastructure could benefit other UK research organisations, as it will exploit the already existing collaborative links.

5.3. However, if a new network of Fraunhofer-type institutes was introduced, ignoring the capabilities of the existing infrastructure and duplicating resource, there would be a massive effect on the viability of both the new and existing research organisations, with a corresponding detriment to UK efficiency.

6. Summary

6.1. The Fraunhofer model demonstrates how the effective use of core funding for applied research organisations can support the national industrial strategy.

6.2. The UK has an existing, comprehensive infrastructure of applied research organisations working for industry worldwide, but maintaining strong links with UK academia. The combination of this existing infrastructure with core funding will enable the UK to meet the strategic needs of national industry in an effective and cost efficient way.

6.3. There is a similar situation in France, where they have developed a system of “Institute Carnot” which involves selected existing research organisations receiving core funding to allow them to address national strategic issues. 7. Declaration of interests

7.1. This submission is made by the Association of Independent Research and Technology Organisations (AIRTO). The organisation represents research organisations and technical consultants, operating in the space between the academic research of universities and the commercial needs of industry. AIRTO members undertake research and development, and knowledge and technology transfer. They are largely funded by industry, but do undertake competitively bid projects supported by UK and European public funding programmes. AIRTO currently comprises 37 independent organisations, employing more than 20,000 scientists and engineers, with a combined annual turnover in excess of £2billion.

The members of AIRTO are:

Aircraft Research Association Limited (ARA) ARUP ATcare BMT Group Limited BRE Group The Building Services Research and Information Association (BSRIA) Campden BRI CERAM Research Ltd City University London CIRIA E-Synergy Ltd FIRA International Ltd Halcrow Group Ltd Health and Safety Laboratory (HSL) HR Wallingford Group Ltd (HRL) Institute for Sustainability ITRI Limited Leatherhead Food Research LGC MIRA Ltd The Motor Insurance Repair Research Centre (MIRRC) National Metals Technology Centre (NAMTEC) National Physical Laboratory (NPL) National Nuclear Laboratory (NNL) The Paint Research Association (PRA) Pera Group QinetiQ Quotec SATRA Technology Centre The Scottish Whisky Research Institute (SWRI) The Smith Institute Smithers Rapra Technology Limited The Steel Construction Institute (SCI) Thames Innovation Centre Ltd (TIC) TRADA Technology Limited (TTL) TWI Ltd University of Surrey

Prof. Richard Brook President AIRTO

November 2010

Written evidence submitted by the National Nuclear Laboratory and Dalton Nuclear Institute, University of Manchester (TIC 13)

Technology Innovation Centres

1. The National Nuclear Laboratory (NNL) and The University of Manchester’s Dalton Nuclear Institute (Dalton) are pleased to present evidence to the Science and Technology Committee on the topic of Technology Innovation Centres (TIC). We are submitting a joint statement because the deep working relationship between our institutions represents the underlying intent of the TIC concept when applied to the global market for nuclear science and technology. We have followed the development of this important concept from the publication of The Current and Future Role of Technology and Innovation Centres in the UK by Dr. Herman Hauser, through the recent announcement by the Prime Minister and further development by the Technology Strategy Board (TSB). While we understand that the TSB is developing the criteria and process for TIC designation, the NNL and Dalton have been jointly developing a preliminary concept of a Nuclear TIC. Our response to the Committee’s inquiry is focused on each of the questions posed in the inquiry’s terms of reference. As described further below, both the NNL and Dalton declare their strong interest in pursuing TIC designation.

1) What is the Fraunhofer model and would it be applicable to the UK? 2) Are there existing Fraunhofer-like research centres within the UK, and if so, are they effective?

2. The Fraunhofer model, among others as described in detail by Hauser, seems to us to be applicable to the UK primarily in that it provides the ‘translational infrastructure’ to bridge the innovation spectrum between academic science and industrial deployment. Such a bridge has emerged in the market for nuclear innovation in the UK, and could be further developed. Our focus in this response to the Committee’s inquiry is focused on that opportunity.

The NNL, created in July 2008, is owned by the UK Government and operated by a consortium of Serco, Battelle and The University of Manchester. The NNL’s mission is to: • Profitably deploy nuclear technology to a broad range of national and international markets; • Provide independent, authoritative advice on nuclear issues; • Be the employer of choice for nuclear scientists and engineers, with a highly motivated and empowered workforce working in state-of-the-art facilities.

Dalton, created in 2005, is the focus of the growing nuclear research and higher learning capability at the University of Manchester. Dalton aims to: • Undertake leading-edge nuclear research of high impact that is relevant and responsive to the needs of industry; • Deliver through-life higher learning that encourages the study of science and engineering, equips graduates for professional employability, and enhances careers in the nuclear industry; • Engage effectively with the regional, national and international nuclear community through strategic partnerships that enhance capability.

3. The NNL and Dalton have established a close working partnership that includes joint appointments of senior staff, managerial support to the development of the Dalton Cumbria Facility, faculty and student access to the NNL’s state-of-the art facilities, and joint development of an evolving strategy to integrate academic, national lab and industrial innovation in nuclear science and technology.

4. As such, the NNL-Dalton partnership shares with the Fraunhofer model the following key roles as defined by Hauser:

• NNL and Dalton collaborate on R&D projects using a seamless team approach. NNL provide an industrial focus for the basic research and Dalton provide underpinning science and technology input to the application. • NNL staff hold Visiting Professorships at Manchester and Manchester academic staff hold Visiting Senior Research Fellowship posts at NNL. • Dalton undertakes basic nuclear research using approved third-party access to NNL facilities and in collaboration with several UK universities. • The NNL serves as ‘translational infrastructure’ in that it carries out applied research and bridges the spectrum between academic nuclear science and commercial technology deployment by industry. This is being accomplished in both established and emerging sectors of the global nuclear market. • Jointly NNL and Dalton operate a collaboration model working closely with other Universities, research organisations and the nuclear industry in the UK and internationally to provide an extended UK capability. • The NNL and Dalton together are building capabilities to enable SME’s to innovate: knowledge management and transfer systems, facility access and expertise, and nuclear technology cluster development. • The NNL and Dalton support commercialisation by companies both by licensing internally-generated IP and by helping externally-generated IP to scale up to commercial deployment or adapt to the nuclear market. • The NNL and Dalton are helping to develop a highly skilled workforce through major educational programmes, internal development initiatives, and participation in national skills initiatives.

However, three key elements of the Fraunhofer model are presently not in place at the NNL or Dalton:

• The NNL and Dalton are focused on the nuclear sector and not on a wide variety of sectoral fields, although we are both steadily expanding the range of technological applications of nuclear science, for example a joint initiative to transfer technologies among the nuclear and medical sectors. • The NNL receive no core funding from Government, and instead sustain our financial position by winning contracts for public and private sector contract research, technical services, and commercialisation of IP. Dalton’s research portfolio is sustained through funding from Research Councils, Government Departments, industry, and international contracts. • Since no formal network of TICs exists in the UK, neither the NNL nor Dalton enjoy the branding benefits obtained by the Fraunhofer network of institutes.

3) What other models are there for research centres oriented toward applications and results?

5. Fraunhofer does not operate a nuclear technology institute as such, which provides an opportunity for the UK to develop a significant competitive niche in the global market, building on its rich heritage in nuclear science and technology. Thus both NNL and Dalton are very interested in the TIC initiative, as it would potentially address some of the key gaps in the desired innovation model described by Hauser.

6. It is also worth noting that several national laboratories operated by other countries (eg., France, US) provide a model for research oriented toward applications and results, as those labs are clearly positioned between academic science and industrial deployment, providing the facilities and expertise needed to bring scientific discovery into practical application through a time-tested process of research, development, testing and demonstration. This process allows the needs of key stakeholders such as regulators and venture capitalists to be addressed, providing for more effective and timely commercialisation of innovative research.

4) Whose role should it be to coordinate research in a UK-wide network of innovation centres?

7. We understand that the TSB has the responsibility to define and initiate the TIC programme. We believe that the TSB is also the appropriate agency to coordinate TIC research over the long term, although this would represent a significant addition of scope to the TSB’s historic role. We very much appreciated the opportunity to serve TSB’s strategic interests by preparing A Review of the UK’s Nuclear R&D Capability in 2009, and are pleased that TSB is now funding innovation by the nuclear sector. The TSB is focused on the role of innovation in economic development, thus encouraging new business creation and growth, and has an admirable track record in this regard. Unlike the Research Councils, which are focused largely on academic science and research, the TSB has a strong relationship to industry, on whose needs TICs need to be oriented. The TSB may need to expand its stakeholder networks in order to coordinate TIC activities.

5) What effect would the introduction of Fraunhofer-like institutes have on the work of Public Sector Research Establishments [PSREs] and other existing research centres that undertake Government sponsored research.

8. In general, for PSREs and other research institutions not designated as TICs, one could predict a certain amount of initial ambiguity as the TICs are added to the overall mix and establish their operations. However, over the longer term, it might be expected that the TICs would reach out to a variety of research institutions to further their collective aims, and thus develop and adapt their respective missions, scopes and operations accordingly. The most important factor will be for the TICs to demonstrate a positive impact on UK innovation on a global scale.

9. We have also been evaluating this important question from the perspective of the UK’s nuclear science and technology sector specifically. We believe that the NNL-Dalton partnership reflects the successful attributes of the Fraunhofer and certain other models. We have initiated discussion to explore the potential of a Nuclear TIC. We envision a hub-and spoke approach to integrating the nuclear research capacity of the UK to achieve TIC objectives. The NNL would be positioned between academia and industry to provide the translational infrastructure necessary for commercially viable innovation. Dalton, which has developed as the UK’s premier nuclear science institution, would anchor the academic end of the nuclear innovation spectrum. Operating generally at Technology Readiness Levels (TRL) 1-3, the nuclear science community conducts exploratory proof-of-principle research, generally at small scale, using low amounts of radiation or surrogate materials, and operating from non-licensed sites. The NNL converts science into technology, generally at TRL 4-7, using larger quantities of higher-activity materials in appropriately licensed facilities, and scaling up technologies to establish commercial viability. Industry, generally operating at TRL 8-9, develops full-scale technologies as marketable products. We will expand our existing partnerships with leading nuclear organisations such as the Nuclear Advanced Manufacturing Research Centre, Rolls-Royce, EDF Energy, Westinghouse, Serco, the Atomic Weapons Establishment, Nuclear Installations Inspectorate, AMEC, and the Nuclear Decommissioning Authority to establish an Implementation Board that will anchor the industrial deployment end of the innovation spectrum as part of the Nuclear TIC hub, interacting with industrial nodes in both the supply chain and customer communities. This will establish a delivery mechanism that networks into all aspects of the UK nuclear industry in order to accelerate and expand innovation through to commercial deployment. An integrated innovation approach is one means of reversing the fragmentation of the UK nuclear industry that has taken place over the past three decades, and regain international market leadership.

10. Designation as a TIC, reflecting the positive global image of the Fraunhofer model, would provide immediate network benefits, both with the global nuclear industry and with other TICs in the UK. Innovation often occurs at the boundaries between technology centres, and we see strong opportunity for

technology transfer between the nuclear and other sectors, such as medicine and space. The nuclear sector is much broader than a form of low-carbon energy, having major applications, for example, in sensors and imaging, decommissioning and security.

11. In addition to serving the innovation needs of the nuclear industry directly, a Nuclear TIC could act as the focus for ‘nuclearising’ technologies transferred from other sectors into nuclear applications, and vice- versa, thus creating commercial opportunities. Further, a Nuclear TIC could assist in providing informed input to the UK on nuclear energy options for the future as a strategy advisor. This would help position the UK to take advantage of major international initiatives.

12. There may be some re-balancing of funding for R&D that could impact on the capacity of the UK to undertake traditional University research. Engagement in TICs by Universities such as Manchester, that have invested strategically in key areas such as nuclear, will ensure that an appropriate balance is maintained between fundamental and applied research, and will maximise the opportunity to commercialise the most promising research developments. Such engagement will also open up the opportunity for academics to engage in the development of their own research.

13. To conclude, the NNL and Dalton jointly commend the Science and Technology Committee for examining the TIC concept. We believe that it is a fundamentally sound approach, reflected in the success of the Fraunhofer and other models. We will be interacting with TSB in the next few months to evaluate a Nuclear TIC within the UK’s innovation landscape.

Mike Lawrence Manager Director National Nuclear Laboratory

Professor Andrew Sherry Director Dalton Nuclear Institute The University of Manchester

30 November 2010

Written evidence submitted by National Renewable Energy Centre Ltd (trading as Narec) (TIC 14)

Background to Narec

1.1 The National Renewable Energy Centre (Narec) is the UK’s national centre for accelerating grid integration of renewable energy systems and catalysing the development and deployment of offshore wind, marine and photovoltaic energy generation technologies.

1.2 Narec is a not‐for‐profit organisation. Our primary purpose is to secure economic, social and environmental returns for our public and private sector clients by undertaking research, development and deployment projects in the field of renewable energy technology.

1.3 Narec’s highly experienced, multidisciplinary team of 120 scientists and engineers operate some of Europe’s largest translational research and testing facilities for electrical networks, offshore wind, marine and tidal power generation technologies. Our clients range from large multi‐national companies, to technology start‐ups, local authorities and major investors in renewable energy projects.

In addition to our technical role, we play an important role in supporting delivery of the government’s policy objectives and attracting and anchoring internationally mobile investment to the UK. Clipper Windpower, for example, is building the prototype of the world’s largest wind turbine at Narec.

1.4 Narec undertakes mission‐oriented research, development and demonstration projects between Technology Readiness Levels 3 and 8, the range between proof‐of‐concept and system test and demonstration. We are organised and managed as a business, with strong industrial processes and norms and are highly flexible in terms of the nature, length and complexity of the projects we undertake.

1.5 Our technical assets are sized to address the problems and issues faced by companies seeking to develop and demonstrate technologies at full scale. We operate one of the world’s largest ultra high voltage testing laboratories and are currently constructing the world’s largest wind turbine blade testing facility which will be capable of testing 100m long blades.

Other key facilities include: the UK’s only independent Photovoltaic R&D, prototyping and short run manufacturing Centre (PVTC); a new 3MW marine drive train development and testing facility; a 100MW offshore wind turbine demonstration facility off the Blyth coast. We are working with the Energy Technologies Institute on the development of Project Fujin, the world’s largest wind turbine drive train testing facility rated at 15MW.

1.6 Narec adopts an open access model and collaborates very closely with a global network of universities, businesses and governments to secure breakthroughs in the design, deployment and commercialisation of renewable energy technologies. We have been successful in securing a wide range of European (e.g. FP7) and national research and development projects and have worked with over 60 UK and international universities.

Consultation Questions

2.1 What is the Fraunhofer model and would it be applicable to the UK?

2.1.1 The Fraunhofer‐Gesellschaft is a not for profit organisation that undertakes applied research in a broad range of scientific and technical disciplines. It has a core mission of pursuing research of practical utility and occupies a position in the innovation system between the types of research traditionally undertaken by university and industry.

2.1.2 The Fraunhofer model has evolved over time. The current model, which has been relatively stable since the mid to late 1970s, has seen the Fraunhofer Society generate about 30% of its income from industrial contracts, with a further 30% from specific government projects and the balance made up in a 9:1 proportion from federal and state government grants.

This funding model encourages a focus on applied research but also provides freedom to develop key organisational competencies and autonomous priorities. The model applies to both the Society itself and its individual institutes.

2.1.3 The Fraunhofer model has developed over 60 years, with a number of significant iterations, to address Germany’s particular needs, priorities and policy approach. It is likely to be very difficult to successfully import the model without adapting it to the very different UK social, economic and business environment. That said, some of the core elements of the Fraunhofer model have attractions for policymakers seeking to address key gaps in the UK innovation system.

2.2 Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

2.2.1 The Fraunhofer Society is a very large, successful and mature organisation. From humble beginnings in 1949, it currently has some 80 research units employing in excess of 17,000 staff and an income of over €1.6 billion per annum in 2009. There are no analogous organisations with such scope, scale and history in the UK.

2.2.2 The UK has a very rich and diverse innovation ecosystem which is both a strength and weakness. Whilst there are no direct analogues to the Fraunhofer, a wide range of organisations operate very successfully in the continuum between industrial application and academic research.

Organisations like MRC Technology, Warwick Manufacturing Group, the Advanced Manufacturing Research Centre, National Renewable Energy Centre (Narec), Centre for Process Innovation (CPI) and the European Marine Energy Centre (EMEC) operate with very different business models but are nevertheless successful because they are tailored to the needs of the very different industries, technologies and markets which they are targeted at.

2.2.3 In the North East of England, Narec and CPI have similarities to the Fraunhofer model. They are both translational research centres that operate at TRL levels 3‐8. They occupy a space between industry and academia, are building a critical mass of UK‐based expertise and globally competitive testing and development assets, are focussed on growth sectors and technologies of significant economic importance and are required to undertake industrial and state funded (e.g. TSB, FP7) research to supplement their income.

They have a mix of industrial and public funding. Narec, for example, generates nearly half of its operating revenue from commercial contracts. Importantly, both Centres have explicit economic development objectives and their contribution to the rebalancing of the regional and national economy towards new high growth sectors is a critical measure of success.

2.2.4 To date, both CPI and Narec have been very effective in relation to the delivery of contractual obligations to their public and private funders. In particular, they have been, and continue to be, key players in the economic rebalancing of the North East of England.

They have successfully performed their intended purpose as disequilibrating investments targeted at securing a strong and highly visible global presence for their region and the UK in emerging sectors of the economy that have the potential for rapid growth.

2.2.5 Herman Hauser has pointed out that ....’Britain is second only to the US when it comes to quality research; in fact, if you look at the best papers per pound invested, we are number one in the world. But when it comes to commercialisation of products or services, we are not so good.’ The North East Centres were established with the firm intention to shake up the status quo and implement new approaches to address this problem.

2.2.6 Key challenges for the future will include: ensuring momentum towards the development of a viable, globally competitive UK specialisation in the commercial exploitation of technologies in key competence areas; further enhancing linkages with UK and international universities; retaining the financial flexibility required to invest ahead of market needs (3‐7 years) in order to retain market leading competencies.

2.3. What other models are there for research centres oriented toward applications and results?

2.3.1 There is a wealth of models for research centres oriented toward applications and results. These include push models such as university based technology transfer centres; membership based research associations such as PERA; commercial consultancies such as Cambridge Consultants; not for profit research organisations with charitable status; service based institutes such as VTT in Finland. There is a rapidly growing body of literature that analyses the work of such organisations, albeit utilising somewhat eclectic naming conventions – they are variously called Research Technology Organisations, Intermediary Technology Organisations, Centres of Excellence, Translational Research Centres etc.

Examples of key organisations of interest would include NREL (USA), IMEC (Belgium), ITRI (Taiwan), ETRI (Korea), VTT (Finland), SINTEF (Norway). They all operate in very different policy environments and differ significantly in age, size, mission, funding etc. but share a common interest in the diffusion and exploitation of knowledge. In addition, the Centres established to deal with market failures in the dissemination and utilisation of knowledge rely on a significant financial contribution from the public sector.

2.4. Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

2.4.1 It would be appropriate for the TSB to co‐ordinate a UK network of innovation Centres. They have the appropriate credibility, expertise in programme management and excellent links with the key stakeholders in central government, UKTI, the Research Councils, business, research centres etc that will be essential for successful implementation and the alignment of the innovation centre programme with other policy areas.

2.4.2 As it is unlikely that a ‘one size fits all’ model would be successful across the range of technologies and industries targeted by the TSB, we would encourage sufficient flexibility in the model to enable individual Centres to align their operations appropriately to their target markets. We feel that the requirement for Centres to generate at least a third of their income from industry will help ensure that they are appropriately sensitive to business needs.

2.5 What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

2.5.1 The government’s proposals are for a limited number of Fraunhofer type institutes, with clear commercial and public good objectives, operating in clearly defined areas of science and technology. There should be no undue effect on organisations that focus on delivering services and policy‐relevant information to government.

Andrew Mill Chief Executive

30 November 2010 Written evidence submitted by Professor Lord Bhattacharyya (TIC 15)

Technology Innovation Centres

1. Introduction. As the Director of WMG (Warwick Manufacturing Group) I must declare an interest at the outset of this submission. I set up WMG at the University of Warwick in 1980 with the specific objective of conducting applied research and skills development directed to the competitiveness of UK industry. WMG has grown over the past 30 years to a scale equivalent to one of the larger Fraunhoffer Institutes (on which the Technology Innovation Centres (TICs) in the Hauser review are modelled) – with 300 staff, 150 industrial secondees (rising to 250 over the next year) and a £100M pa annual programme.

2. The Hauser Review. We were impressed with the review undertaken by Hermann Hauser. His analysis of the issues at the interface between the research base and industry are insightful. Indeed we would contend that WMG is already addressing the main issues identified in the report and fulfilling the role of a TIC. This fact is amply demonstrated by the recent decision of Jaguar Land Rover (JLR), under a German CEO well aware of the strength of the Fraunhofer approach, to move its advanced technology research teams to co-locate with WMG staff. 3. Our view is that delivery of the TIC programme would be best achieved by committing to the more effective “TIC-like centres” (such as WMG) that already exist in the UK and growing or establishing new centres only where there are strategically important gaps. It does not take too much imagination to envisage a network of TICs of real merit spread across the country, focusing support and providing technical excellence, international credibility and national leadership for key industrial sectors.

4. Addressing the Select Committee’s Questions. Below we address the specific questions outlined in the call for evidence - i). What is the Fraunhofer model and would it be applicable to the UK? The Fraunhofer model is one variant of many where an “intermediate institution” acts as an interface between industry and research providers (in academia and elsewhere). The Fraunhofer model is noteworthy because of its longevity (>60 years) and sustained balance between longer term core funding and specific industrially funded projects – but is not directly transferable to the UK because of the different levels of national and regional funding made available to the Fraunhofer institutes. However the basic Fraunhofer ethos of offering a more effective interface between the research base and industry (as achieved at WMG) can be more widely adopted in the UK. ii). Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? With all due modesty, we would draw attention to the success of WMG with thirty years track record of improving the competitiveness of UK companies and the effectiveness of UK service organisations. The Select Committee is invited to send a representative to WMG to explore the effectiveness of our partnerships with industry. Some of the ex-Independent Research Organisations (IROs), such as TWI and MIRA, have had noteworthy successes – as have Public Sector Research Organisations (PSREs) such as NPL. The loss of so many of the corporate research labs, and the CEGB and AEA labs weakened the applied research capability serving industry in the UK. iii). What other models are there for research centres oriented toward applications and results? There are other similar programmes to Fraunhofers for “intermediate institutions” working successfully elsewhere in the world – for example the NSF Engineering Research Centres (ERCs) and Industry-University Collaborative Research Centres (IUCRCs) in the US, and the Collaborative Research Centres (CRCs) in Australia. We know from working with the support agencies in US and Australia that the success of the ERCs and CRCs owes more to lessons learned from WMG’s style of operation than from Fraunhofers. iv). Whose role should it be to coordinate research in a UK-wide network of innovation centres? Overall coordination of the TIC programme and core funding should lie with the Technology Strategy Board (TSB). Specific project or other funding could come from a range of public sector, charitable or business sources in the normal way. Each centre should have a “Board” with strong business and relevant local/regional/sector membership. Each centre should be given the remit, and some discretion within its core budget, to pro- actively engage with companies and other research organisations both nationally and regionally. Since many likely TICs already exist and have critical mass, in the majority of cases (other than exceptionally where gaps may exist) one would be talking largely about both consolidating existing funding and, where necessary, increasing core funding to ensure critical mass is maintained. v). What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? The best of the PSREs could take on a TIC role and make a valuable contribution to the national TIC network. But it should not be a right for PSREs to be so classified – and the TIC label should only be retained by any organisation so long as the relevant user sector articulates a clear need and there is on going substantial commitment from partner companies.

5. More effective and efficient delivery of support for technology and innovation in the post-RDA era. Whilst we support unambiguously the TIC concept, we provide below further ideas we believe would make substantial process improvements to the more effective and efficient delivery of support for technology and innovation in the post-Regional Development Agency (RDA) era – where TICs can play a role.

6. We are assuming that at least some of the support previously delivered by the RDAs will be channelled through the TSB maintaining “outreach” to the regions and providing sector specific support. The Local Enterprise Partnerships (LEPs) will have a role to be defined in detail. The focus of this paragraph is on large scale technology or challenge-led support, not on the more generalized business and innovation support for business start-ups or “best practice” support for SMEs etc. where we assume the LEPs will lead. The new regime must satisfy the following requirements: (i) robust prioritization to ensure critical mass of support; (ii) business led, focused on the improved profitability of end product or service to ensure benefit to the UK economy; (iii) much more seamless decision making and support between the Research Councils and the TSB whilst recognizing the primary focus of the former will be TRLs 1-3 and the latter TRLs 4 and above; (iv) fewer “schemes”, shorter decision times, lighter administrative burden. In considering outreach to the regions, where the TICs could play an important role, a range of options present themselves including: a) Change TSB rules on funding allocation so that there is explicit differentiation e.g. across sectors and regions. b) Retain existing TSB rules based on neutrality in design but not neutral in application (e.g. after a selection process adjust funding levels to ensure appropriate regional/sectoral coverage). c) Change allocation rules in terms of targeted technologies and targeted sectors so that funding is spread around regions according to current and evolving industrial distribution of high technology plants or firms and more general technological competence or capacity. (d) Retain existing allocation rules but try and improve access to funds by setting up TSB offices outside London to help and advise firms on how best to apply and increase chances of successful application. Our strong preference is option (c), which works with the grain of the market and technology efficiency – and fits perfectly with the TIC approach focused on sector needs whist at the same time able to exploit the strong regional focus of many key sectors (e.g. nuclear in the North West, auto in the Midlands and North East, pharmaceuticals in the South East etc.). The main argument which could be deployed against this option is that it risks becoming locked in to out-dated technologies, and particular centres and technologies that lose their value because the market goes against them. The TIC concept has an element of predict and provide about it on technologies and applications. If we go down this route we need some system to enable a quick and decisive exit when technologies or centres become less crucial.

7. TSB and Research Council funding of technologies or challenges of common interest still need yet better alignment in terms of timing of calls, appraisal processes and decision timescales. A greater willingness to achieve strategic alignment, free from “territorial claims” by funders, is required. There is scope for increased use of joint calls, project assessments and decision making to provide larger scale and more strategic, streamlined support. Many ‘calls for proposals’ are for relatively small sums of funding, with each submission involving significant transaction costs. Delivery of funding should operate genuinely at “arm’s length” from Whitehall. Perhaps the TIC programme will encourage such closer collaboration and ‘pooling of resources’ between Government bodies which can be consolidated across a wider spectrum of their activities?

Professor Lord S K Bhattacharyya Director Warwick Manufacturing Group University of Warwick

1st December 2010

Written evidence submitted by UK Business Incubation (TIC 16)

The purpose of this memorandum is to submit the views of UK Business Incubation (UKBI) for consideration by the Science and Technology Committee in its examination of the Fraunhofer as a model for Technology Innovation Centres (TICs) in this country, and its validity in improving commercialisation of research in the UK.

The ‘Fraunhofer model ‘ refers to “an application oriented research organization which is geared to the needs of its customers , who are from industry and the service and public sectors”. We understand that there are 59 Fraunhofer Institutes in Germany, whose revenue comes two thirds from industry and publicly financed research projects and one third from public sector funding. The majority of their staff are qualified scientists and engineers.

We are confident that other submissions will give details to the Committee of existing research centres in UK, many of them attached to universities, and of the benefits which could be derived by having public sector funds available to extend the number and scope of application orientated research organizations, whether they are part of universities or independent. We wish to restrict our submission to emphasizing that should this enquiry conclude that TICs and the Fraunhofer model are worth adopting, it should be recognized that there is already in existence a network of business incubators which are available to assist high technology spin out activity, and the development of a TIC should be done in cooperation with the business incubators in its area. The structure for helping to commercialise at least some (see below) of the research coming from TICs is already in existence, and it is important that TICs make use of this rather than duplicating it.

It is relevant that in the German Fraunhofer model the majority of the staff are qualified scientists and engineers, which suggests that in a Fraunhofer greater emphasis is given to its role of applied research than to the problems of spinning out and building a sustainable start‐up, which are the skills of business incubation. This is probably not of relevance in the majority of the cases of the exploitation of applied research since these result in licenses which are taken out by large companies who have the structure and skills to make use of the licenses. In the case of M.I.T. in Boston we understand that more than 70% of the exploitation of their research is in the form of licenses: in the case of a particular UK university we questioned the equivalent figure is around 50%. It is probably only a minority of applied research ideas which end up as being the subject of spin out, but it is in these cases that the work of a business incubator is invaluable and is complementary to the work of the TIC.

UKBI represents some 300 business incubation environments in UK. Not all of these are appropriate for working with a TIC, as UKBI is concerned with regeneration (viz job creation through the creation and growth of sustainable small companies in economically deprived area) as well as innovation and growth, viz encouraging start‐ups derived from research which will grow to become major creators of wealth and of jobs. But many of our members are well qualified to work with TICs as they develop, and are willing and ready to do so. It is important that the TICs make appropriate use of this expertise.

Appendix

UKBI

UK Business Incubation (UKBI) was set up twelve years ago as a not-for-profit company, limited by guarantee. It was sponsored by the Treasury and its initial financial backing came from both the DTI and the private sector. It has been self supporting for the last 9 years. UKBI’s purpose was and is to promote the creation of wealth and sustainable jobs through encouraging start-ups and the growth of small companies, including the commercialization of university research and the regeneration of economically deprived areas. It is a national organization, and its board is drawn from business incubators in all parts of the UK. UKBI has worked with all of the RDAs in recent years, as well as the World Bank, the EC and a number of overseas governments. It has a strong international brand, and acts as host for an annual ‘Global Business Incubation Day’ which in 2008 included a reception at 11 Downing Street.

Business Incubation

Business Incubation is a powerful socio-economic development tool that acts as a ‘catalyst’ and a ‘gateway’ for growth, entrepreneurship, and innovation activities as well as industry clustering. It comprises the processes which collectively help start-ups to survive and grow. These include the provision of flexible property leases, availability of shared administration and support services, mentoring, formal and informal peer group interaction, access to university research, access to proof of concept funding, investment readiness counseling, management selection and access to growth funding. Where these processes are made available in a physical location (viz an incubator) the client companies are encouraged to ‘graduate’ from the incubator after say three years, so enabling new companies to be accepted.

With the help of businesses incubation, innovators and entrepreneurs are better prepared to turn their business ideas into successful new ventures that have an above average chance of success and survival. Research undertaken initially in the US and confirmed in the UK (and globally) has shown that business incubators/business incubation environments reduce the risk of business failures, and business incubation practitioners generally report that more than 85% of all firms that have ‘graduated’ from their incubators are still in business. This compares with a ‘standard’ survival rate for start-ups of around 50%.

The business incubation industry has experienced rapid growth over the last 30 years, but the first business incubator started more than 50 years ago in New York. By 1980, there were 12 to 15 incubators operating in the United States and since then the global industry has grown to include more than 9000 incubators worldwide. In the UK, in 1998 (when UKBI was founded by the Treasury and DTI) there were estimated to be around 25, and there are now more than 300 business incubators/incubation environments throughout the UK in urban, suburban and rural situations.

The 300 business incubation environments in UK work directly with around 12,000 clients, including ‘virtual’ clients who make use of and benefit from the incubation processes on offer but are not physically located in an incubator. By way of comparison, in the US incubation assists more than 27,000 start-up companies annually and provides full-time employment for more than 100,000 people generating annual revenue of more than US$17 billion. Research shows that every US$ of public funds devoted to business incubation generates a 30x return on that investment in tax revenues each and every subsequent year.

See http://www.nesta.org.uk/library/documents/Business-incubators.pdf).Independent research by Nesta.

Graham Ross Russell Chairman UK Business Incubation

30 November 2010

Written evidence submitted by DREM Ventures Ltd, Optropreneurs Ltd, Pinacl Solutions UK Ltd and Grounded Innovation Ltd (TIC 17)

1. Introduction

2. The Science and Technology Committee (“the Committee”) is exploring models to improve commercialisation of research in the UK.

3. Based on the recommendations made in two reports (one by James Dyson, one by Hermann Hauser), the Committee is considering Technology and Innovation Centres (“TICs”) to facilitate and engage in technology transfer, thus enabling effective and rapid transfer of ideas from the science base into manufacturing. NOTE: We have adopted Hauser’s phrase “Technology and Innovation Centres” because technology management and innovation are different activities.

4. The Hauser report takes the Fraunhofer model as an example of good practice and strongly supports this model for the UK. The Committee is examining this as a model for TICs in the UK.

5. This submission addresses the issues in the terms of reference, drawing on UK experience and the stated objective of “improving commercialisation of research in the UK”. If the UK is to recover from the economic crisis, an effective TIC network is vital to feed research into UK industry as quickly as possible, while defining and managing risk with adroit management.

6. The terms of reference include examination of other models that have been successful in the UK. This submission presents a model we believe is better suited to the UK, and has a successful track record. This is the business model that was used to create and operate OpTIC Technium in St Asaph for the first five years of its operation. We strongly urge the Committee to examine this model in detail before making a final decision on how the TICs should operate. NOTE: Parliamentary Question 2009/1904 identified OpTIC in the context of the TICs.

7. This submission is made by members of the former management team of the OpTIC, and an independent consultant who worked with the team.

8. OpTIC Technium – an introduction

9. The OpTIC Technium (“OpTIC”) was created in 2003 as a result of an industry-led initiative aimed to provide sustainable growth to an established, high technology, industry cluster in North Wales and the North West. OpTIC was a unique entity. Its main activity was to foster

technology transfer and technological innovation in the cluster. This is consistent with one of Hauser’s recommendations (number 3).

10. The original plan was conceived in 1999 when the Welsh Optoelectronics Forum (“WOF”) initiated various studies of “incubators” and best practice in knowledge transfer across the UK and internationally. The Welsh Development Agency (“WDA) adopted the plan, developed it further, and in 2000 submitted a bid for ERDF funding under Objective 1. This was approved in 2002 and the project resulted in two contracts. The first for the OpTIC building began at the end of 2002, the second, a five-year contract for the management of the business started around a year later. Optropreneurs Limited operated the OpTIC business from January 2004 to February 2009 (five years) when the business was transferred to the new Glyndŵr University.

11. OpTIC predates the Technium concept and was different from other Techniums in that it was managed, from the outset, by the private sector on a not-for-profit basis and designed to become self- sustainable. OpTIC was a successful example of public-private- partnership which operated with support from the Welsh Assembly Government. Other Techniums were WDA “projects” managed largely by WDA staff. Hauser makes the point about a strong brand reinforcing a TIC network – a brand represents a set of values and there were different values between OpTIC and elsewhere in the Technium brand.

12. Since the transfer of OpTIC to Glyndŵr University, the management model has changed dramatically and the strategy of OpTIC has altered very significantly. Consequently all references to the OpTIC model in the following paragraphs will be in the past tense.

13. A key driver of OpTIC’s success was its links with a wide range of partners (locally, regionally, nationally and internationally), in both academic and non-academic fields. OpTIC developed a spirit of collaboration between industry, academia, the financial and legal professions, and public sector. Its purpose was to generate new, high technology businesses, quality jobs and to play a major role in sustaining and growing the existing Welsh Optronic cluster in the region. The cluster's economic performance and employment numbers grew at an impressive rate since the launch of OpTIC: the revenues generated in the opto-electronics cluster around St Asaph increased since 2002 by 37%. (WAG press release).

14. The business model for OpTIC was developed on a thorough understanding of the actions necessary to manage successful technology transfer. Among its objectives was to improve the commercialisation of optoelectronics research in the UK.

15. OpTIC was conceived and operated in the technology development space covered by Technology Readiness Levels (“TRLs”) 2-8, which is a wider span than Hauser proposed for TICs: 3-8. This was because it

had both applied research being conducted in the same environment as product development with incubation companies.

16. Drawing on both the considerable management experience available in the region, and on more general lessons and best practice from two major consultancies, Scientific Generics and Oxford Innovation, the team pioneered a technology incubation, brokering, investment and management model that became OpTIC. As Hauser recommended, OpTIC had a strong governance structure providing strategic direction, as well as operating with a high degree of autonomy. Although Optropreneurs was only initially awarded a 5-year contract, the strategic direction was set over a longer timescale. Hauser also makes the point that a ten-year timescale is appropriate.

17. OpTIC comprised three key, inter-related elements: a business centre, technology centre, and incubation space, each of which was run as a profit centre by the experienced Optropreneurs team who worked to generate a surplus on operations for re-investment to maintain the leading-edge status of OpTIC.

18. The Business Centre – provided business support, workshops and short courses for continuous professional development. The building was used as an asset for events relevant to the UK industry, and for providing hands-on management expertise into the Incubation Centre, thus providing important cash flow in the early days.

19. The Technology Centre – was designed to operate as a world-class facility, performing leading edge product development, research, contract research. Academic staff maintained their University posts while providing support for development projects that had been won by the management. Academic staff did not necessarily have to be geographically close to OpTIC. The activities within the Centre complemented work being carried out in academia and provided a focal point for joint projects. The work in the Centre did not compete with the R&D undertaken by the Universities – in practice it made the ‘Third Mission’ task easier for those Universities that were involved. The operating model was recognised by EPSRC as they established their first Integrated Knowledge Centre (IKC) at OpTIC.

20. The Incubation Centre – provided accommodation for up to 24 new start-up opto-electronics businesses coming from either industry or academia. The business model for OpTIC did not simply provide space to rent in the Incubation Centre: incubation is an active process that needs to be managed. OpTIC would take equity stakes in the incubation companies, thus providing close involvement and support that came from the Optropreneurs management team as well as appropriate external experts – including seed capital funding experts.

21. Incubation Centre start-ups signed up to a limited tenancy in OpTIC after which time they were encouraged to seek larger premises to accommodate their expanding needs. Incubation companies paid a

market rent for the facilities and could also procure other services and access to additional technological resources within the Technology Centre. OpTIC allowed flexibility in the use of these additional services by considering each company’s unique needs and whether services could be provided in exchange for equity (a model that is also often seen in the TV programme “Dragons’ Den”).

22. Evidence of success: In addition to the delivery of the required “project outputs” OpTIC's successes include:

a. The creation of six “centres of expertise” – with cost effective transfers of staff from internationally recognized sources,

b. Awarded status of “UK National Facility for Ultra Precision Surfaces”,

c. Having helped to attract some £20M of research council funded projects into Wales,

d. Enabling the relocation of internationally recognised academics into Wales,

e. The establishment of IP generating alliances and programmes with UK National and International Universities,

f. The generation of several new business ideas being taken forward as candidates for the incubation centre, most of these based on internal IP,

g. Being selected by the Engineering and Physical Sciences Research Council (EPSRC) to host the first “Integrated Knowledge Centre”. This programme provides some £7M of funding over 5 years which will be match funded by industry to deliver leading edge product developments based on precision surface engineering,

h. A rapidly expanding client list of internationally significant corporations,

i. The establishment of an International Corporate Partner Programme with an annual two day Strategic Conference,

j. ISO 9001 accreditation,

k. Awarded “New Business Incubator of the year” (2007) by UK BI,

l. A track record in co-ordinating and winning both UK DTI funded and EU funded collaborative programmes to the benefit of our collaborating partners,

m. Recognised by the EU with a Regiostars Award as the best ERDF-funded project in its class.

23. Management model

24. The OpTIC experience shows that a professional management team, with industrial experience, is well-equipped to make a TIC operate. At OpTIC, the team focused on making a surplus (through a Company Limited by Guarantee) that was re-invested in the business.

25. The principles of management for a TIC do not have to be entirely dependent on the specific technology. It is true that each area of science and technology has different routes to market, but the management processes can be similar in many ways. Thus the management model used at OpTIC can be adapted successfully to the TICs. The principles are not dissimilar from those in the book “The Art and Science of Technology Transfer” by Phyllis L. Speser (2006).

26. The management model for OpTIC was entirely different from that of the Techniums across Wales. It was established by an experienced team of successful managers and entrepreneurs who brought their experience, insights, flexibility and drive to the task of successfully managing technology transfer.

27. As evidence of the importance of the right management approach, we offer comments from Andrew Davies AM, the former Economic Development Minister in Wales. In reflecting on the failure of most of the Techniums, he acknowledged, recently, that "The weaknesses of the Technium concept have been identified over many years. Audit reports on it have said it is very good in principle but delivery is poor.” (Western Mail). He continued, "There was no strategy for the roll out of Technium and it was flawed in terms of its day-to-day management.” Management was, in some instances, carried out by large, commercial, service providers or by bodies close to University technology transfer offices. In all cases, as Andrew Davies observed, the management model was flawed.

28. It is therefore important that the Committee pays particular attention to the quality and type of the management of any TIC. Hauser also makes this point (recommendation 7).

29. IP model

30. The IP model used by the Fraunhofers in Germany has been found to be difficult for some major companies to accept. In discussion with Schott Glas, they said that they had stopped working with the Fraunhofer Institutes for this reason, (comment made during DTI study tour in 2000).

31. Other major companies often find that the Fraunhofer Institutes are becoming competitors, using their public sector funding to provide highly competitive costing in tendering for projects.

32. Hauser makes the point that commercialisation of IP should be a core part of the activity of a TIC. Care should, therefore, be given to an appropriate and fair IP strategy within the TICs. The Lambert model for IP management in collaborative R&D projects has been found to be successful and has been adopted by the Technology Strategy Board (TSB), for example, for their collaborative R&D competitions.

33. The next sections address the terms of reference of this enquiry, drawing on the OpTIC experience.

34. Issue 1: What is the Fraunhofer model and would it be applicable to the UK?

35. A “model” of an organisation is a complex entity and comprises many elements; the most significant being: ethos, funding, and management.

36. The fundamental ethos is for successful “knowledge transfer”. Fraunhofer Institutes focus on applied research, “near to market”. They are not research-driven; they respond to market needs (and are often competing in the market place against other organisations).

37. Achieving the Fraunhofer ethos in the UK is certainly a worthwhile aim, however it is unlikely to be achieved through conventional academic institutes. A different starting point is needed.

38. A TIC, in the sense of “improving commercialisation of research in the UK”, requires a different ethos from either a Fraunhofer or an academic institute. On this issue, we differ from Hauser.

39. The funding model for Fraunhofer Institutes is dependent on contributions from Federal and Regional Government. One third of their funding is provided directly by the state. Further state funding is received through research grants, in open competition with universities – this can be up to a further one third. The final third of their funding comes from commercial contracts.

40. The Fraunhofer funding model will be difficult to achieve in the UK It implies a significant commitment from the State for both the initial setup period and to ensure ongoing budget levels which would be in excess of the current research budget. Different funding models need to be explored for the UK. Hauser suggests some approaches; our experience suggests there are more productive models.

41. During the period leading to the formation of OpTIC and the awarding of the contract, the management of the Fraunhofer organisation visited St Asaph and discussed, in detail, the operational model of the OpTIC. Eventually, they concluded that they could not operate a model without the ongoing funding stream being underpinned by government by at least one third of its annual value.

42. During the tendering process, the WDA had discussions with one company that subsequently decided to withdraw. This company clearly understood the operating model proposed for OpTIC and had concluded that a profit-oriented business could not both make its own profit target, and ensure a surplus to guarantee a sustainable future business.

43. As stated earlier, the management approach is important. In a Fraunhofer, the management tends to be more academic than commercial. Managers and Directors largely come from an academic background although senior administrators may be commercially trained.

44. It is unlikely that more commercial funding models are achievable with a largely academic management team. A more commercial approach is essential, as described earlier in this submission and by Hauser.

45. Issue 2: Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? Many academic institutions perform their ‘Third Mission’ activities through contract research work as well as attempting spin-outs. These are done, however, with different objectives to those of TICs.

46. Issue 3: What other models are there for research centres oriented toward applications and results? As has already been demonstrated, the model for the OpTIC is better suited to the objectives for the TICs than either the Fraunhofer model or technology transfer offices at academic institutions.

47. We recommend that TICs should be established in a manner that is recognised by EPSRC as appropriate for funding. This is described in the OpTIC model (see para 19).

48. Issue 4: Whose role should it be to coordinate research in a UK- wide network of innovation centres? For the UK to gain maximum benefit from the TICs, a collaboration model should be adopted so that the management teams should be autonomous but willing to share best practice between each Centre. We would recommend a Steering Committee comprising the Directors of each Centre, the TSB (also representing the Knowledge Transfer Networks), as well as senior members from industry who can advise on the effectiveness of the TICs. We agree with Hauser on this (recommendation 2).

49. Any TIC Steering Committee should be mindful of the operational differences between the TSB (a facilitating organisation) and a TIC (an enabling organisation).

50. Issue 5: What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? Our answer to this

question presumes that the term ‘Fraunhofer-type’ refers to the potential TIC model.

51. Our view is that the roles of Public Sector Establishments will be enhanced. TICs will be potentially collaborative partners in developing new work that can move forward into the market place. The research establishments will have more freedom to explore areas of curiosity-led research that is often where new directions for technology emerge.

52. Since the purpose of a TIC will be on improving commercialisation, their approach will be different from that of the existing research centres. That is not to say that they may not share facilities, but the management objectives will be different. As we noted before, on this issue, we have a different view from Hauser – based on experience.

53. Additional issues

54. Any TIC will need to be able to work closely with the academic sector and industry. The management team should be drawn from the commercial world, with experience working with the academic sector.

55. Any TIC will need to form strong links with EPSRC, the Technology Strategy Board, and the relevant Knowledge Transfer Networks (KTNs) – across relevant areas of technology and common scientific research (including European Framework programmes, e.g. FP7). These organisations provide strategic direction for the UK’s technology development, while the Technology Innovation Centres provide one route for the successful adoption in the market place.

56. Each TIC should form close links with the relevant industry associations for its sector. Engaging with industry, and doing so effectively from the start, is key to success for a TIC.

Dave Rimmer, Director, DREM Ventures Ltd Trefor Jones, Non-Executive Chairman of Optropreneurs Limited from 2004 to 2009 Geoff Andrews, Chairman, Pinacl Solutions UK Ltd. Antony Hurden, Independent consultant, Grounded Innovation Ltd.

30th November 2010

Brief Biographies and Statement of Interest

The team making this submission was deeply committed to the setting-up and success at OpTIC. The roles each team member held in OpTIC and other interests are set out below. For the avoidance of doubt, none of the team is currently involved with the management of OpTIC or any other similar institute.

Dave Rimmer Director, DREM Ventures Limited

Managing Director and CEO of Optropreneurs Ltd, the management company responsible for setting up and successfully operating the OpTIC Technium, from 2003 to 2009. Prior to this he held a number of senior industrial appointments and has worked in the UK and France. His background is in manufacturing and engineering management and he has considerable experience in product design, technology transfer, and new product introduction. Through DREM Ventures he currently works with entrepreneurs and investors to optimise the potential of new business opportunities. He is currently a member of the STFC Central Laser Facilities Board.

Trefor Jones CBE, LL

Retired in 2001 as Chairman and Chief Executive of Pilkington Optronics – a £150 million business in optoelectronic products and systems. He held this post for 10 years having played a major role in its formation and development. He has over 40 years of experience in high technology businesses. As non- Executive Chairman of Optropreneurs Limited from 2004 to 2009 Trefor brought this experience to the formation a strong industrial based Board which provided key practical advice and strategic direction for the creation and operation of the OpTIC Technium. In addition to his industrial responsibilities, Trefor has also held the post of Deputy Chairman of the Welsh Development Agency, Chairman of the CBI Wales, Chairman of the Training and Enterprise Council for North West Wales, and has also been Chairman of the Conwy and Denbighshire National Health Trust.

Geoff Andrews Chairman, Pinacl Solutions UK Ltd

Former Director of Optropreneurs Ltd. Currently Chairman of Pinacl Solutions UK Ltd, a £12 million business employing over 100 people and working in information technology solutions throughout the UK. Geoff was one of the founders of OpTIC and ran the Business Incubator for 4 years. Geoff is also a business angel and since leaving OpTIC has invested in one of the high tech businesses located in OpTIC, namely View Holographics Limited.

Antony Hurden Director, Grounded Innovation Ltd.

Before creating Grounded Innovation, Antony Hurden worked for 15 years at one of Cambridge’s business and technology consultancies (Scientific Generics, later Sagentia), following 20 years working in engineering companies taking ideas from the laboratory into the market place. His experience includes the management of technology development within large multinationals (Xerox), medium-size companies (W. Vinten Ltd.), and within a small engineering company as Technical Director.

In his consulting career, he worked on the development of the strategy for OpTIC and was also seconded to be part of the management team in the start-up phase He has also worked with a range of private sector companies, public sector organisations (at both RDA and national levels), as well as various universities. He has been working with the Electronics, Sensors, Photonics Knowledge Transfer Network as a sub-contractor.

Written evidence submitted by Professor Peter Dobson (TIC 18)

Technology Innovation Centres Submission on the applicability of the Fraunhofer Model in the UK

I write as the founder of a multi-disciplinary science park that has been created in Oxford to serve the needs of spin-off companies and provide additional interdisciplinary facilities for members of the University who undertake research of a more applied nature.

1. What is the Fraunhofer model and would it be applicable to the UK?

This model has been developed over a period of around 60 years so it is not something that can be instantly transplanted. At the outset, it was developed to undertake applied research that was business driven and it has done this very successfully. The Institutes are very “sector oriented” rather than “technology driven”...although there is an element of the latter.

Recently there has been more emphasis on working with SMEs, but a large amount of their output has fed into large German companies.

Continued state funding for the core activities has always been a component of this model, but with additional funding from the public sector and EU. They appear to have engaged well with the various FP programmes. I understand that at least a third of funding is provided by businesses on a contractual basis.

They offer a very conducive career path for young scientists and engineers and have become an established tradition within the State. I believe there has been a fair degree of mobility between the Institutes and Industry and Universities and this is a valuable way of transferring skills and knowledge.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

There are several that come close: The examples that come to mind are: The Chipping Campden Brewing and Food research Centre http://www.campden.co.uk/ ; The welding research at TWI http://www.twi.co.uk/content/welding_research.html ; The Advanced Materials research Centre at Sheffield http://www.amrc.co.uk/ just to mention three. These cover a spectrum of involvement with universities, ranging from substantial (Sheffield) to fairly minimal (Chipping Campden).

3. What other models are there for research centres oriented toward applications and results?

There are new models emerging in Europe such as the IMEC in Belgium which is the main centre for electronics and optoelectronics in Europe; there is a new centre emerging around the Philips labs in Eindhoven that is serving many new SMEs. The US has a large number of generously funded national laboratories based on funding agencies, but it is not certain how effective these are at innovation. Japan has in the past experimented with setting up transition centres to do pre-competitive research before transferring back into their large corporates. China is setting new examples by having strong applied research in Universities and then setting up very sector-oriented “manufacturing institutes” close by.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

This should be the remit of BIS, administered via the TSB. There is a wealth of information within the Knowledge Transfer Networks that are administered by the TSB. These KTNs already have a lot of business and market intelligence and are well-placed to know what the “needs” are. Ideally, the TSB should have a much larger budget, probably 5-10 times its present level of funding.

Care should be exercised in not duplicating these establishments. However some elements of realism and focus should be applied to these. It is not obvious that these have fostered an inventive or innovative culture in the past, and there is a lot of scope for enhancement, which at the same time could motivate the “resident” scientists and engineers. One of the most difficult, and yet fruitful areas could be at the interface with healthcare.

Conclusion:

The grave situation facing the UK in falling behind competitor countries points towards urgent and focussed action. An enhanced TSB working with business and industry could be effective in coordinating efforts. The interface between the Research Councils and the TSB is already showing signs of moving in the right direction, with more emphasis on impact and “solutions” and this should be encouraged.

Professor Peter Dobson Director Begbroke Science Park Oxford University

30th November 2010 Written evidence submitted by the Centre for Business Research, Judge Business School, University of Cambridge (TIC 19)

Technology Innovation Centres

The Role of TICs in Rejuvenating British Industry

Summary

Since 2007, we have been working on a project to examine how academic research in the physical sciences could be commercialised more effectively. This work has entailed an extensive examination of Germany’s Fraunhofer Institutes and other organisational models on which the TIC concept might be based. It has included visits to leading R&D organisations in Europe, the United States and Far East, as well as public and private sector organisations in the UK. This submission summarises the key findings and makes detailed proposals for how TICs should be selected, directed, managed and funded.

Background

The project has been undertaken as part of the EPSRC funded Cambridge Integrated Knowledge Centre for Macro‐Molecular Materials. The aim of the IKC is to accelerate the commercialisation of a group of plastic electronics and photonics projects in the Cavendish Laboratory and Electrical Engineering Division at the University of Cambridge by attracting industry partners and adopting a more “managed” approach to the portfolio1.

The CBR project has two special features:

• Tracking the IKC technology projects in real time to examine how strategies and expectations evolve, and identify barriers to commercialisation,

• A parallel programme of visits to other “role model” laboratories and organisations in the US, continental Europe, Taiwan and Korea in order to compare their approach with the IKC and identify organisational models and policies of relevance to the UK

This submission and its conclusions are based on this work, which included a high level policy symposium CBR organised in November 2008 with senior speakers from the Fraunhofer‐ Gesellschaft, IMEC, DIUS, EPSRC, TSB and MOD. It also builds on a number of other innovation research projects undertaken by the authors and other members of the CBR, including research undertaken in its capacity as co‐host of the UK Innovation Research Centre (UK~IRC), funded by

1 See http://www‐g.eng.cam.ac.uk/CIKC/ (EPSRC grant reference EP/EO236141/1) ESRC, BIS, TSB and NESTA. Finally, it draws upon David Connell’s experience as founding Chief Executive of an early stage venture capital fund (TTP Ventures), member of the management team of one of Cambridge’s most successful technology “consultancies” (The Technology Partnership plc, now TTP Group plc), and fifteen years experience of providing consulting advice to large corporations on R&D management, technology exploitation and new ventures.

This research has included visits to three Fraunhofer Institutes in Germany and one in the United States. Visits to other “Intermediate R&D Organisations” include the Industrial Technology Research Institute (ITRI) in Taiwan, the Electronics and Telecommunications Research Institute (ETRI) in Korea, The Holst Centre in the Netherlands, the Inter‐University Micro Electronics Centre (IMEC) in Belgium and the Printable Electronics Centre (PETEC) in Sedgefield, County Durham. Our visits to these institutions have been supplemented by interviews with senior people from industry, government agencies and academia in their host nations to provide insight into their operation and level of success. Fieldwork in Japan will take place during early December.

This project is still “work in progress”. Details of some of the results have been published in a working paper2 and this formed the basis of an input to the Hauser Enquiry earlier this year.

Findings: I. Exploitation of Academic R&D

Our research has shown that there are major problems in accelerating commercialisation in conventional university research settings.

• Most externally funded research projects in universities are undertaken by teams staffed by PhD students and post‐docs who tend to move on quickly. As a result it is very hard to retain competence in depth or build the core technology team required to create a spin out business. This is exacerbated by the dominance of short term grants and employment contracts

• The time that must be devoted to writing publications, teaching, supervisions and giving papers at academic conferences means that R&D during a pre‐venture stage can only be advanced in fits and starts

• IP is often not managed throughout a project, but is typically only thought about at the point of considering a spin‐out or negotiating with large users who may wish to commercialise the technology. Past leakages of various kinds and competitor positions may only then become apparent. The problem is particularly acute for the long lead time technologies which typify much academic research as there may be an accumulation of IP over successive projects involving many different individuals attached to a given research group. Failure to protect early inventions (or where appropriate to publish to ensure

2 Mina, A, Connell, D. and Hughes, A. (2009), Models of Technology Development in Intermediate Research Organisations, CBR Working Paper No. 396, Centre for Business Research, University of Cambridge: Cambridge.

“freedom to operate”) can compromise commercialisation opportunities that may arise several years later.

• Pressure to collaborate with industry, coupled with changes in personnel, means that exploitation rights are not always properly thought through or managed over the long term in the way that a commercial organisation or Intermediate Research Organisation such as a Fraunhofer Institute would. This can cause conflicts to emerge later that can restrict the potential for spin‐off or effective licensing and contract research developments with potential commercial funders.

• It is very difficult to accelerate the pace of R&D prior to the stage when a technology becomes ripe for exploitation, for example by increasing the size and commercial orientation of the R&D team during the pre‐venture stage. As a result any competitive advantage can be eroded at this critical stage.

• Universities are not normally equipped with the expertise or resources to take technologies to the demonstrator stage required to attract investment or customer interest

• University academics lack the time and experience to manage a portfolio of projects using stage gate approaches to manage risk and progressively focus funding on the projects which are most promising from a commercial perspective

It is difficult to see how these problems could be addressed within a conventional UK university research setting.

These issues are compounded in the UK because in many areas of technology the natural industry collaborators are foreign companies with little inclination to commercialise in the UK. Spin‐outs, commercialisation partnerships with smaller UK based companies, and a systematic attempt to encourage the attraction of inward investment must therefore play a disproportionate role if there is to be significant economic benefit to the UK3. Furthermore, SMEs often lack the funding or resources to engage with university academics, especially given the long lead times to commercialisation that is often involved.4

This interpretation is reinforced by research on the business models pursued by the most successful companies within the Cambridge Cluster.5 This concludes that very few of its most successful science and technology companies – at least in the physical and engineering sciences

3 Inward investment in science and technology industries is, of course, often itself associated with the acquisition of an existing company. 4 In a recent major parallel set of CBR surveys of academics and businesses funded by the ESRC the most important and frequently cited factor which businesses identified as constraining their interactions with the science base was their own lack of internal resources. Academics cited lack of time. Neither rated differences in culture or time scales as a significant factor. See. (www.cbr.cam.ac.uk/research/programme1/project1‐17.htm) 5 Connell, D. and Probert, J. (2010), Exploding the Myths of UK Innovation Policy: How ‘Soft Companies’ and R&D Contracts for Customers Drive the Growth of the Hi‐Tech Economy, Research Commissioned on Behalf of the East of England Science and Industry Council by the East of England Development Agency. CBR, University of Cambridge.

‐ have their origins in academic intellectual property and that the importance of direct university spin‐offs has been significantly oversold.6 In particular, the city’s technology “consultancies”, described later, have been a more important source of successful spin‐offs in terms of jobs created.

This research also shows that R&D contracts with customers and the “soft start‐up”7 model has played the dominant role in funding these successful companies through their early stages, with venture capital playing a less significant, or later stage, role than the conventional wisdom would imply. The report argues also that multi‐partner R&D collaborations, the dominant model in UK Government and EU R&D funding for companies, are of little relevance to early stage firms and other SMEs.8 Lead customer contracts from private and public sector customers usually provide a much better mechanism for directing and funding their technology development.

Our international comparisons have revealed a variety of ways in which other countries’ innovation systems address these problems and designed institutions that are better equipped to exploit long lead time commercialisation opportunities for national benefit.

Findings: II. Institutional Models

Private Sector Technology Consultancies

The R&D organisations with the most relevant track record of turning R&D projects into product businesses in the UK are to be found in the private sector, and comprise the Cambridge technology “consultancies” (Cambridge Consultants, TTP Group plc, PA Technology and Sagentia as well as smaller companies focused on specific sectors). The term “consultancy” is really a misnomer and relates more to their revenue model (fees), than the kinds of outputs produced. These are predominantly developed products and specialised manufacturing and test equipment for their customers, rather than reports or advice.

Individually the four main firms are of similar size to the Fraunhofer Institutes and they perform a very similar role for their private sector customers. However, this has been almost entirely without Government or EU funding of any kind (the Fraunhofer Institutes are roughly 50% Government and EU funded), and they typically earn 60‐70% of revenues from exports (c.f. 10% or less in the case of the Fraunhofer Institutes). Furthermore, the rate at which jobs have been

6 See also Hughes, A. (2008), ‘Innovation policy as cargo cult: Myth and reality in knowledge‐led productivity growth’, in Bessant, J. and Venables, T. (eds), Creating Wealth from Knowledge. Meeting the innovation challenge, Edward Elgar, Cheltenham and CBR/PACEC(2009), Evaluation of the Effectiveness and Role of HEFCE/OSI Third Stream Funding: Culture Change and Embedding Capacity in the Higher Education Sector Toward Greater Economic Impact, A report to HEFCE by PACEC and the Centre for Business Research, University of Cambridge. 7 A “soft company” is a science or technology based company whose business model is to provide R&D based services (e.g. technical consulting, contract R&D) and which draws on its expertise and/or proprietary technologies to provide bespoke offerings for a range of customers and applications. A “soft start‐up” is a company that uses this model in whole or in part to finance its early development, thereby reducing or avoiding entirely the need for external equity investment. Soft start‐ups may continue to adopt this model and remain a service business, or they may transition to a “harder” business model based around standard proprietary products. 8 Exploding the Myths of UK Innovation Policy, op. Cit.

generated in product spin outs is significantly better than the Fraunhofer‐Gesellschaft and they have had bigger, and more sustained, successes.

The Cambridge consultancy cluster is not mirrored anywhere else worldwide and is an important national economic asset.9 Only the larger Cambridge consultancies are able to invest significantly in technology development on their own account and the relatively short term focus of the consulting model militates against this. Nevertheless, they have been able to harvest IP and expertise developed over the years to spin off many successful product businesses. In one or two cases very long term investments in platform technologies have been made alongside commercial contracts for specific applications.10

The trigger for the creation of a product spin‐off has often been the loss of a major customer, bringing both opportunity (through, for example, the chance to acquire unwanted IP) and incentive.

The four largest Cambridge consultancies employ over 1,000 people between then, but have created product spin‐off business employing over 5,000 people, including two of Cambridge’s largest and most successful companies, Domino Printing Sciences and Cambridge Silicon Radio. The Cambridge consultancies are some of the most effective organisations we have seen anywhere in developing and commercialising new technology. So in considering how to exploit the academic science base better, we would do well to learn from their successes. In later sections we draw upon aspects of this private sector model that can be borrowed in designing public sector subsidised interventions.

The Fraunhofer Model

The operation of the Fraunhofer Model is described in our working paper.11Its principal advantage over the private sector consultancy model is the core public sector funding that Institutes receive. This enables them to invest in long lead time technologies and supporting equipment where it is more difficult to attract private sector funding. This in turn helps them create the technology platforms around which commercial R&D contracts can later be sold.

Of the Fraunhofer Laboratories we have visited during the research, the Fraunhofer Institute for Photonic Microsystems (IPMS) in Dresden illustrates best the kind of role we believe such organisations could play in the UK. Although it is possible that its position in the old East Germany has brought it particularly high levels of public sector funding. In technology terms IPMS is also a good comparator to the Cambridge University Integrated Knowledge Centre in Macromolecular Materials, whose EPSRC grant provided most of the funding for our research.

IPMS was founded in 1992 around a core team of 100 people from one of the GDR Academy of Science’s Laboratories in Dresden, home of the DDR’s large, but uncompetitive semiconductor industry.

9 There are individual organisations with some similarities in many countries. 10 For examples of how this has worked in practice, see Page 26, Exploding the Myths of UK Innovation Policy, op. Cit. 11 Op cit.

It is important to understand the relationship between Fraunhofer Institutes and academia. They are not university institutions and are managed, directed, administered and funded entirely outside the university system. Their role and modus operandi is very different. A close relationship with a local university is important, but this is subservient to their role as developers of technology for their industrial clients and the level of interaction with academia is much smaller than sometimes believed. Today IPMS has some 200 permanent staff with a further 25 doctoral students and 25 masters students from related universities. Two of IPMS’s directors hold chairs at the Technical University of Dresden.

This level of interaction with academia is typical of other similar Fraunhofer Institutes, with roughly one in a hundred of their 17000 permanent staff holding university positions simultaneously12.

IPMS’s 2009 revenue budget was $24m comprising $7m from core government funding, $7m from public projects (contracts, grants etc) and $10m from bilateral contracts with industry, license revenues etc. The Fraunhofer funding model uses a formula for the amount of core funding provided each year which is carefully designed to encourage revenues from bilateral industry contracts at between 25 and 55 per cent of the total13.

In addition to the core funding for operating expenditures, capital investments at Fraunhofer Institutes are also funded by government on a case by case basis. IPMS has benefitted greatly from EU, Federal and Länder investments over the last five years. This has enabled it to acquire two significant clean room facilities and specialised processing equipment at a total cost of some €60m. One is for producing CMOS based microelectronic mechanical systems (MEMS) and micro opto‐electronic mechanical systems (MOEMS) and the second is for OLED based products ‐ lighting, organic solar cells and OLED‐on‐CMOS devices. The latter was originally built as the Dresden manufacturing plant of Micro‐Emissive Displays, an Edinburgh based venture capital and AIM funded company. IPMS acquired this facility when MED went into administration in 2008.14

Both clean room facilities are operated around the clock on three shifts, five days a week. They have dedicated process management teams through whom research scientists must work to get experiments designed and run15. Both facilities can produce devices at pilot or small volume production scale, although there is considerable sensitivity amongst Fraunhofer management to conflicts of interest; they stress that these facilities would not (and cannot) be used to

12 On appointment, the Executive Director of a Fraunhofer Institute is also simultaneously appointed as a professor at the university with which it is twinned. It should be noted also that it is rare for a Professor of Engineering in Germany not to have experience of working in industry first. 13 New Institutes typically start with 20‐30 people, sometimes as a spin‐off from another institute, or by acquisition of another organisation. The level of core funding is usually guaranteed for 6 years initially on a gradually reducing basis as commercial contracts are expected to be won. After this the amount of core funding an institute receives is calculated according to a formula linked to its success in winning contracts. In the case of IPMS, the start up team was larger – around 90 people – and the transition time was a little longer. 14 Dresden is also the home of the manufacturing facility of Plastic Logic, the VC backed spin‐out from the University of Cambridge, though this is not co‐located with IPMS and the two organisations have not collaborated on R&D projects. 15 This compares with the typical UK university arrangement where students use the equipment themselves, with minimal specialist technical support

compete with existing German or European companies. It is difficult to see how a comparable style of operation could ever be achieved within a UK university environment.

The primary role of all Fraunhofer Institutes is to support German companies, including SMEs, without competing with them. In each case they aim to deliver fully developed products and if necessary the process equipment to manufacture them. In some cases they can also undertake pilot scale manufacturing on Fraunhofer Institute equipment and even full scale manufacturing for niche products where no fully commercial facilities are available This contrasts strongly with the role of universities which are limited to developing very basic “proof of concept” technology demonstrators16. Professor Lakner, the Executive Director of IPMS, stresses “the difference between a demonstrator which may show that a product is feasible, but without meeting a customer’s full specification and a prototype which must meet full specification without meeting lifetime, yield and cost targets”. The Fraunhofer Institutes go well beyond the prototype stage to manufacturable product, just like the Cambridge consultancies.

There are significant differences between Fraunhofer Institutes in their mode of operation. IPMS typically works on product developments that are five to seven (or more) years from market and it is characterised by its industrial investment in capital intensive process technologies. Some are closer to market and more comparable with the Cambridge consultancies.

The most comparable facility to IPMS in the UK is the Printed Electronics Centre (PETEC) in Sedgefield. PETEC has had comparable levels of government investment to IPMS, but is inconveniently located for overseas customers and is geographically distant from major academic centres of materials and electronics technology.

Whilst IPMS has yet to demonstrate that it can spin‐out substantial product businesses this is only one indicator of success. The level of engagement from (predominantly) German industry suggests it is a successful organisation in broader terms. Some Institutes seem to have a less good reputation and have probably suffered from low staff turnover and the gradual decline in the relevance of R&D programmes to which all privately and publicly funded laboratories are prone without regular review and rejuvenation.

The most publicised success of any of the Fraunhofer Institutes in commercialising technology on its own account relates to the MP3 standard. This was developed by the Fraunhofer Institute for Integrated circuits, based in Erlangen, and has generated tens of millions of Euros for the Institute in licence revenues. A good deal of effort has been devoted in recent years to encouraging the establishment of spin‐off companies. Some 150 spin off companies have so far been created, though most seem still to be quite small and it is still too soon to evaluate how successful this activity has been17.

Within the Fraunhofer system there have historically been certain aspects of the model, notably levels of pay and other incentives, as well as attitudes towards personal risk taking,

16 Producing technology demonstrators at the level needed to interest potential investors in spin‐off companies and commercial partners is very challenging within the academic environment, even with policies designed to assist this process. 17 The most successful “exit” so far seems to have been the sale to Dolby for $250m of an MP3 related company formed with a Swedish partner.

which might have reduced their effectiveness in commercialising technology on their own account. If replicated in a UK context, the need to attract and retain the best people will be cardinal. This is particularly true in relation to creating economic value through that part of their activity concerned with spin‐out businesses.

Other Intermediate R&D Institutes

In terms of economic impact, two of the most interesting institutions we have visited are the Industrial Technology Research Institute in Taiwan and IMEC in Louvain. We focus on the former here.18 ITRI was instrumental in building the service based semiconductor industry in Taiwan, of which the Taiwan Semiconductor Manufacturing Company (TSMC) is the key element.19 In 2009 the Taiwanese semiconductor industry had revenues of $39 billion and was the world’s largest in terms of manufacturing. Its investment in semiconductor manufacturing has enabled many other companies to become established at other points in the supply chain. However, it should be noted that this was a “catch up” strategy involving licensing in existing semiconductor manufacturing technologies from western companies. Insofar as strategy is concerned with spin outs it is also important to note that the spin out performance of ITRI has not been central to its role in recent years. This is in part a reflection of the growing strength of Taiwan’s companies and their use of strategies less dependent on government funded R&D to move into major new areas of business, like LCD displays. The central lesson from the ITRI model is the strategic creation of a central capacity to develop major businesses located in Taiwan.

A key part of ITRI’s role in strategic capacity building20 has been in training. 160,000 alumni have graduated from ITRI, with more than 140,000 of them currently employed in the business community. More than 5,000 work in Hsinchu Science Park, in which ITRI is based, serving in mid to high level management positions. 60 of ITRI’s alumni are Chief Executives of Taiwanese corporations. The expertise built up through on‐the‐job training in technology development and exploitation in an organisation like ITRI is of course very different to that acquired in a university research role.

Finally, we would point also to one further interesting model – the Computer Aided Design Centre created in the early 1970s in Cambridge. This was largely Government funded with some industrial contracts. It was not part of the University of Cambridge, although there was an active 3‐D modelling group at the University’s Computer Laboratory. The CAD Centre went through some difficult times and many changes, including privatisation and flotation. Today it has transmogrified into AVEVAs the world's leading engineering IT software provider to the

18 IMEC’s focus is on semiconductor processing. This makes it unique in Europe. Because of the huge investments in R&D and capital expenditure entailed in developing next generation process technology, the large companies involved are prepared to collaborate in a major way. A similar organisation in the US is the Albany Nano‐technology Complex; its predecessor Sematech now has an international customer base. This approach is particularly appropriate where large players in mature markets are willing to co‐invest on the scale and in the collaborative way necessary. For further discussion see Mina, A, Connell, D. and Hughes, A. (2009) Models of Technology Development in Intermediate Research Organisations, CBR Working Paper No. 396, Centre for Business Research, University of Cambridge, Cambridge. (www.cbr.cam.ac.uk/pdf/WP396.pdf). 19 TSMC manufactures semiconductors for development and marketing companies like Cambridge Silicon Radio. It has enabled a whole new business model, that of the fables semiconductor business. 20 See Models of Technology Development in Intermediate Research Organisations, op.cit.

plant, power and marine industries, employing over 600 people. In addition, some of CAD Centre’s early staff went on separately to found a succession of very successful software companies.21

Conclusions and Recommendations

Fraunhofer Institutes and other intermediate R&D laboratories have three key features which contribute to the role they play in technology exploitation: long‐term government support through core funding and capital investment; their focus on mission oriented development rather than research and academic publications; and engagement with real customer innovation needs with significant R&D funding from lead customers. These include procurement contracts from government agencies.

Experience from the Cambridge cluster shows that the role played by lead customers in defining needs, funding technology development and trialling prototypes is crucial to successful technology exploitation. In the US government has played a key role in the process, through the £2 billion a year SBIR programme and other innovation procurement programmes.22 Indeed, the vast majority of US government funding for R&D in companies is based on the procurement contract model as opposed to the multi‐partner collaborative model involving companies and universities favoured in the UK23. In contrast in the UK, Government has found it far more difficult to encourage spending departments to place R&D contracts with companies.24

Exhibit 1 Policies for Translating Long Lead Time Technologies into Commercial Businesses

21 See Case Study 9, page 50 in “Exploding the Myths of UK Innovation Policy, op. Cit. 22 Connell, D. (2006), 'Secrets' of the world's largest seed capital fund: How the United States Government Uses its Small Business Innovation Research (SBIR) Programme and Procurement Budgets to Support Small Technology Firms, Centre for Business Research, University of Cambridge, Cambridge. 23 Lead contractors in the US may well use small companies or academics as subcontractors, but this is not generally prescribed a priori by government agencies. 24 After two false starts the UK’s misnamed Small Business Research Initiative is running successfully, but at a still very small level, at around £25 million a year.

In deciding how much money to commit to Technology Innovation Centres, it is therefore important to consider what could be achieved through a complementary policy of increased innovation procurement from private sector companies. Both policies have the potential to bridge the gap between academic science and commercial markets illustrated in Exhibit 1. The former plays a dominant role in the US, the latter in Germany, though even the German Fraunhofer model depends for its success partly on Institutes being able to win R&D contracts from customers in the public sector as well as the private sector.

Of these two complementary policies, we would place at least as much emphasis on expanding government funding for innovation procurement contracts to capitalise on the successful “soft company” model exhibited in the Cambridge context (and elsewhere) and enable the private sector to play the dominant role in technology development.25 The funding and endorsement from lead customers this brings would also make it easier for entrepreneurs to grow their businesses more aggressively when the time is right, with funding from venture capital firms if needed.26. As indicated this would also support UK TICs created on the Fraunhofer model where this approach makes sense.

Experience of UK Faraday Centres and the more recent network of Micro and Nanotechnology facilities suggests that past UK attempts to create “innovation centres” have suffered from a poor understanding of success factors and inadequate specification of the model, coupled with its subsequent dilution to try to satisfy individual regional agendas on a restricted budget.

Nevertheless, we believe that TIC’s based on a modified Fraunhofer model could have an important role to play for long lead time technologies where there is no conflict with an existing commercial business. 27

Their objectives should be to undertake mission driven R&D leading to the creation of commercial products and processes, and through this activity to train scientists and engineers in both the technical and management disciplines involved. In time this should enable TICs to generate revenues from contract R&D for customers, licences and spin‐offs.

It should be emphasised that this will require a very different style of operation to a university laboratory, with very different management philosophies. Whatever the process involved in the identification and selection of TICs, and while collaborative university and industry initiatives will be welcomed, it is essential that TICs have the independence and governance, management and incentive structures needed to deliver this mission driven, and strictly commercial orientation.

25 See also submission to House of Lords Committee on Science and Technology on this subject by David Connell, December 2010. 26 Data on returns from the British and European Venture Capital Associations show that average returns on early stage investments in the UK and European technology sectors are inadequate to attract pension funds and other investors. Importantly, this is a long term problem, not a feature of the current economic climate. Significant complementary public sector support, as in the US, is therefore required to increase participation and procurement innovation contracts would be a way of helping to achieve this. 27 The choice should be informed by a systematic strategic analysis as advocated by the Council for Science and Technology in their Report Strategic Decision Making for Technology Policy (2007) (www.bis.gov.uk/assets/bispartners/cst/docs/files/whats‐ new/07‐1618‐strategic‐decision‐making‐technology.pdf). Key elements include an assessment of the scale of the market, the potential to capture a significant component of it based on outstanding scientific excellence and a commercialisation model capable of appropriating a key component of the value chain and where the technology requires the kind of sustained output identified in this submission.

We recommend that:

• TIC’s should be focused on a small group of related long lead‐time technologies with engineering support. These should normally be newly emerging areas of technology with significant potential commercial impact but a scarcity of expertise internationally. A single, high risk area of technology is probably too narrow as it would inhibit comparison with other technologies and possibly prevent rational resource allocation within a TIC. • TIC’s should aim to be competitive globally for contract R&D, rather than perceiving themselves as providers of services to UK industry. It is by working with the best and most demanding customers world‐wide that expertise and IP is built up over time to enable spins outs and commercialisation programmes with UK companies. • Each TIC should have 80‐200 people. Experience from the Cambridge technology consultancies suggests that this is the “sweet spot” for economies of scale in R&D, though the initial start up team would obviously be smaller in most cases. • TICs should be twinned with a single, geographically close university with existing world class competence and sizeable teams in their fields of interest (This should not of course prevent individuals and teams from any university in the UK or indeed elsewhere from using a Centre’s facilities or collaborating on projects on an ad hoc basis). • However, TIC management, administration, funding, resource allocation, remuneration and appointment processes should be entirely independent. • CEOs should have significant experience of managing R&D in industry and an international reputation in their field. • A small number of other directors or staff should also have joint positions in varying proportions in terms of the time devoted to their TIC and university roles (the Fraunhofer norm appears to be roughly two per institute) • To ensure a development rather than research orientation, senior staff should be recruited mainly from industry. Some of those joining at graduate or post doctoral level direct from university would be expected to move into managerial positions in due course. • Salaries should be linked to competitive industry norms rather than academic scales • With the exception of the small number of staff at a TIC holding joint positions with the twinned university, staff should have no formal teaching roles The objective of each Centre should be to develop and commercialise; academic publications should play no formal role in performance evaluation at TIC level • TICs should be encouraged to take a limited number of PhD and Masters students on secondment

• Specialised equipment should be professionally operated and managed by experienced technicians on the TICs payroll • The funding model adopted should be based closely on the Fraunhofer Institute model: - a multi‐element formula for the amount of core funding provided annually to reward Centres proportionally to bilateral contract income secured between 25% and 55% of total revenues - typical, steady state funding split target: 25% core government funding; 25% public sector contracts, EU etc; 50% bilateral private sector contracts - core funding guaranteed for at least 6 years on a gradually reducing rate - grants for major equipment investments available from Government; such equipment to be treated as a national resource • Although the institutions we have reviewed have had very long life spans and include provision for rolling reviews within that, consideration should be given to a normal TIC life expectancy of 15 years. They should in any event be subject to major review after 10 years, with the possibility of privatisation or disbandment to follow. This would have the following benefits: - It would avoid TICs losing their innovative edge as the best people move on and as the new technologies on which they are based become more mainstream and more readily available from the private sector - It would help encourage commercialisation: the evidence from the technology consultancies and elsewhere is that loss of regular revenues can stimulate new thinking in pursuit of commercial returns and enable R&D activity to be converted into a scalable product business - It would release funding for the creation of new TICs In essence this proposal has some similarity to the way MRC research institutes are funded • The programme for new centres should first be piloted with at most two centres, with others added after two years operational experience, if positive, at the rate of one new TIC every one to two years

Conflicts of Interest

David Connell is a one per cent shareholder in TTP Group plc and Director of TTP Capital Partners, General Partner of its venture capital fund.

David Connell, Professor Alan Hughes and Dr Andrea Mina Centre for Business Research, Judge Business School, University of Cambridge

1 December 2010

Written evidence submitted by the Smith Institute for Industrial Mathematics and System Engineering (TIC 20)

Introduction

1. The Smith Institute for Industrial Mathematics and System Engineering welcomes the opportunity to contribute to the Science and Technology Committee's inquiry into Technology Innovation Centres. The Smith Institute is an independent company that supports private and public sector clients in maximising return on research investment.

2. The Institute's distinctive features are its focus on business requirements, its use of advanced mathematics and its close connections with top researchers in the science base. Its clients include major international corporations, small technology companies, and government agencies. As a company limited by guarantee, it generates capital for its future growth by retaining operational surpluses within the business. It receives no institutional funding from either government or the private sector. The Smith Institute was founded in 1993 by Smith System Engineering Ltd, and established as an independent company in 1997.

3. The Smith Institute's staff have higher degrees in mathematics, statistics, physics, computing or engineering. This expertise is reinforced by close working relationships with the UK's strongest research groups in industrial mathematics and scientific computing, which enable the Institute to mobilise a formidable intellectual resource. We occupy a natural position on the interface of the business world and the academic world, from which we deliver services in contract research, professional development and research management.

4. The Smith Institute's experience provides an alternative to the Fraunhofer model for connecting strength in basic science to business innovation. In some areas, the Fraunhofer model may well be an appropriate choice for the newly proposed Technology Innovation Centres (TICs) in the UK. However, in other areas, for example the exploitation of mathematics in the UK, we believe that the Smith Institute's approach is preferable, for the reasons laid out below. Any assumption that the Fraunhofer experience can be easily replicated in the UK should be scrutinised very carefully.

What is the Fraunhofer model and would it be applicable to the UK?

5. The Fraunhofer approach highlights flagship laboratories, sited alongside partner universities. The programme currently has 80 research units, of which 59 are the well‐known Fraunhofer Institutes, with a combined workforce of 17,000. Their remits cover a mix of underpinning and emerging technologies, grouped into the following areas: ICT; life sciences; light and surfaces; microelectronics; production; defence and security; materials and components.

6. The Fraunhofer model is notionally built upon a balanced funding structure, in which income is derived roughly one‐third from industry, one third from public sector projects and one third in base funding from national and regional governments. Over the period 2005‐2009, there has been a trend of decline in the percentage of total income coming from industry,

from a historic high of 40% in 2005 to 30% in 20091 (the low point over the last 20 years was 25% in 1993). Over the same period there has been an increase in income from public research projects from 16% to 24% of total income. Base funding contributes a steady 32‐ 33%. Approximately 5% of income is secured from the European Commission and 9% from other sources, of which the main component is international activity.2

7. The base funding received by Fraunhofer Institutes (€424M in 2009) enables them to undertake longer‐term strategic research, alongside their contract research activities. PhD students are a significant component in Fraunhofer staffing levels. To take the example closest to the Smith Institute's area of operation, the Fraunhofer Institute in Industrial Mathematics in Kaiserslautern (Fraunhofer‐ITWM) has a staff of 200, of which 60 are PhD students.

8. To copy this approach in the UK could put at risk the strengths of the university base that as a nation we wish to capitalise on, especially where the current research base has strength in diversity, as it does in mathematics. In such an underpinning area, there are many 'pockets of excellence', which have strong multidisciplinary interactions with their local colleagues in other areas of technology. For example, no single university in the UK could plausibly claim to be the centre of excellence for the UK's research in industrial mathematics.

9. To engineer a high concentration of mathematical researchers, in a UK version of a Fraunhofer Institute, would damage the current strengths of the research base. We therefore advocate an alternative approach, in which the existing research base is allowed to thrive, while being provided with new incentives and opportunities to work with industry, through the work of organisations such as the Smith Institute.

Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

10. Fraunhofer Institutes have a distinctive combination of key features: driven by business requirements; independent of business ownership; able to pursue strategic research alongside contract research; training grounds for PhD students and postdoctoral researchers. They combine elements of university research groups, Public Sector Research Establishments and independent Research and Technology Organisations. Many organisations in the UK share some of these features, but it is difficult to identify any that combine them all.

What other models are there for research centres oriented towards applications and results?

11. The Smith Institute has developed its approach over more than 15 years, and we believe it is the right one for the space in which we operate. In building up the Smith Institute on the interface between business and academia, we have created a highly connected research environment that enables new ways of innovating through the science base. We provide

1 These figures include licensing income, which in recent years has included considerable income from the licensing of mp3 technology.

2 These figures are drawn from the Annual Report 2009 of Fraunhofer‐Gesellschaft, http://www.fraunhofer.de/en/Images/Annual‐Report_2009_tcm63‐60137.pdf

services and mechanisms that maintain a focus on the priorities and requirements of the business world.

12. The Smith Institute's independence allows it to enter into contractual relationships that reflect the particular requirements of individual engagements. We deliver rapid results that are readily embedded into industrial planning and operations. We recognise that successful innovation very often depends on the speed with which an idea can be identified, refined and applied in a business setting. We can achieve these aims without the need to concentrate research in a single geographical location or build extensive physical infrastructure.

13. The success of the Smith Institute derives in large part from its staff's ability to build strong relationships with business and academia. This requires strong intellectual skills coupled to a professional and practical approach. Through the work of the Smith Institute, companies have informed access to the UK's dynamic and diverse research landscape. We are able to take industrial problems and opportunities, and match them to the best sources of know‐ how and the most relevant experience. In mathematics, the solution has often already been developed in completely different application domains, and so we deliberately operate across a broad industrial front.

14. Areas where a Fraunhofer approach is better suited will have a research base that is concentrated in a small number of established, stable and internationally leading groups. In these circumstances, it can be highly effective to create a physical centre alongside one of the leading research groups, with the mission of applying and exploiting this research.

15. In contrast, for areas with many 'pockets of excellence', the emphasis is better placed on creating a high density of connections on the interface of business and academia, and with very little reliance on physical infrastructure. This approach is suited to industrial mathematics in the UK and is the approach that we have adopted in developing the Smith Institute. It may well be the right choice for other underpinning technologies, too.

Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

16. The Fraunhofer‐Gesellschaft delivers the necessary coordination in Germany, and in fact acts much more like a corporate headquarters for the network of Fraunhofer Institutes than a government sponsor of research. For example, Fraunhofer‐Gesellschaft is the employer of the researchers who work in Fraunhofer Institutes, and it publishes annual reports of the sort that one would see from any large corporation.

17. The indications at present in the UK are that the Technology Strategy Board will have a coordinating and monitoring role for Technology Innovation Centres, but that this would not extend to a role that is comparable with that of Fraunhofer‐Gesellschaft in terms of governance.

18. One option for TICs would be to contract out some or all of the functions of Fraunhofer‐ Gesellschaft, for example to the companies who already run some of the UK's Public Sector Research Establishments. This would provide uniformity of processes across TICs, with associated economies of scale, but would still fall short of the sense of corporate identity that Fraunhofer‐Gesellschaft embodies. Perhaps a more likely choice is to contract (or

create) different organisations to take governance responsibility for different TICs, under the general oversight of a government agency such as the TSB.

19. It is important that the introduction of TICs, in whatever form, does not distort the markets in which other research centres operate. There is a risk that base funding, in the Fraunhofer mode, can create subsidised competition that would be unfair and unnecessary. On the other hand, existing research centres and PSREs might themselves have many of the capabilities needed to deliver successful TICs, provided that they have the necessary exposure to business requirements as a pre‐requisite.

Conclusion

20. The Smith Institute for Industrial Mathematics and System Engineering successfully uses advanced mathematics to boost innovation. Its provides an effective alternative to the Fraunhofer model that works so well in Germany. The Smith Institute's approach is ideally suited to technology areas such as mathematics, where the UK's research base is naturally fragmented and difficult for companies to navigate. The Fraunhofer model, with its heavier reliance on physical infrastructure, is better suited to areas that seek to exploit more concentrated research landscapes. In developing proposals for Technology Innovation Centres, the UK should take care that their structure is sufficiently flexible to derive greatest return on the investment in all areas of the science base.

Dr Robert Leese Director Smith Institute for Industrial Mathematics and System Engineering

01 December 2010

Written evidence submitted by University College London (TIC 21)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable in the UK?

1.1. The Fraunhofer model refers to the organization supporting application driven research (technology readiness level 4 – 6). There are 80 research units including 59 centres within the Fraunhofer organization (http://www.fraunhofer.de/en/institutes-research-establishments/) and these provide a service to industry, the service sector and public administration.

They have a total of 17,000 employees and operate with an annual budget of around €1.6bn. In 2008 the budget comprised approximately 35% core government / state funding; 23% public funding won from competitive bids, 34% of private sector funding and 7% from licensing.

1.2 The Fraunhofer model has a strong governance structure, which ensures a clear strategy in support of national priorities, but also recognizes the importance of individual centres having institutional autonomy.

1.3 They have 12 research topics into which the institutes fit and 12 frontline themes which appear to have been identified to help shape future priorities. There are 18 innovation clusters, which are regional groupings of universities, Fraunhofer Institutes, and private companies. The majority of groups are based in Germany and there are some areas which have a fairly high concentration of the institutes / groups (e.g. Dresden 12, Berlin 8). The centres are typically comprised a minimum of 100 staff, although some are much larger and they have a minimum annual budget of around €10M. In the most recent annual report (2009) it was noted that there were seven key themes into which a large cluster of Fraunhofer institutes could be classified (Materials, Microelectronics, ICT, Production, Life Sciences, Light & Surfaces, Defense & Security).

1.4 The Fraunhofer also has several international centres in order to support international collaboration, take advantage of global markets and enhance the international competitiveness of German businesses.

1.5 The Fraunhofer network also provides the infrastructure required to stimulate and support innovation through education and training of staff, providing a focal point for stimulation of collaborative research and developing national and international partnerships.

The benefits of the Fraunhofer structure are:

• Provides a governance structure at a national level, which supports research at technology readiness level 4 – 6. • Stimulates innovation and helps generate intellectual property and routes to exploitation. In 2009 there were 675 invention reports, 522 patent applications and 261 patents granted. In 2009 there were 74 spin-off companies on the balance sheet, 14 new companies established and support for 32 spin-offs. • Supports training of workforce • Promotes transfer of staff from academia to industry • Provides services to business in the form of contract research • Creates a national network, identity and brand

All of these are deemed essential in order to support a knowledge-based economy.

1.6 Key comments for consideration:

1.6.1 Whilst there is a good case made for the value of Fraunhofer institutes in terms of stimulating technology innovation and provision of services, there are no clear metrics to establish the direct economic impact of Fraunhofer Institutes on the German economy. Hence it is unclear whether the Fraunhofer institutes as configured represent good value for money.

1.6.2 The Fraunhofer funding model is heavily reliant on sustained public funding either through baseline support or from competitively awarded grants.

1.6.3 The income generated from exploitation of intellectual property is low at 5 - 10% of budget.

1.6.4 The governance structure does help ensure coordination at national level but is complex which may have a negative impact on emerging areas.

1.6.5 TICs established using the Fraunhofer model would never be financially independent of state support.

1.6.6 There is a critical need for a National Network in support of TICs in the UK, but it must be designed to build on the UK’s research strength and maximize the UK’s immediate, medium and long-term economic health. It is unlikely that a simple replication of the Fraunhofer model would be appropriate for the UK.

1.6.7 Some of the structures and ideas contained in the Fraunhofer model are worthy of incorporation into a national network of TIC, for example regional clusters, thematic areas, international collaboration.

2. Are there existing Fraunhofer-type research centres within the UK and are they effective?

2.1 The majority of research centres within the UK are clearly directed toward fundamental research (TRL 1 – 3). These are run are individually or jointly by RCUK, Charities or HEIs and it is widely acknowledged that the UK has an exceptional basic research capability and impact in science and technology.

2.2 The Hauser Report (http://bit.ly/bbAlkD) asserts that in 2008 the UK RDAs and devolved administrations have committed £150M to over 50 business-focused TICs and makes mention of a selection of these including Printable Electronics Technology Centre (http://bit.ly/dCB4PZ), MediaCityUK (http://www.mediacityuk.co.uk/), Bioscience Campus Stevenage (http://bit.ly/LIzdW), Advanced Manufacturing Research Park (http://www.ampuk.com/).

2.3 Despite the significant financial investment there appears to be no national co-ordination of these and the other 50 technology centres. There is no common brand, or clear evidence for exchange of ideas, facilities or communication between these centres.

2.4 The business model, plans for financial sustainability and evidence for direct economic impact and effectiveness are not easily accessible and therefore it is hard to assess the benefits of these investments.

2.5 One example of a successful technology research centre is the Medical Research Council Technology (MRCT), which is the technology transfer arm of the MRC. It has been set up to help exploit and translate the discoveries from MRC funded research (currently £355M p.a.). Whilst small in comparison with Fraunhofer institutes it is focused, plays a national role and has had considerable commercial success with >£400M of licensing income. It also provides research support to MRC scientists and arguably MRCT covers a wider spread of TRL’s than most Fraunhofer institutes might expect to do. However its business model does not appear to focus on provision of services for the UK private sector, but rather to develop intellectual property assets further down the TRL scale and towards commercialization. It is an excellent example of a successful technology transfer organization and it differs from the models operating within UK universities by virtue of having its own research capability. It may be considered to be a cross between a TTO and a Fraunhofer Institute.

3. What other models are there for research centres oriented toward application and results?

3.1 In the UK, University technology transfer organizations play an important role; however, such organizations rarely have the staff or funds to carry out developmental research to progress along the TLR scale from 4 onwards. Usually they work with the inventors to secure further funding from public or private organizations in the form of equity investment, proof-of-concept funds, or translational research awards. RCUK, Charities, TSB, industry and the VC sectors all play a role in providing finance in support of this element of translation.

3.2 There is no doubt that there is merit in developing research centres oriented toward application and results. However the following key questions need to be considered before determining the optimum structure of the proposed TICs.

3.2.1 What are the most important outcomes for proposed Technology Centres?

This question drives the entire agenda of TICs and needs to be assessed in the light of NESTA’s ongoing work on Innovation Index (http://bit.ly/9tEdKO). If for example the principal role of the TIC is to develop technology that supports external businesses and enhances their competitiveness then that suggests a heavy bias toward a service provision for industry. If however there is a strong desire to commercialise / exploit intellectual property to generate new products then this would suggest a different balance of developmental / translational research vs contract research and service provision.

3.2.2 What is the business model for sustainability of TICs?

There are many examples of TICs that enjoy very significant levels of core public funding and the Fraunhofers have a funding stream of 30% government funding. Moreover Fraunhofers generate only 5% - 10 of their funds from licensing revenues, with the remainder coming from contract research / service provision. It is notable that in the absence of government funding these organizations would be unlikely to be viable. The reliance of the Fraunhofer Institutes on successfully bidding for government grants for translation research funding through open competition might result inefficiencies. Furthermore it would be preferable to see TICs develop ambitious plans to become less reliant on government funding after an initial 10-year period.

3.2.3 Role of TICs in R & D / Business clusters or hubs

One of the great opportunities for creation of TICs is to promote interactions between the knowledge base and businesses and strong consideration needs to be given to co-location of TICs into clusters where there is clear research excellence. For example location of TICs into innovation hubs could provide an excellent mechanism for TICs to play a key role in promoting innovation across a range of sectors in which the UK is competitive (Health, Communication, Creative Industries, Manufacturing). This could encourage the development of cross- sector collaboration, which could enhance the global competitiveness of the UK.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1 This is very clearly a role that should be overseen by the Technology Strategy Board who are ideally placed to use existing resources and planning to determine the number, scale, scope, mission and location of a UK national network of TICs. The Technology Strategy Board will need to work closely with UK HEI’s, RCUK, Charities, NHS, NESTA, Work Foundation, HEFCE and the existing TICs to ensure that the UK takes a genuinely innovative and effective approach. It must be driven by a clearly articulated vision of the outcomes on the UK economy in the immediate, medium and long term.

5. What effect would the introduction of Fraunhofer-type institutes have on the work of public sector research establishments and other existing research centres that undertake Government sponsored research?

5.1 This is highly dependent upon the mission of the proposed TICs, but is likely to be beneficial to public sector research establishments in that:

5.1.1 There is an opportunity for mission differentiation between public funded research establishments and TICs. Existing research establishments should be encouraged to develop close collaborative links with the TICs and this could be encouraged through staff exchange, events, specific TIC-delivered funding schemes.

5.1.2 As long as there remains a clear commitment to public funding of fundamental blue-sky research then TICs should enhance the impact of existing research centres.

5.1.3 TICs may encourage interaction between basic research and industry.

5.2 It will be important that TICs are not established at the cost of the fundamental research base and careful consideration will need to be given to the role of the research councils in funding basic and applied research. It would be inefficient if TICs and research centres were directly competing for the same funds.

5.3 There may be competition for industrial research funds between research centres and TICs, which may not be helpful.

6. Summary

6.1 In summary we are supportive of the concept of a coordinated national network of Technology Innovation Centres that support Technology development particularly at the TRL 4 – 6.

6.2 Careful consideration needs to be given to the desired outcome of the TICs, i.e. whether it is direct generation of assets / products, or provision of technical capabilities and services which enhance the global competitiveness of UK business. If it is both then an appropriate balance of those activities needs to be identified.

6.3 Detailed metrics to provide evidence of successful economic outcomes must be determined.

6.4 A business model for long-term sustainability needs to be developed. This must include an assessment of the proportion of UK government funding likely to be required to sustain the centres. A model leading to the prospect of a high degree of financial independence is highly desirable. It should be recognized that some level of financial support from government funding may need to be maintained throughout the lifetime of the TICs.

6.5 Careful consideration needs to be given to the structure of governance of the national network. It needs to be sufficiently robust to ensure adherance to the core aims of the national network and to reinforce benefits of the brand. However, it must also ensure that the TICs have institutional autonomy and encourage the emergence of new TICs and the closure of unsuccessful / redundant TICs.

6.6. Careful consideration needs to be given to the balance of activities including: service provision, contract research, education and training. Assessment of how the TICs will more effectively deliver those outcomes by comparison with existing or alternative mechanisms needs to be undertaken.

6.7. The extent to which staff in TICs enter into competitive bidding processes to win research funding from public bodies needs to be carefully assessed, as there is a possibility of significant inefficiency if this becomes a key goal for the TIC staff.

6.8 There should be an international dimension for the UK National Network of TICs. Ideally this would involve a small number satellite TICs operating overseas as in the Fraunhofer model. As a step towards this the TICs should have an international programme for inward secondment of overseas science / technologists into UK TICs.

6.9 There is considerable merit in developing TIC clusters or hubs which are co-located and which take advantage of research excellence. They should have the opportunity to provide space and resources for new businesses to be located. Examples include the Olympic Park, Bioscience Park at Stevenage and the Advanced Manufacturing Park along with several others.

6.10 With the funds available it will not be possible to replicate the Fraunhofer model on the same scale. There is merit on focusing on a small number of TIC hubs including: advanced manufacturing; health; cultural and creative sectors; energy and environment; and security. These hubs should contain one or more TICs and should provide a focal point for technology development (TRL 4 – 6) and be national centres which coordinate affiliate TICs – working at earlier phases of TRL (2-4). These affiliate TICs should be supported as centres via research council initiatives (e.g. EPSRC IMRCs, IKCs etc).

6.11 The development of TICs should be integrated into a wider Comprehensive Innovation Review for the next 10 years as promoted by the Work Foundation (http://www.theworkfoundation.com/Assets/Docs/Publications/CSR%20Submission%20FINAL%2030-9- 2010.pdf)

7. Declaration of interests

University College London has a wide range of research interests and is committed to the commercialization of the knowledge base through technology transfer. Therefore the organization has a profound interest in the development of technology centres and would be interested in significant involvement and leadership many of the possible areas of TIC development, including manufacturing, medicine and health, digital technologies, creative industries, energy and environment, security and many others.

Professor Steve Caddick Vice-Provost (Enterprise) UCL

01 December 2010

Written evidence submitted by Kingston University (TIC 22)

Technology Innovation Centres - TICs

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1. The Fraunhofer-Gesellschaft model is that of an applied or industry focused research and development centre on an ambitious scale, funded by a blend of government grants and private sector and government contract support. It is an integral part of the German innovation system and has an annual research budget of approximately € 1.6 billion. Of this budget, € 1.3 billion euros is generated through contract research (two thirds is derived from contracts with industry and from publicly financed research projects). One third is contributed by the German federal and Länder governments in the form of institutional funding. 1.2. The Fraunhofer platform encompasses more than 80 research units (including 59 Fraunhofer Institutes) at different locations in Germany, although there are research centers and representative offices in Europe, USA, Asia and in the Middle East. The Institutes are closely aligned with Germany’s research active universities and the Max-Planck Institutes (An independent not-for-profit research organisation)

1.3. A key element of the German government’s high-tech strategy is to promote cluster initiatives and the Fraunhofer network has the task of conceiving and implementing innovation clusters. The purpose of innovation clusters is to pool the strengths of a region and activate them to solve demanding tasks. In addition to industry and universities, the networks include local non-university research institutes that can make important contributions in relevant thematic areas. Examples of Fraunhofer Innovation Clusters include Adaptronic Systems, Darmstadt, Cloud Computing for Logistics, Dortmund, Digital Commercial Vehicle Technology, Kaiserslautern and Future Security BW, Freiburg. 1.4. Although Fraunhofer network could be applied to the UK, there are a number of pre-existing structures and boundaries that need to be acknowledged and taken into consideration in the development of the TICs network. Arguably, there is an embryonic Fraunhofer infrastructure emerging in the UK as a result of successive rounds of Government support through mechanisms such as HEIF and focused innovation funding via the Research Councils. For example the Advanced Manufacturing Technologies for Photonics and Electronics IKC, funded via EPSRC based at University of Cambridge.

1.5. Any development of Fraunhofer type structures in the UK environment would have to take account of, and complement existing R&D and innovation mechanisms and funding should be deployed in a manner which provides additional investment for some existing structures, and pump-priming for others. Therefore an element of funding should be ring-fenced for competitive allocation. In addition, a threshold of engagement should be agreed e.g. 30-40% income from industrial partners which if not secured results in a proportion of the core funding returned for re-deployment. In essence, embed a financial claw-back system. 1.6. The significant scale of the Fraunhofer network in Germany and the level of year-on-year national investment mean that any UK development would initially be a fraction of the size (assuming the £200 million proposed budget). Only a limited number of specific initial investments could be made on this basis and care should be taken to ensure that funding is not spread to thinly within any UK network.

1.7. Care should be taken to ensure that the UKs design thinking research expertise is taken into consideration when formulating TIC components. This would enable some lesser research intensive universities with pockets of research excellence linked to the creative industries to engage with the

innovation agenda and for the UK global research base to access and utilise the pockets of expertise that exists in such institutions without dilution of critical mass funding. For example, the sustainable materials resource library Kingston University 1.8. It is not clear how the Local Enterprise Partnerships will be able to contribute to the TICs in some areas, especially if, as in the Greater London area, there is a question about the availability of Regional Growth Funding to support development. Until the full extent of the L.E.P & R.G.F. is known, the TIC funding and leverage assumptions linked to regional development, should be acknowledged but not incorporated into any funding model until the future is clearer 2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1. There are a number of existing UK university research infrastructures that are similar to the Fraunhofer business model, that is, large scale interaction with business. For example, the Advanced Manufacturing Research Centre in Sheffield with Boeing and Rolls Royce is a world- leading research centre dedicated to developing innovative technology solutions for advanced materials, cutting-edge technologies and providing practical solutions to manufacturing problems.

3. What other models are there for research centres oriented toward applications and results?

3.1. The Research Councils Innovation & Knowledge Centres are indicative of the current model in a majority of HEIs that is, significant funding won in competitive processes from RCUK and other sources, working in conjunction with KT support from central and/or devolved university collaborations. 3.2. In essence, high quality STEM research activities tend to attract industrial contract research, collaboration and co-investment which is closely aligned to the RCUK research priorities.

3.3. Previously the UK innovation system has also included former Government research facilities such as those of MoD/DERA. In that instance the loss of specific capabilities, capacity and expertise which followed privatisation and the creation of QinetiQ can be viewed as a key example of why ongoing Government co-investment is needed in order to maintain R&D resources of national importance.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1. The coordination of the network should be the Technology Strategy Board since it will need to be closely aligned with the work of the Knowledge Transfer Networks (KTNs).

4.2. In addition to the coordination role, the TSB should be responsible for ensuring the views of the following constituents are taken into consideration as the TIC network emerges: 4.2.1. the Research Councils (not simply as part of the pathways to impact agenda, but also as a mechanism to ensure that Government R&D funding is strategically deployed); 4.2.2. UKTI as a means of calibrating the activities with UK inward investment and global market demands; 4.2.3. the professional bodies representing the staff responsible for the commercialisation of the applied research in the HE sector (AURIL and PRAXISUNICO) as means of providing sectoral insight on the global potential of the UK HE portfolio to leverage venture funding;

4.2.4. Business leaders of Local Enterprise Partnerships and Regional Growth Funds.

5. What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 5.1. The German model tends to be one dimensional /linked to a particular organisation/institution when the PSREs look to bring various organisations – HEIs/companies etc – together to collaborate often on an interdisciplinary basis e.g. the International Space Innovation Centre (ISIC) at Harwell and the Cockcroft Institute at Daresbury at which the partners are Universities of Lancaster, Liverpool, Manchester, and the North West Development Agency). 5.2. There is a significant risk that UK Fraunhofers might offer significant - and subsidised - competition to research capabilities in PSREs and universities. Government would need to ensure that the Fraunhofer or TIC offering in the UK is distinct and builds on existing capacity, as opposed to duplicating it. There is also a risk associated with any new offering supported by significant Government funding out-competing existing research providers and thereby disrupting their linkages with business (potentially to the considerable detriment of the private sector stakeholders)

Declaration of Interests Statement

Kingston University is a large multi-disciplinary institution with 22,783 students that offers a broad spectrum curriculum ranging from art and design to science and engineering. For us, the main issues are that the contribution that design thinking adds to the innovation process appears to be overlooked in much of the literature coming out of Government and whilst the proposed investment is welcome, it is debatable how effective this will be given the scale of the TIC proposal.

Deborah Lock Executive Director, Enterprise Kingston University

November 2010

Written evidence submitted by The University of Lancaster (TIC 23)

Technology Innovation Centres

1. Thank you for the opportunity to respond to your enquiry regarding the development of Technology Innovation Centres (TICs). Lancaster recognises that TICs, should they be developed, would play an important translational role between universities and industry from research to application and production, and that the Fraunhofer model is certainly one model by which this could be achieved. Lancaster, however, would like to suggest to the committee that it is not an exclusive model and that a more distributive variation, taking greater countenance of the pivotal role played by small and medium sized enterprises (SMEs), could and should be given equal time for exploration.

2. What is the Fraunhofer model and would it be applicable to the UK?

The particular structural and organisational arrangements for Fraunhofer are well known. There are, however, benefits and challenges of the model considering the external environmental context in which TICs would find themselves and their internal organisation and governance. TICs provide a strong means by which business and the economy may harness scientific and industrial capabilities. The very traditional model would see ‘blue skies’ research being undertaken in universities and industry working primarily to further known technology driven wholly by the profit margin such exploitation might engender. In this model, Fraunhofer TICs could provide the translational skills to bring these two elements together.

3. In bringing people together on the scales suggested by the Fraunhofer model, TICs would provide the critical mass missing in universities and industrial research facilities; and with the closure of a significant number of large company laboratories (for example Bell Labs, IBM, Philips and EMI), TICs are potentially a well timed positive response to the changing industrial landscape.

4. By separating TICs from both universities and corporations this provides TICs with an autonomy which allows them to define their own projects within their own areas of technological competence. As a consequence of this independence budgets become internally driven, success motivated and clarity of purpose understood. It allows for branding of the TICs and greater potential for commercialisation. The longer term funding arrangements also provide the financial assurance that allows focus to be squarely on development rather than on the constant administration of drafting and submitting funding bids.

5. However, there are challenges both external and inherent which need to be considered. Fraunhofer Gesellschaft in Germany have typically been developed around quite narrow technological foci, often associated with very large industrial partners. This is ideal for the German economic situation, but is less clear how this would translate to the UK with its broader spread industrial environment (for example Rolls Royce had an annual turnover of approximately £10 billion in 2009 while for BMW the figure for the same period was over £45 billion). This greater diversity of UK industrialisation is both a strength and a challenge. There are huge benefits in the adaptability of smaller scale economic arrangements (it should not be forgotten that the majority of the UK’s economic output comes from SMEs), however, the challenge for TICs would be to identify which elements of technological growth are best positioned within the UK for translation to industrial output. In your own recent publication “Technology and Innovation Futures: UK Growth Opportunities for the 2020s” you identify no less than 55 technologies in 28 clusters. Given the scales necessary for success in the Fraunhofer model there is no feasibility in establishing 28 TICs, let alone 55, and it is not clear on what criteria such selection of the smaller number to be supported would be based.

6. The second challenge would also stem from the macrostructure of the UK economy. As already stated above, the majority of economic output in the UK comes through SMEs. Research and development in SMEs is critical to future success and has previously been supported through endeavours such as the Small Business Research Initiative (SBRI). It is difficult to envisage how a physically located TIC would be in a position to continue the strong work of SBRI and other similar schemes and given the economic portion SMEs represent this would seem an unaffordable lost opportunity.

7. There is also a challenge in working with the larger corporations in securing long term research funding. This has been a considerable issue for the Fraunhofer Gesellschaft and cannot be underestimated in this period of austerity.

8. Where it would be possible to identify a large corporation and a university in sufficient geographical congruence so as to locate a TIC somewhere between them, the diversity of UK universities are such that it is highly unlikely that the full necessary suite of research expertise would be present. This would require external expertise to be brought in from across the sector. This can be done but needs very specific attention.

9. The final external challenge for TICs is the recent history of government investment, and its focus on regional development. While is cannot be the case that activities are carried forward simply because they have been in previous receipt of funding, by the same token, where public funding is so squeezed currently, to consider how best to evolve from the current landscape and to avoid, wherever possible even an impression of waste, would be politically astute.

10. The single largest inherent challenge, as Lancaster sees it, is the expectation of linear technology transfer. The idea that academics have the ideas, these are carried by TICs and then corporations commercialise and exploit in a linear three step process is one that Lancaster’s own experience on knowledge transfer and commercialisation does not support. The process is far more organic with each piece working in collaboration and support of the others in cyclical processes which collectively create an environment in which the possibility of success is heightened and the means to success enhanced. It is mutually interdependent and more akin to an ecosystem than a production line. TICs are in positions to play a key role in this ecosystem, but only if their internal governance is such that they enhance engagement, provide real support in real time and become an enabler within an environment and not a barrier on a road.

11. Inherent in this enabling capacity is the necessary recognition that the most constructive research development is, by its very nature, almost always collaborative. By drawing together the best in a technological field, regardless of location, or even nationality, ideas are incubated, articulated and then, ideally through a successful TIC, manifest as economic growth and regeneration. Similarly, the co-ordination of academic research, business development and government policy-making, is critical. There are, however, existing centres that are closely aligned to universities and these can work if appropriate governance is put in place.

12. Regardless of whether TICs are direct elements of universities or located out with, the issue of the management of intellectual property will be a challenge to any development. Universities and academics are very open to exploitation of their intellectual property, but only within properly negotiated and articulated governance structures.

13. A TIC must have a clear vision of its primary mission. The needs of technological advancement, industrial market forces and public authority do not necessarily always wholly align. A TIC, as the locus for the expectations of all three needs to have a clear, articulated and agreed position as to how it sets, prioritises and, as necessary abandons projects. If this is not done, and understood to be done by all three parties the inherent tensions between the competing interests could be disruptive.

14. What other models are there for research centres oriented towards applications and results?

We think a model based on a more distributed approach is one worth exploring. As stated above, the best research and development leading to applications and results happen when the best minds are given over to the tasks. As these are not all located in either one geographical point nor within one institution, a model that: (1) distributes to those best capable, (2) maintains a structure which retains the focus on commercialisation and application and (3) is held together through strong governance structures is one that can best place the UK in the fore front of harnessing scientific capabilities. An ecosystem approach, as partially detailed above (paragraph 10), is such an approach.

15. By developing collaborative consortia around technological areas it would be possible to develop both more of them, thus putting the UK on a position to exploit more of the 28 cluster areas identified by yourselves, as well as ensuring that each consortium brought the strongest persons from throughout the UK, if not physically together then at least connected. Given that many the new technologies are electronically-based; this interconnectivity without physical co-location should not be an inherent barrier. Even if there is to be a central location for a TIC with capital infrastructure in place, a hub and spoke model which connects this space with research and development on going across the UK should be considered.

16. Such a model would be able to tap into regional developments already in train, as well as enabling the creation of more. There are a number of already existing TIC-like arrangements in place across the UK, and while these are currently sub-critical in terms of their size and ability to both commercialise and influence, if they could be brought together under large distributed TIC arrangements then (a) previous investment would be seen not to be lost, and (b) it would remove the not insubstantial barrier of requiring persons to move in order to become engaged. Distributed TICs with potential for regional engagement would also allow them to continue the positive engagements with SMEs that SBRI and other schemes have sought to capitalise.

17. TICs can also look beyond UK borders and build a global reach. The ability to leverage in international research partnerships is one that can only enhance TICs. Such action would necessarily require careful consideration and articulation of legal agreements, particularly around intellectual property. However, the UK is a global centre of intellectual property law practice and by integrating this into a distributed TIC it would activate the added value of this strategic national asset. With this ability to focus regionally, nationally and internationally, we think the a distributed model that goes beyond the Fraunhofer model is the one best placed to grow the UK’s technological and innovative future.

18. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

As mentioned above (paragraph 16) there are a number of smaller Fraunhofer-type centres in the UK. However, not all of them have the critical mass necessary for the type of success we suppose the government is seeking. Collectively, however, in a distributed model, this success is achievable.

19. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

Wherever the role of central coordination may fall, it is critical to success that it involves direct input from all parties (government, universities, research councils and industry). The suggestion of a UKTICs Management Board under the auspices of the TSB strikes us as sensible.

20. What effect would the introduction of Fraunhofer-type institutions have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

This is difficult to predict. It is likely to engender competition between work undertaken through TICs and that undertaken through the Public Sector Research Establishments. This could be positive as competition drives innovation, or it could be negative through the restriction of collaboration. Which happens will largely come down to the governance and management of both sets of organisations.

Secretariat Pro-Vice-Chancellor for Research Lancaster University

01 December 2010

Written evidence submited by the University of Liverpool (TIC 24)

Technology Innovation Centres

Summary 1. The University of Liverpool greatly welcomes the proposals to establish a UK network of Technology Innovation Centres (TICs) and the opportunity to submit evidence to the Committee’s enquiry. The University would emphasise that: • TICs should be built on existing infrastructure and located where there is genuine world‐ class research, a strong or emerging industrial capability and a track record of effective collaboration and delivery. • effective implementation will require careful consideration of how a UK network will map onto and complement the UK’s current innovation ‘culture’, its existing ‘infrastructure’ and any overarching innovation policy to enhance success in commercialisation, exploit the value of knowledge assets more fully and secure future international economic competitiveness. • initiatives will only succeed where there is a focus upon a sustainable area of technology in which the barriers for business to undertake projects themselves are prohibitive. • TICs have the potential to anchor globally‐mobile knowledge‐intensive companies and form an integral part of the innovation ‘infrastructure’ within given localities. Consideration should be given to how any UK co‐ordinating body will engage at local level to ensure that growth opportunities and benefits of TIC location in a given area are maximised. • as hubs of engagement and interaction, TICs have the potential to offer a range of mutual benefits to establishments engaged in elite ‘pure’ research, whose outputs form an essential part of the ‘commercialisation supply chain’.

Introduction 1. The UK’s exceptionally strong fundamental science base, of which the University of Liverpool forms part, provides an ideal foundation upon which to build a TIC network and deliver a major boost to the UK’s innovation ‘infrastructure’. Founded in 1881, the University has an impressive history of pioneering education and research, with a particular emphasis on ‘education for the professions’. As one of the UK’s top research‐led universities, and a member of the Russell Group of major research‐intensive universities, it has an enviable international reputation for innovative research.

2. Ranked 5th for KTPs in the UK, the University has a successful track record of harnessing its knowledge, expertise and equipment to help commercial and public sector organisations meet the challenges entailed in innovation. It has helped organisations to achieve their objectives by providing access to a wide range of expertise and transforming ideas into creative solutions, new technologies, applications, products and skills.

What is the Fraunhofer model and would it be applicable to the UK? 3. Any consideration of the value of the Fraunhofer model needs to proceed from a clear understanding of what purpose such Institutes would serve in the UK. The analysis presented here assumes that the development of a UK network of Fraunhofer‐type Institute would be one response within a broader integrated policy to address the UK’s comparative lack of success in commercialisation, exploit the value of its knowledge assets more fully and secure its future international economic competitiveness.

4. The success of Fraunhofer Institutes as elite organisations which provide a business‐focused capability that bridges research and technology commercialisation needs to be understood within the broader environment within which they exist in Germany. Any development of a network of similar Institutes in the UK needs to be sensitive to the particularities of this context. Effective implementation will require careful consideration of how a networks of Institutes will map onto and complement the UK’s current innovation ‘culture’, its existing ‘infrastructure’ and ongoing cross‐sector innovation activities.

5. The Coalition Government’s ambitions for more balanced and sustainable future growth would make the establishment of a UK network highly timely. The capacity of Fraunhofer‐type Institutes to ensure that new technology is market‐ready and deliver a step change in commercialisation could form an integral part of the drive towards an economy driven by a more dynamic private sector delivering export‐driven growth. The UK’s academic community has a strong entrepreneurial spirit and this could be harnessed if Institutes provide attractive opportunities for development and career progression.

6. It will be important to give close consideration to the levels of core funding which will be provided to Institutes. It is essential that Institutes supplement this by winning additional income from sources such as contract research, commercialisation and subscriptions as reliance on demand from end users is crucial to encouraging innovation and boosting efficiency.

7. To assist with this objective, there should be an explicit sweet spot for engagement (e.g. 40% income from industry), with core funding then being proportionally withdrawn if this is not achieved. Institutes could become overly focused on the short‐term and ultimately unsustainable if they are required to generate too great a percentage of their revenue from commercial sources.

8. In this respect, it should be emphasised that one of the key purposes of TICs will be to develop the high value technologies of the future, which will safeguard the UK’s international competitiveness of the UK economy. Whilst emphasising the importance of TICs developing a commercially responsive ‘offer’, this overarching national objective raises a corresponding question of the users of TICs and how their approach to engagement with Institutes might help to reinforce this longer‐term goal.

9. Similar facilities operated by the University of Liverpool have benefited from having a physical presence, providing an opportunity for researchers and businesses to work on projects side by side. The ability to undertake short‐term work in a flexible manner is important as it helps to build relationships and establish trust between partners. This can be achieved through core funding for postdoctorate‐level staff capable of delivering large as well as smaller commercial projects. A second important lesson is that initiatives will only succeed where there is a focus upon a sustainable area of technology in which the barriers for business to undertake projects themselves are too high. Finally, physical centres must be effectively embedded within pre‐ existing networks, with a capacity – virtual or otherwise – to access and export relevant expertise, wherever mutually beneficial.

10. TICs should be built on existing infrastructure and be located where there is genuine world‐class research, a strong or emerging industrial capability and a track record of effective collaboration and delivery. The establishment of a UK network should be driven by these factors and the potential to deliver comparative advantage rather than geographical distribution.

Are there existing Fraunhofer‐type research centres within the UK and, if so, are they effective? 11. Whilst there are no direct UK comparators for Fraunhofers, the University has led initiatives with similar objectives. Often funded from regional or European sources, these programmes have had a positive impact on the Liverpool City Region and UK economy. However, sustainability has remained an issue.

12. The newly established Virtual Engineering Centre (VEC) is currently catalysing virtual engineering activities within regional SMEs and encouraging joint research programmes between industry and academia. Financed by the European Regional Development Fund, Northwest Regional Development Agency and the University, it assists the North West aerospace sector and wider industry by providing a focal point for world class virtual engineering technology, research, education and best practice. It is improving business performance throughout the supply chain and has key strengths in digital simulation and modelling and managing simulation, an area of increasing demand for industry.

13. The ability to test and model new products and production processes virtually reduces both risk and cost. The VEC catalyses virtual engineering activities and joint research programmes across the sector and between industry and academia. It provides: • a physical centre with ‘best practice’ facilities, which display integrated, interactive simulation and modelling software across the full range of virtual capabilities • a research partnership that will add value to existing research activities within the city region and beyond by providing a commercially relevant focus • a knowledge exchange centre to increase awareness and give potential users an opportunity to ‘try before they buy’ so they can become more confident of the business advantages that can accrue from using VE tools • an educational centre to help meet the current skills shortages in VE in the UK.

14. The VEC is strategically located at Daresbury Science and Innovation Campus (DSIC), facilitating access to the high performance computational facilities and scientific expertise in specialist software development. It is now incorporated within tours for UK and international delegations visiting the campus and is connected to research expertise at the University via six academic leads and links across the Faculties.

15. Strategic Partners of the VEC include the Science & Technology Facilities Council, North West Aerospace Alliance and BAE Systems. This upstream engagement with industry has proved extremely beneficial and provided an effective foundation for the VEC’s operations.

16. Although it has a current focus upon aerospace, the VEC’s overall ambition is to establish a centre of excellence in and hub for Advanced Manufacturing and other sectors – investing in ‘Virtual’ Advanced Manufacturing would be a logical position before investment in large capital facilities. Its current successes and anticipated future trajectory suggest that there would be scope to replicate this approach on an expanded scale.

What other models are there for research centres oriented toward applications and results?

17. The Centre for Materials Discovery (CMD) opened in January 2007 through a combination of £9.6 million funding from the University, NWDA, EU Objective 1 and industry. Located on the University campus, the Centre provides research and knowledge transfer services to academia and industry in the area of high throughput materials discovery.

18. The focus of CMD is to use state‐of‐the‐art robotics and automation technologies for the accelerated discovery of new functional materials in applications such as energy, health, home and personal care. Working closely with other universities, the centre aims to provide access to leading‐edge equipment for research, training for industry personnel. It is accessible to all businesses across the North West and UK and has enabled small, medium, and large industries across a range of sectors to move rapidly into the next generation of materials science.

19. Since its establishment, the CMD has created 35 jobs, filed 33 patents, assisted 72 businesses and brought £9 million net value to the North West region. A suite of automated facilities has provided major leverage for the University’s research both on academic levels and also in terms of research and economic exploitation.

20. The Centre has pioneered new modes of interaction and working‐level integration with industry; it functions as the major research base and working environment for 10 Unilever staff co‐located on the site. This presence of industry staff has offered opportunities for research students to gain an insight into industrial best practice.

21. The CMD was recently invited to become an affiliate of an international Polymer Institute as a result of its activity: it will explore the strong potential for staff/expertise exchange to expand the centre’s global presence and enhance its impact. Other objectives will be to extend the very successful model to new industrial partners. An increased focus will also be placed on intellectual property exploitation.

22. The Knowledge Centre for Material Chemistry (KCMC) is a virtual centre of expertise providing a single point of contact for companies of all sizes to access a substantial range of facilities and expertise in applied materials chemistry. This includes the molecular modelling capabilities of the Science and Technology Facilities Council at Daresbury as well as relevant expertise at the University – including the CMD, University of Manchester and the University of Bolton. By operating in a business‐engaged and business‐enabling manner, KCMC has established a model that draws on linkages between world‐class research strengths and those of other providers in a flexible way.

23. In its start‐up phase of its operation, KCMC funding has been broadly comparable to the Fraunhofer benchmark; the revenue funding profile to date (representing c.18 months of operation) has been:

Core Public Sector Contribution: £2.6 m Additional Grant income: £2.7 m Industry income: £2.1 m Total Income: £7.4 m

This has been supplemented with income in excess of £16m for applied research and materials chemistry grants for knowledge generation.

24. Much like the Fraunhofer model, KCMC brings new ideas and technologies to market through R&D collaboration between top quality applied research capabilities with innovator companies in the manufacturing and process industries. However, the approach adopted by the KCMC enables leading research expertise in the universities to be directly integrated in its activity – a core advantage over the German model. In addition, the focus of KCMC is to seek the engagement of industry partners on the scale‐up and exploitation of new product concepts rather than investing KCMC resources in large scale prototyping and pilot scale facilities. This sector‐specific selection of resource deployment is key to minimizing investment risk.

25. The impact of KCMC in outputs relative to Fraunhofer benchmarks illustrates the viability of this approach:

KCMC output Comparable Fraunhofer (assuming same core funding) Applied research income £4.8million (65%) £5.2million (66%) Commercial 11 patents, 2 licences 3 licences Opportunities Spin‐outs 1 <1

Crucially, in addition to successful engagement with a number of major multinational enterprises, KCMC has established a number of key relationships with SMEs and delivered immediate benefits to their commercial prospects via these collaborative arrangements. This approach has the potential to deliver a ‘win‐win’ for Universities and UK Plc as, whilst SMEs are the subject of renewed focus in economic policy, they also now contribute a substantial proportion of industry research income (c.17%).

Whose role should it be to co‐ordinate research in a UK‐wide network of innovation centres? 26. The position of the TSB as a body which occupies a position between business, government and the research community, its UK‐wide remit and its role to ensure that the UK is at the forefront of innovation‐enabled by technology mean that it would be well placed to lead on the co‐ ordination of a UK‐wide network. A national strategy should be welcomed in that it would provide coherence; reduce duplication of effort; and, deliver centres of true international – rather than national – critical mass.

27. In order to deliver an effective network, which maximises potential synergies and realises new collaborative opportunities, this function should not be undertaken in isolation. Relevant stakeholders with whom the TSB should engage would include RCUK and UKTI as well as Government Departments, notably DBIS. In view of the emphasis on excellence, a positive relationship with the Russell Group would be welcomed.

28. TICs have the potential to anchor knowledge‐intensive activities of globally mobile companies and form part of a wider‐ranging innovation architecture within given localities. In this respect, it is essential that consideration be given to how any co‐ordinating body will engage at local level to ensure that growth opportunities and the benefits to the UK of TIC location in a given area are maximised; there is also a corresponding imperative that localities and their Universities establish how they wish to engage with any UK network.

29. By way of illustration, within the Liverpool City Region, any TIC development should be brought forward within the context of established business capabilities in Materials Science, Advanced Manufacturing and Life Sciences alongside other key facilities such as Daresbury Science and Innovation Campus, Liverpool Science Park and the proposed Biomedical Health Campus and

BioInnovation Centre on the site of the Royal Hospital. The existence of a Knowledge Economy Group for the Liverpool City Region, which is chaired by the University’s Vice‐Chancellor and will be aligned to future Local Enterprise Partnerships (LEP) structures, has proved to be a highly beneficial vehicle in taking a strategic overview and identifying how research excellence complements commercial strength and demand; the Group would provide a mechanism for future dialogue at UK level.

30. The advantages of such a vehicle are reinforced by the recent Government White Paper on Local Growth, which announced that LEPs will be given opportunities to make proposals in relation to the innovation infrastructure in their locality. The presence of senior HE representation as well as business leaders on several LEP boards, including that of the Liverpool City Region, should therefore be viewed positively.

31. Care should be taken to ensure that funding is not spread too thinly within any UK network, particularly in the current straitened context. The connection between local growth agendas and UK innovation policy suggests that consideration should be given to how TIC funding may be leveraged against the Regional Growth Fund to maximise economic impact and assist the transition towards sustainable private sector‐led prosperity.

What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 32. Fraunhofer‐type institutes will be a welcome addition to the portfolio of UK research establishments and should be positioned effectively within this context as part of the UK’s global knowledge ‘offer’. In this respect, it will be important to identify where they will complement and compete with existing facilities.

33. As hubs of engagement and interaction, TICs have the potential to offer a range of mutual benefits to establishments which are engaged in elite ‘pure’ research. The outputs of these establishments lay the foundation for comparative advantage by forming an essential part of the ‘commercialisation supply chain’. They generate international profile in their own right and help to attract leading researchers, knowledge workers and investors.

34. These strengths should continue to be recognised and aligned effectively with any development of a UK network of Institutes. In this respect, the fact that the UK’s fundamental research base remains under‐resourced in relation to international competitors, notably in physical sciences, should not be overlooked; transferring resources from fundamental science to commercialisation risks curtailing the flow of new technologies.

35. The UK’s academic community has a strong entrepreneurial spirit to drive the success of TICs. A crucial consideration therefore – beyond the relationship between centres – is how academic staff will view their relationship with the Institutes and what opportunities they will provide for career development. The orientation of UK and institutional performance systems can militate against staff engaging in knowledge exchange activities. The establishment of a high‐profile UK network will not alleviate this by itself and should therefore be considered within the context of broader UK HE policy.

John Flamson Director of Partnerships & Innovation The University of Liverpool 01 December 2010

Written evidence submitted by the University of Strathclyde (TIC 25)

Technology and Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 Fraunhofer Society was established in 1949 and has since developed to become Europe’s largest organisation for applied research. Today Fraunhofer consists of 59 Fraunhofer Institutes with a total staff of 17,000 and an annual research budget of 1.6 billion €.

1.2 Fraunhofer is positioned between Universities focused on fundamental research and industrial companies eager to create innovative products. Its mission is to provide excellent research services to industry, in particular SMEs, while maintaining an excellent reputation in the scientific community.

1.3 Further information of the Fraunhofer Society may be obtained at http://www.fraunhofer.de/en/about-fraunhofer/

1.4 The Fraunhofer model is quite adaptable but there are a few key elements of the model the primary one of which is that there needs to be a stable funding base provided by the public sector. In the Fraunhofer model the public sector funding is in direct proportion to funding secured from industry.

1.5 The criteria for establishing Research Centres outside Germany includes • Accessible research market • Complementary competences to existing Fraunhofer Institutes and Centres • Stable funding base, locally sourced • Potential for establishment of more than one Centre

1.6 Fraunhofer Research Centres have been successfully established in many countries including USA, Portugal, Italy and Austria. The Fraunhofer model is certainly applicable to the UK and could be of great benefit in bringing innovation to the industrial base.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 There are several organisations and centres in the UK that operate in the same domain as the Fraunhofer Society but, as far as we are aware, there are no research centres in the UK which have been set up using the Fraunhofer model. The UK system lacks long term investment, coordination and coherence.

2.2 The UK does have research centres which attempt to bridge the gap between academia and industry. The University of Strathclyde has several such centres including the Institute for Energy and Environment, Institute of Photonics, Advanced Forming Research Centre and the Power Network Demonstration Centre. All of these centres are collaboratively funded with industry. Current funding models make sustainability of these centres quite challenging. The Fraunhofer model provides the financial underpinning that leads to long-term benefits to the economy and society. This has been recognised as imperative in both the Hauser and Dyson reports.

3. What other models are there for research centres oriented toward applications and results?

3.1 The UK has attempted, several times, to replicate the success, for UK businesses and industry that Fraunhofer has had in other countries. The fundamental challenge is that the current UK system is based around project funding or initial funding for initiatives that are supposed to reach sustainability in three or five years. This leads to a lack of long-term impact and ultimately does not provide benefit to the industrial base and society.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1 Ideally, a UK-wide network of research centres should come under the umbrella of a central coordinating body to act as a single voice to Government. Government should establish the common framework (i.e. the model) under which these research centres operate, but Government should not be responsible for setting the research agenda of these centres. Centres should be established in areas where there is industry demand and these centres should exist for as long as that demand exists.

4.2 The UK should work collaboratively with the Fraunhofer Society to build on their expertise and success.

5.1 Fraunhofer Research Centres and Institutes are established alongside a host University, enhancing that University’s commercialisation activities by undertaking further applied research, development, prototyping and, if necessary, small scale production. Fraunhofer Institutes and Centres also collaborate with other Universities which have the same need in a technology area in which that Fraunhofer operates. Germany has an extensive and extremely well respected University sector which actively engages with Fraunhofer because the Universities see the benefit of doing so. The latest Fraunhofer to be established in the USA is hosted by MIT, which also sees the benefit of being attached to a Fraunhofer.

5.2 In addition, there are other research organisations in Germany, as well as in the other countries in which Fraunhofer Research Centres are based, which are in the public sector, for example Max Planck, Helmholtz etc. (in Germany); the National & Defense Labs etc. (in the USA). Their activities co-exist with Fraunhofer activities and, for the most part, complement the work that Fraunhofer undertakes. There is some competition, however, this is seen by the respective Governments as healthy in keeping the various institutions sharp.

5.3 In the UK, the situation would be similar, in that Fraunhofers would collaborate with Universities to undertake work at higher technology readiness levels than Universities have traditionally been able to address. This would benefit the Universities concerned as well as providing benefit to UK industry and society.

6. Other

6.1 The majority of the R&D that Fraunhofer Institutes and Centres undertake is demand-led work for industry - a Fraunhofer Institute’s survival depends on this work. The other work they do is preparatory work in anticipation of industry’s demands. The priorities of a Fraunhofer Institute or Centre are entirely industry focussed. Long-term Government funding is necessary to provide industry with established, stable and expert partners on which industry can rely. Industry must be able to know, with certainty, that they can access Fraunhofer’s expertise to provide help and assistance now and in the future which will enable their business to compete and thus grow.

Declaration of Interests The University of Strathclyde is in discussion with Fraunhofer Gesellschaft regarding the creation of a Fraunhofer associated with the University.

Prepared on behalf of the University of Strathclyde by Professor Allister I. Ferguson FRSE Deputy Principal Professor of Photonics (Research and Knowledge Exchange)

01 December 2010

Written evidence submitted by The University of Warwick (TIC 26)

Technology Innovation Centres

Introduction

1. The University of Warwick, offers the enclosed comments in response to the House of Commons Science and Technology Committee inquiry into Technology Innovation Centres (TIC).

2. With a reputation for enterprise, innovation, and knowledge transfer, the university has long embraced the concept of a wide mandate for universities, being not solely ‘knowledge-creators’, but also ‘knowledge-sharers’.

3. This is demonstrated most recently by Warwick’s participation in the £57M Birmingham Science City initiative; the industry-focused activities of WMG (formerly Warwick Manufacturing Group) and our resolute commitment and enthusiasm to the innovative Quantum Technology Partnership between Universities of Warwick and Lancaster, Qinetiq and Advantage West Midlands.

4. Alongside the expertise of our award-winning research commercialisation company, Warwick Ventures, these examples show Warwick’s academic, administrative and governance expertise in delivering large, strategic, theme-based technology development, with extensive academic-industry collaboration and societal-led measurable innovation outputs (such as new jobs and new business creation) - attributes and skills shared with the Fraunhofer Institutes.

5. This response draws upon our first-hand experience in technology-development derived in particular from these examples and our own direct interactions with various Fraunhofer Institutes.

6. Finally, we highlight the important link that each of the Fraunhofer Institutes has to a university acting as its ‘technology-creator’, and declare a future interest if this initiative proceeds, in acting in this role to any Technology Innovation Centre.

Question: What is the Fraunhofer model, and would it be applicable to the UK?

Response:

7. Although there is increasing focus on the role of universities in contributing to innovation, economic growth and wealth creation (Lambert, 2003; Sainsbury 2007; BIS, 2009), the interaction modes between them and external business are complex and multi-faceted including broadly technology transfer and people- or community- based problem-solving.

8. However, it is apparent from a number of studies (particularly, Michael, 2009, ESRC) that technology-transfer (licensed research, patenting, spin-off company formation, consultancy), is amongst the least common form of knowledge exchange activity. Typically, the key motivation for business to interact with universities is not to gain commercial advantage through technology, but through management-innovation.

9. Furthermore, a major academic motivation for external business engagement is to pursue academic research and teaching agendas, with the solution of problems for external partners not always prioritised.

10. This is one example of several significant differences that exist between universities and businesses. It is argued that these cultural barriers limit collaborations that include a significant element of technology transfer - the Lambert report states ‘companies and universities are not natural partners: their cultures and their missions are different’.

11. The teaching and research qualities of leading UK universities are by most metrics internationally competitive, however establishing the best methods by which these qualities are directed towards UK societal innovation and wealth-creation remains a challenge. Although a number of UK initiatives have been implemented in order to improve this performance, none of these have entirely replicated the core characteristics or success of the Fraunhofer Institutes.

12. The first Fraunhofer Institutes were established in 1949. The primary motivation for their formation was to maximise novel military-applicable technology growth from research institutions in West Germany, augmenting contributions from other western nations against the emerging Soviet Bloc threat. Despite considerable technical and societal differences that exist in 2010 compared to 1949, the core characteristics to ensure their success were anticipated correctly and remain similar today. In 2010, there are almost 60 Fraunhofers, mostly located in Germany but with increasing numbers now created internationally.

13. The Fraunhofer model provides an environment in which the operational, management, governance and cultural characteristics are ‘aligned’ in order to expedite research application and commercialisation.

14. Each institute is associated with both an academic organisation (for example, a University, a Technical University, or a Max Planck institute) which acts as a source of ‘technology- supply’, and external business and commercial partners, these bringing market-led ‘technology-pull’ problems and opportunities.

15. Hence, the Fraunhofers exist as an ‘intermediary organisation’, operating between these two stakeholders, providing coordinated, easily-accessed technology-development and commercialisation expertise, coupled with an operating culture common and familiar to both and an expedited route between them.

16. A number of the major characteristics of Universities and Fraunhofer Institutes are listed in Table 1.

Descriptor Universities Fraunhofer Institutes Core Mission Research, Applied research, Teaching, Technological problem solving ‘3rd-Stream’ Technology-enabling Funding ~ 30% Competitive ~33% local government research (German Lander) ~2-10% Industry ~33% competitive research ~ 50% core Teaching (German TSB equivalent) Balance %, Other ~33% Industry peripheral activities (e.g. CPD) Main Funder Government Mixed government-private sector Main Funding-type Speculative, Competitive, technology competitive, funding development opportunity driven opportunity driven Typical Research Academic research Academic research community Interactions community Technology businesses Research Councils Technology development funders Typical Technology 1-4 3-7 Readiness Levels (TRL) Governance Academic Mixed academic-commercial Core Staff Expertise Knowledge generation Knowledge exploitation Core Outputs Critical-thinking Open-access journal enabled graduates publications Open-access Journal Private know-how publications Technology development expertise Commercialisation expertise Market intelligence Research Activities Broad, diverse Focused, themed, market-led selective Outlook Academic Technology-Business Research Horizons < 5years >5 years Funding Horizons < 5years >5 years Table 1: Major characteristics of Universities and Fraunhofer Institutes

17. Fraunhofer research activities focus on a number of centrally selected themes, providing expertise within applied-research, commercialisation, and technology-development. By contrast, Universities generally maximise the potential to generate new knowledge by encouraging research diversity and academic freedom.

18. This impartiality of research focus and direction is appropriate when new knowledge is the prime objective, but not when technology development becomes the core activity. This requires a different and more diverse skill-base, partially dependent on the technology types to be developed and the anticipated engineering and market challenges. These differences and the intrinsic challenges of technology development are frequently underestimated.

19. Although published journal papers are a Fraunhofer output, the core deliverable is to provide bespoke technology solutions in a form most accessible and relevant to funders and clients.

20. The management and governance of the Fraunhofers also reflects the requirements of both its academic and business stakeholders. Representatives from both groups are involved in the operational and strategic management of the centres. This ensures that the requirements of applied research, commercialisation, and crucially, the transitions between these activities, are understood.

21. University research funding is accessed on a speculative, responsive basis by single academics, submitting proposals in response to a well-advertised national call from a single government-funding (e.g. EPSRC) source. This contrasts with the funding requirements of technology-development, where an early strategic plan or technology roadmap for the anticipated development and potential applications of core technologies is important, particularly for generating external industry funding. Fraunhofers commonly develop technology roadmaps to underpin their strategic plans as part of a continuous assessment of new technologies derived from the affiliated institution.

22. The technology development process, where university-derived technologies are translated to the marketplace, often takes in excess of 10 years to complete. Partial, but significant funding for each Fraunhofer is provided by the regional government (Lander) in which it is established, in anticipation of eventual economic benefit to the local region. This core funding recognises the long-term development process, and is provided with minimal variability in terms, conditions, and financial value, coupled with light-touch audit approach, for terms of over 10 years.

23. By comparison with some of the UK initiatives, this provides a stable financial framework in which a new Fraunhofer can devote significant resources to establishing its technical proficiencies and optimising operations, without the distraction of regularly needing to secure substantial amounts of replacement core-funding.

24. The process of technology development typically requires a considered transition between these major stages:

i. New knowledge (Knowledge Development)

ii. Tests of its wider relevance and applicability (Applied Knowledge and anticipated Technology Roadmap)

iii. The generation of suitable, appropriate route to market, and prototype generation (Commercialisation)

iv. Production, distribution and marketing (Manufacturing).

25. Navigating this process typically takes many years, considerable funding, and luck. Each step requires differing skills-sets of the participants, and many different providers can be commissioned for each stage. Identifying the most appropriate group of partners to deploy as the process develops requires an understanding of the new core technology, what successful routes similar technologies have taken, and the likely end-user market.

26. The expertise available within Fraunhofer Institutes recognises these challenges, and provides all within a single centre, allowing a more ‘porous-transition’ between each stage and a consistent governance and cultural framework to both the University technology provider and the industry end-user.

27. Figure 2 shows key technology-development characteristics of a typical University.

Figure 2: University technology development characteristic

28. The universities greatest strength, derived in part from the principle of academic freedom, is their depth of expertise in the creation of new knowledge. Coupled with wide research diversity, this provides a substantial capability for new knowledge creation over a wide thematic base.

29. In addition, the research-active universities, through intervention of ‘Business Development’ and ‘Technology Transfer’ offices, are able to ‘move’ new knowledge along the technology development process.

30. However, one of the key challenges to the development of university-derived technology relates to the academic culture of innovation. The depth and vibrancy of activity, coupled with academic freedom, and the need to respond to short term funding initiatives, as opposed to a known research roadmap, make it difficult to predict from where and when new technologies may emerge, and whether the investigator will continue to develop their research into the more process-complicated applied domain.

31. This complicates the role of university ‘Business Development’ and ‘Technology Transfer’ offices that are reliant on the engagement of academic colleagues in the translation of their research, but have limited ability to influence shape and direction of that research.

32. These factors tend to limit interactions between the research and the technology development elements of a university with relatively solid ‘boundaries’ between them, where closer working and further strategic planning would be beneficial to both groups.

33. As the future commercial and societal potential of entirely new knowledge is rarely initially apparent, it is difficult for universities to attract industry backing prior to further applied research investigations. Since the mandate of the Universities is principally new knowledge creation, a different organisation may be better placed to carry out the applied research, technology assessment and generation of the technology roadmap. In Germany, this organisation is the Fraunhofer Institutes.

34. Figure 3 shows key technology-development characteristics of a Fraunhofer Institute.

Figure 3: Fraunhofer Institute technology development characteristics

35. Unlike universities, the research and commercialisation activities of each Fraunhofer focus around the development of technology within a selected applied research theme. This focus allows the institute to more easily identify and track technological advances and anticipate the most effective technology-development routes and strategies. This advance knowledge and strategic planning enables a more porous development of technology across the development stages within the institute.

36. The university and Fraunhofer models are therefore complementary to each other. The need for a regular flow of new knowledge is satisfied through partnerships between the Fraunhofer institutes and their partner university. The externally focussed cultures of the Fraunhofers, with their understanding of market requirements, make them an attractive resource to both universities and external businesses when either seeks technology- development expertise.

37. The success of the Fraunhofers is not derived from a single, key characteristic, but by a number of mutually supportive factors:

i. An applied, responsive culture, founded on understanding the needs of external clients.

ii. Focussed, themed, market-led technology areas leading to definable, relevant, technology transfer strategies and expertise.

iii. A collective, national network, all sharing similar long-term funding, governance, mandates, staff qualities and culture.

iv. A strong brand – the 1949 Fraunhofer model has proved successful, and has grown with strong continuity in the external offering.

v. Mixed academic-commercial staff expertise

vi. Light-touch, long-term, secure, core funding.

38. Although we have identified the mandate, governance and procedural features underpinning Fraunhofer successes, there remains the influence of the wider cultural environment in which they operate.

39. Whilst we may practically reproduce the Fraunhofer Institutes, we cannot quickly recreate the more developed technology-research ecosystem and innovation economy of Germany.

40. Hence, Warwick also strongly supports a number of recommendations found within the study ‘Ingenious Britain’, Dyson, 2009. A key task for this report was to consider how a wider UK culture of science, technology and engineering might be promoted. Although outside the reference terms of this return, further analysis of the Dyson recommendations is advisable to improve the external technology-ecosystem the TICs must operate within.

41. In particular, we consider that greater importance should be given to science, technology and engineering within pre-University education, promoting networked collaboration, and providing the correct investment environment, governance and regulation for a thriving technology industry.

Question: Are their existing Fraunhofer-type research centres within the UK, and if so, are they effective?

Response:

42. We are aware of a number of activities that demonstrate some, but not all of the key Fraunhofer characteristics.

43. For example, the IRCs (Interdisciplinary Research Centres), IMRCs (Innovative Manufacturing Research Centres), and Cambridge University Technology Centre all show the applied, interdisciplinary approach, but are entirely university-based. These lack a dedicated commercialisation arm concentrating on developing technology transfer expertise suitable to their research theme, network-coordination, and long-term ‘light- touch’ funding.

44. Additionally, the NIHR-funded (National Institute of Health Research) Biomedical Research Centres and units are existing University-NHS partnerships, which have major additional elements of Industrial partnership.

45. The closest current UK model is the EPSRC-TSB-Industry-funded Innovation Knowledge Centres (IKC). The IKCs (currently six centres and increasing by competitive review at two centres biennially) are university-based and interdisciplinary, but with comparatively short-term core funding of 5 years.

46. However, the IKC funding is primarily not to support fundamental or even applied research, which is provided by industry partners, but to generate Fraunhofer-type expertise in thematic-based technology-transfer, market awareness, and business-culture. It is anticipated that there will a loose network of IKCs will develop, but with no central coordination of themes.

47. As previously indicated in our covering letter, WMG at University of Warwick also demonstrates a number of Fraunhofer characteristics, particularly with its prime mission being the provision of externally focussed academic-derived innovation and technology solutions to UK industry.

48. WMG recognises the benefits of focussed research themes, with particular expertise in the well-defined areas of materials and sustainability, digital technologies, manufacturing technologies and operations and business management.

49. Finally, WMG also understands the advantages arising from close networking, with international teaching and research based partnerships in Hong Kong, India, Singapore, Malaysia and Thailand.

Question: What other models are there for research centres oriented toward applications and results?

Response:

50. Some similar international centres exist: ETRI, Korea; TNO, Netherlands; Carnot Institutes, France; Industry-University Collaborative Research Centre (IUCRC) USA; GTS, Denmark; Hong-Kong Research and Development Centres, China; Rolls Royce Technology Centres, International.

51. Warwick has recently made efforts to understand the success of the MIT Media Lab. This applied research laboratory works on future methods for information flow, control, and dissemination. This work is predominantly industry-commissioned (for example, Apple, Microsoft, Sony, BT). Although journal publications are an output, the audio-visual component of the research means results are frequently delivered in nearly-complete final product form. This minimises the transition boundary between commercialisation and manufacturing, further accelerating the commissioning of the new technology.

52. Warwick recommends further investigation of the MIT Media Lab as part of the TIC enquiry.

Question: Whose role should it be to coordinate research in a UK-wide network of innovation centres?

Response:

53. A significant strength of the Fraunhofer Institutes arises from the focussing of research- expertise around technology themes.

54. By comparison to universities, each institute has by design a narrow technology outlook. It is only by careful coordination of all centres expertise into a mutually supportive network, each with similar mission, governance and funding, that a broad, encompassing, strategic technology outlook is achieved. We therefore support the requirement for central coordination to the overall network.

55. There are a number of complex, interdependent factors that determine the broad research themes each Fraunhofer Institute follows and similar considerations should be given to TIC themes. These considerations include but are not limited to:

i. Suitability of the UK university technology base in the chosen theme.

ii. Availability and primary source of core TIC funding.

iii. Technology-market requirements.

iv. Venture capital funding requirements.

v. Future societal technology requirements (for example, greater clean energy generation, greater food production, greater material recycling demands).

vi. Capabilities of existing TICs.

vii. Ready, local availability of suitable mixed academic-commercial skilled TIC staff.

56. We are not aware of any single body with this broad mandate currently capable of meeting these requirements. Hence, we propose the establishment of a new body to oversee TIC strategy. Considering the above requirements, membership could include representation from TSB, BIS, Research Councils (Technology and Social Science mandates), universities, local-government, learned institutes (Institute of Physics, Institute of Electric

and Electronic Engineers etc.), CBI, LEP, Chamber of Commerce etc., jointly reporting to the Secretary of States for Business Innovation and Skills, and Universities and Science.

Question: What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

Response:

57. This is a complex question, subject to many coupled factors, meaning we can only speculate on TIC impact. As noted, there are some UK initiatives that possess similar characteristics to the Fraunhofers, but no single substantive example demonstrating all attributes.

58. A direct negative consequence would be if funding were to be transferred from existing centres to the new TICs. We believe that the government component of TIC funding should be new funds to avoid any reduction in existing research capacity.

59. The activity of TICs can be expected to be useful to all institutions engaged in technology development, and a formal route for the analysis and dissemination of TIC practice should be established as part of a standard TIC review process.

Professor Mark Smith; Deputy Vice Chancellor

Professor Tim Jones; Chair, Science Faculty

Dr Mark Barnett; Business Engagement, Research Support Services

University of Warwick

01 December 2010

Written evidence submitted by Professor Andy Hopper (TIC 27)

Technology and Innovation Centres

1 There are many ways to innovate ranging from corporate research supporting internal business units to outsourcing of research to universities. However over the last decade there has been a reduction in the number of corporate research laboratories and attempts at technology transfer from universities have not made their mark considering the level of investment in “third stream” funding.

2 Many efforts have been made to improve the situation but it may be that little more can be done within existing structures.

In industry it is often difficult for business units to absorb innovative ideas and products. This is because big things start small and large organisations are most effective once products are at scale.

In academia there is pressure to publish which in my view is a distraction to innovation, and peer review of research grants is not a method of maximising economic impact. Most importantly teaching has to be delivered and the training of well qualified people is the most effective economic output for an academic.

3 Nevertheless knowledge and opportunities are being generated for new markets and ventures. Our universities are producing an excellent feedstock of well educated and talented people. Investment in technology, engineering, and science is the underlying wealth creator of our society. The global marketplace is ready and waiting.

4 A gap exists for institutions whose context and mode of operation is focused on economic output. If this “institutional gap” is filled then the well known “funding gap” is likely to be filled as well. To do this the new institutions have to produce fundable or acquirable businesses. For the most successful outcomes this can only be done if they are able to attract the most talented people.

5 The TICs present an opportunity to do something new but the positioning and scope of these centres is crucial to success. An important consideration will be the ability to attract top talent.

One positioning would be as middle ground entities integrating the work of industry with that of universities. This would tend to emphasise a service mode for the university and a customer mode for the industrial partner. To proceed in this way would require more realism than exists today of the value different stakeholders bring to commercial ventures.

However another positioning would be for industry and universities to fuel a TIC which aims to produce really new businesses based on very innovative work carried out within the TIC. For the industrial participants this disruptive approach presents a threat and an opportunity. The threat is that the output may undermine the industrial business model but the opportunity is to be aware of it and use it. For universities this positioning is straightforward and based on supplying qualified employees, a very wide intellectual context, and only occasionally intellectual property. This in turn is best achieved by academics conducting world-class research judged in its own terms.

6 Below is a description of the Olivetti Research Laboratory (ORL), an industrial research lab which existed in Cambridge for a period of 16 years and innovated in the ICT sector. I hope the ORL experience provides a useful template for how a TIC might be structured. The model may not generalise or translate directly to other sectors, but does present a specific example from which lessons can be learned.

ORL was a major wealth creator in the UK, a source of inward investment, and one of its legacies is the continuing existence and evolution of numerous businesses which have attracted investment of over £100M.

7 ORL was set up by Olivetti in 1986 as a subsidiary company based in Cambridge with a charter of changing the world of computing. Over its existence ORL was initially funded by Olivetti, subsequently by Olivetti and Digital Equipment Corporation, then by Oracle and Olivetti, and finally it was bought and funded by AT&T. The approach was to keep the number of sponsors small.

8 ORL had a symbiotic relationship with universities, funded a large number of PhD students, and sponsored research. However it was not a downstream organisation and used universities for recruitment and to reach more distant parts of the worldwide research community. The specific research conducted within ORL was equal to if not more significant than that carried out at any university. Sponsored university research was expected to be world beating in its own terms.

9 The leadership of ORL chose the research directions with full backing of the most senior people in the sponsoring organisations. It was agreed from the outset that strategic and operational decisions would be made in the local context and not by head office. In other words the model was to back leaders on a sustained basis.

10 The research directions were chosen to take into account technology, business models, and the availability of venture, angel, and corporate investment capital. Direct links were maintained to all these sectors. The contractual arrangements with sponsors permitted full visibility of the global marketplace within the sponsoring companies. Projects were targeted for impact on timescales from 3-10 years. The innovation model was to buck trends and construct real systems.

11 The strategic positioning of the laboratory alongside but independent of a university was attractive to a particular group of very talented people. These were individuals primarily incentivised by real-world impact and in many cases financial gain, rather than publication and teaching, or the corporate world.

The laboratory employed up to about 50 people at any one time. At that size it was possible to have little internal hierarchy and while a command line was available it was used judiciously so as to empower talented employees. Indeed 20% of time was available for individuals to work on any project of their choosing (an approach now used by Google). Thus barriers to contribution and innovation were reduced as much as possible.

12 As projects showed promise additional personnel were recruited with the intention of forming teams and businesses which were fundable or acquirable. Thus the model was personnel transfer rather than solely technology transfer.

13 The commercialisation model was to offer first option on output to sponsoring companies but on the basis of “use it or lose it”. However “lose it” meant lose control but maintain an appropriate share of subsequent success. Thus commercialisation could not be held back.

14 A spin-out company was the next option in the waterfall of commercialisation, followed by licensing, and ultimately open sourcing. In this way commercial output was maximised, and apparently unwanted output was kept alive with the possibility of reuse as the industrial landscape changed.

15 Each spin-out consisted of the core team, the seed funding, the initial business plan, and early customers. Intellectual property was assigned exclusively to the new venture. The core team always left the research lab and became founders of the spin-out with appropriate stakes. This approach was also well suited for potential transfer to a sponsor or acquisition by another company. Thus the ORL model was to spin-out the team, and the technology, and move on to a new research challenge.

16 In essence over a period of 3-5 years ORL developed very strong groups around promising projects which were disruptive in the market place. Individual incentives were constructed to maximise output while the clear and commercial arrangement with sponsors made for an admirable amount of flexibility and support from them.

17 A number of companies were spun out. The most successful Virata was in the DSL chip business and at its peak had a NASDAQ market capitalisation of over $3Bn, $500M in cash, and some 35% of the worldwide consumer DSL chip market.

18 The most successful open source output (VNC) became a de-facto worldwide standard for remote control of computers with by now several hundred million downloads.

19 In the long term ORL sponsors were offered returns which outweighed the costs of running the laboratory. Furthermore personal wealth was also created and recycled in to the UK economy.

20 The laboratory was suddenly shut by AT&T in 2002. An interesting observation can be made on what has happened since then. Almost all the teams that constituted the ongoing projects reformed as start-up companies. Where required these companies have subsequently attracted investment capital (totalling over £100M) and a number are doing very well. Indeed some of these companies have themselves spawned new businesses thus the cascade of innovation has continued.

21 The companies spun out directly from ORL were Adaptive Broadband, IPV, and Virata. The phoenix of subsequent companies includes Adventiq, Apasphere, Apoideas, Cambridge Broadband, Camvine, Camvit, Cotares, CRFS, DisplayLink, Imense, Ndiyo, RealVNC, Solarflare, and Ubisense.

I would argue that the success rate of these ventures is much higher than for conventional start- ups and in particular spin-outs from universities. This is sometimes called the “soft company” model and is behind some of the UKs biggest successes such as ARM plc.

22 “TICs” have come at a time when governments around the world are fulfilling their role in promoting and stimulating innovation. However not all are sophisticated in their approach. I recommend that “TICs” should be used for creating entities with forward-looking innovation models and not for the creation of conventional “integration centres” which cover middle ground between universities and industry. More sophisticated innovation models which back people and not processes, maximise incentives, and minimise barriers, are the most likely to be successful. Such approaches are also best suited to the UK mindset and UK strengths.

I declare an interest having been Managing Director of ORL during the whole time of its existence. Hermann Hauser was the other co-founder and on the Board. All views expressed in this note are my own.

Andy Hopper CBE FIET FREng FRS Professor of Computer Technology and Head of Computer Laboratory, University of Cambridge Chairman RealVNC Chairman Ubisense 1 December 2010

Written evidence submitted by The Centre for Process Innovation Ltd (CPI) (TIC 28)

Technology Innovation Centres

1. INTRODUCTION AND DECLARATON OF INTERESTS

The Centre for Process Innovation (CPI) is an innovation centre that serves the Process Industries. The Chemistry Innovation KTN notes that the chemistry using industries in the UK turnover over £800bn/yr and directly employs over 2.3 million people (see appendix).

CPI is based in the North East of England and serves the Industrial Biotechnology, Advanced Manufacturing, Printable Electronics and High Temperature sectors. It is an intermediate technology institute that sits between academia and industry. CPI has an open access capital asset base of over £55m and employs over 120 people from a wide range of business and technology disciplines. It works with SMEs, large corporates, universities and the finance community to link market pull with technology push and has so far supported the creation of over 120 new businesses and provided a return of some 780% on the public investment into the centre.

CPI is seeking to become on of the first elite independent technology innovation centres (TICs) announced in the recent comprehensive spending review that work between invention and the commercial market.

2. What is the Fraunhofer model and would it be applicable in the UK? 2.1. The Fraunhofer model is part of the German research, innovation and development system. There are 59 Fraunhofer Institutes grouped into 7 major technology areas. They operate between invention and commercialisation. Their role is to link researchers and industrial companies. In a typical year the Fraunhofer network turns over €1.6 billion. A third of this is contributed directly from the German federal and Länder regional governments. The other 67% come from a combination of private organisations and from publicly financed research projects. The additional public funding comes from German technology projects and other public organisations such as the EU. Total public funding from all sources is around 50%. Although linked to individual Universities the network operates as separate businesses with different skills1.

2.2. Public investment in science and technology development must be affordable. If there is inadequate return, continued investment is difficult to justify. Currently the UK favours knowledge creation over the development of products and services. Insufficient resource is placed onto transforming research into market ready products, processes and services that create significant value in the economy.

2.3. Public investment is required for research and discovery (knowledge creation) where risks are highest and uncertainty is greatest. This is needed to further

1 CPI Internal Benchmarking Study June 2009 and Fraunhofer website

scientific understanding and to discover ideas that could create economic value. The UK is one of the acknowledged world leaders in creating knowledge through its public investment in research and discovery.

2.4. In the UK’s competitor countries public investment is also used to identify research work that could be developed into commercial products and to catalyse private investment. The development and commercial demonstration of the technology is also supported, leading to subsequent exploitation by the private sector.

2.5. This is the Innovation Phase that is filled by the Fraunhofer Institutes in Germany (similar organisations operate in other countries such as VTT in Finland). In the UK the amount of public funding going into the innovation step is insufficient to ensure that value is created from the UK’s excellent science and technology research. The UK does not have enough public/private innovation centres like the Fraunhofers.

2.6. The conclusion from the comparison with Germany is that the UK needs to invest to fill the innovation gap between research and commercial exploitation. The proposal to establish a network of elite independent technology innovation centres (TICs) is both sensible and appropriate. These would combine technology innovation assets with incubation facilities and have strong links with financial organisations (such as a Green Investment Bank) that are willing to fund the development of early stage technology businesses.

2.7. In some markets, this research, innovation and commercialisation supply chain is referred to in Technology Readiness Levels (TRLs). TRLs range from 1 to 9. Universities typically work in level 1 to 3 and commercial businesses at level 8 and 9. The innovation gap is in TRLs 4 to 7.

2.8. TICs could resemble the Fraunhofer Institutes, but CPI’s view is that the UK should follow a model where a small number of centres are focused on technologies in which the UK has a high chance of global economic success. This model gives the UK centres greater access to cross disciplinary skills from a number of universities, allows the centres to develop deep expertise in the technologies, and is more market driven. This approach would bring greater focus and market drive than the fragmented Fraunhofer approach.

2.9. The centres need to be independent from universities and co-ordinated by a central body (the Technology Strategy Board). An ideal structure would be have 10 or 12 key technology innovation centres each with 5 to 6 satellite centres rather than Fraunhofer’s 59 centres working in 7 groups.

3. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 3.1. CPI is an example of a technology innovation centre in the style of a Fraunhofer Institute. Although just over 6 years old, (Fraunhofer and VTT are each more than 50 years old), CPI is already recognised as a TIC by the equivalent organisations both in Europe and around the world. Fraunhofer- Gesellschaft was a member of the CPI pre-incorporation Board and contributed

to setting-up the organisation.

3.2. CPI uses market knowledge and technology understanding to develop products and processes quickly and efficiently with minimal risk to its public and private sector partners. IT works in Technology Readiness Levels 4 to 7.

3.3. CPI is a not-for-profit company limited by guarantee. It is an independent company created in April 2004 by One North East, the regional development agency for the North-East of England, to address the innovation gap in the process sector.

3.4. CPI’s goal is to be national in scale and importance with a strong international positioning. We operate to world class standards to ensure that international companies have the choice of working with the UK, and SMEs have access to competitive and benchmarked world-class capability.

3.5. CPI has ambitious plans to grow its two technology areas to revenues of some £50m per year, and employing more than 300 staff by 2020. Even at this scale, each of these areas will only be of average size compared to a single Fraunhofer Institute.

3.6. Initially 100% funded by One NorthEast, CPI is targeting a 50:50 public:private partnership (the same as the Fraunhofer model). In the 6 years since inception, it has diversified its sources of public funding to include Europe, the Technology Strategy Board, and BIS amongst others, and reduced its dependence on One NorthEast to well below 50% of its revenues. Its commercial revenues have grown from zero to some 15% of the total (£2.5m).

3.7. The CPI business model develops processes and technologies that meet an identified market need. It has already delivered substantial benefit because it links the needs of business to CPI assets and technology expertise. The approach combines business pull with technology push. The model is to:

• Carry out market analysis with businesses or partners that have technology or a defined market need; • Set-up a team of technology, market and commercial professionals to design assets to develop a range of technologies which meet the market need; • Find a combination of private and public investment to build and operate the development assets; • Private companies – both SME and large companies – use the assets and CPI expertise to prove, develop and scale-up their technology until it is ready for commercialisation; • Companies then invest their own funds to take the technology to market and create value; • The development assets are retained and developed by CPI for use by other companies and projects to build a UK capability in the sector.

3.8. CPI is driven by an independent, business-led Board and which includes representatives from academia. The Board and the CPI Executive management team are assisted by a company technology advisory committee

(TAC) and each technology area is advised by specific technology and innovation advisory groups (TIAGs). The TAC and the TIAGs are independent advisory groups comprising recognised expert representatives from industry, academia and the public sector. This approach ensures CPI is being advised by the best.

3.9. CPI creates partnerships between public organisations, academia and private industry to deliver capability not available to any individual organisation. This is delivered by a team of 120 highly qualified scientists, engineers and other staff, who have extensive management, project management and commercial experience.

3.10. The CPI team has consistently delivered innovation assets and leading edge development programmes on time and to budget. Since inception, it has grown at over 60% per year and now serves many major clients including Arup, Tata, Croda International, Ensus, DeLaRue, Dr Reddy’s, Johnson Matthey, Unilever and Thorn Lighting.

3.11. It has far outgrown its regional beginnings and has created a national and international reputation in two technology areas which are strategically important to the UK:

• Advanced Manufacturing for the Process Industries – CPI develops advanced manufacturing technologies for the energy, high value chemicals, carbon capture and pharmaceuticals markets amongst others with a combined potential future economic impact for the UK of between £4bn and £12bn by 20252. This business unit houses the National Industrial Biotechnology Facility (NIBF), the Industrial Biotechnology Demonstrator (IBD) and the Anaerobic Digestion Development Centre (ADDC). All have significant funding from the Department for Business Innovation and Skills (BIS) and the Department for Energy and Climate Change (DECC).

• Printable Electronics – CPI is home to the National Printable Electronics Centre (PETEC) where experimental processes are transformed into manufacturable products for a market expected to be worth some £4bn to the UK economy by 2020 – Assuming the UK takes 5% of the global market3. The asset base has been created with significant support from BIS. It targets barrier coatings, advanced material deposition processes, printable electronic materials, printable circuits for high resolution display and smart packaging applications, solid state lighting and organic photo- voltaics: all areas where UK industry can develop value from the global printable electronic supply chain.

3.12. At CPI, these technology areas have a capital asset base of over £55m. This has been largely funded by the public sector and is available on an open access basis.

3.13. CPI and its assets feature largely in the collaborative projects. Many are stimulated by the Technology Strategy Board’s technology competitions.

2 IB 2025: Maximising UK Opportunities from Industrial Biotechnology in a Low Carbon Economy, BERR, May 2009 3 Plastic Electronics: A UK Strategy for Success, BIS, December 2009

3.14. The CPI model has been developed and tested to serve the process industries. It is now being applied to high temperature processing in collaboration with Tata Steel to develop a centre for gasification and pyrolysis technologies.

3.15. CPI works with a number of businesses that have been spun out of Universities such as Imperial and Cambridge.

3.16. CPI is strongly networked with academia and works with many of the leading research intensive-universities in the UK. Examples include Cambridge, Imperial College, Manchester and Swansea on Printable Electronics. In Industrial Biotechnology, CPI is working with many universities including Durham, Manchester, Newcastle, York and Robert Gordon and links are developing with other leading UK institutions. We also have a number of important relationships with overseas universities.

3.17. One of the main challenges facing process technology businesses in the UK is that of raising the early stage finance necessary to support long term development. To help alleviate this problem CPI is working with the investment community to develop collaborative cross sector funding models that address this issue. This has been discussed with the British Venture Capital Association (BVCA) and work is in progress to develop an investment model that links TICs with the private sector to support investment in early stage businesses.

3.18. The UK has only a small number of potential technology innovation centres that work in the innovation space, but most of the UK competitor countries have purpose-built centres or institutes that fill this space. In addition to the Fraunhofers, others include VTT in Finland, and TNO and ECN in the Netherlands. Potential UK examples include the Advanced Manufacturing Park in Sheffield serving the engineering manufacturing industry and the National Renewable Energy Centre, NaREC, providing testing services for the renewable energy industry. The Hauser Review1 gives examples of other centres.

4. What other models are there for research centres oriented towards applications and results?

4.1. In CPI’s view there are three fundamental models that can be followed:

4.1.1. The creation of application development centres in individual or groups of Universities. The advantage of this type of centre is that the innovation process is located close to the source of the invention. However, the disadvantage is that it can only support the output of the university or universities it serves. It is a technology-pushed model, and assumes that the university grouping is doing market relevant research. It limits the value creation opportunities for the UK and does not support the wide range of inventive organisations that also produce technology ideas. These include SMEs, large companies, individuals and government organisations;

4.1.2. The development of single company based innovation centres that focus on the technology of a specific company. This type of centre can support the development of growing businesses and keep

them at the forefront of international technology generation and thus create value for the company. The disadvantage is similar to that of the university centres as it limits the value creation opportunities to a specific company, is fraught with state-aid potential, and does not support the wide range of inventive organisations that also produce technology ideas. This is unlikely to create the best value for the UK from a public intervention;

4.1.3. The creation of independent technology innovation centres that serve selected nationally important technology platforms or industry bases. The advantage of this type of organisation is that it becomes skilled at all aspects of the innovation process and can serve a wide range of inventors/researchers. It can work with a number of universities and companies within the technology space and can support SMEs and inward investors as well. This larger national centre can build up a flexible reconfigurable asset base that can service a range of innovation ideas and processes. The challenge for this type of centre is retaining the confidentiality of the wide range of partners the organisation works with. This is a manageable process with well proven mechanisms.

4.2. CPI’s conclusion is that the independent technology innovation centre model is the most sensible approach to creating wealth for the UK as a whole. In our experience, the centre is also likely to spin-out companies to seed the process of building a cluster of companies, supported by the centre.

5. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

5.1. The UK needs a mechanism to set the long-term strategic direction for science & technology. Such a body should be drawn from departments in Government and combined with senior figures from industry, finance and the third sector. The role would be to define target markets and work collaboratively to cover all the technology readiness levels. The strategic technology areas should match national policies and needs. Such a body could be established under the aegis of the Department for Business, Innovation and Skills to provide guidance to the Technology Strategy Board.

5.2. Once the technology target areas have been set and funding decided a national body could be tasked with implementing the strategic plan. This body should be independent of the research councils and direct government management. CPI believes that the appropriate body to co-ordinate TICs in the UK would be the Technology Strategy Board (TSB). It would need additional resource to deliver this function, but strengthening and developing the TSB would deliver value to the UK.

5.3. The TSB must coordinate and not control the TICs. A performance management framework is essential, such as in the Fraunhofers, where more public funding rewards greater acquisition of private sector revenue up to a limit (to discourage the centres from becoming too private sector dominated), and failure is results in less funds. Such a process will allow the centres to nurture an entrepreneurial approach.

5.4. It is also important that the TICs play a significant coordination role with academia and other TSB initiatives such as the Knowledge Transfer Networks. The explicit collaboration that the TIC model brings between the Research Councils, the TSB and Industry must be continued through to individual universities, the TICs and their industry partners.

6. What effect would the introduction of Fraunhofer-type institutes have on the Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

6.1. The challenge is not to decrease or diminish the amount of work done in the UK’s Public Sector Research Establishments and other centres. It is to ensure that the UK fills the innovation gap between invention and commercialisation. As such the establishment of technology innovation centres should be seen as adding greater strength to the UK value creation process by addressing a market failure.

7. Other Issues

7.1. The European Union has a large number of collaborative research, innovation and demonstration programmes that are well funded. These include the Framework programmes and the strategic energy technology (SET) plan. The UK contributes to these programmes, but has no systematic strategy for securing and using these funds to assist in its innovation activities. The TICs should provide a focus and a strong base for bringing UK industry together and creating a collaborative strategy with our European partners that also secures funding to assist UK companies.

Nigel Perry, FREng Chief Executive Officer

Dr Graham Hillier, CEng, FRSA Director of Strategy and Futures

Centre for Process Innovation Ltd

01 December 2010

Written evidence submitted by Research Councils UK (RCUK) (TIC 29)

TECHNOLOGY INNOVATION CENTRES

1. Research Councils UK (RCUK) is a strategic partnership set up to champion the research supported by the seven UK Research Councils. RCUK was established in 2002 to enable the Councils to work together more effectively to enhance the overall impact and effectiveness of their research, training and innovation activities, contributing to the delivery of the Government’s objectives for science and innovation. Further details are available at www.rcuk.ac.uk.

2. This evidence is submitted by RCUK on behalf of all Research Councils and represents their independent views. It does not include or necessarily reflect the views of the Science and Research Group in the Department for Business, Innovation and Skills. The submission is made on behalf of the following Councils: • Arts and Humanities Research Council (AHRC) • Biotechnology and Biological Sciences Research Council (BBSRC) • Engineering and Physical Sciences Research Council (EPSRC) • Economic and Social Research Council (ESRC) • Medical Research Council (MRC) • Natural Environment Research Council (NERC) • Science and Technology Facilities Council (STFC)

3. RCUK recognises that there can be a gap between the early stages of research development and knowledge transfer that we fund and the full exploitation of innovation opportunities emerging from that research. We welcome the opportunity to work with agencies responsible for filling that gap. RCUK does not currently fund anything which exactly matches the Fraunhofer-type institute model. While we support knowledge transfer and commercialisation, and provide important research facilities and resources for industry, we do not tackle the Technology and Innovation Centres’ (TICs) aims of providing later-stage platforms for large scale development from strategic technologies into new products as set out in the Hauser Report and the Dyson Review.

4. RCUK believes that the Technology Strategy Board (TSB) is well placed to coordinate a national strategy for TICs and welcomes the opportunity to support it in this development, as announced by the Government on 25 October 2010. RCUK has been assisting the TSB with its work on the development of potential TICs. We have identified areas of high priority from the research base perspective from a long-list of areas that the TSB has created, and have had discussions on the research excellence which could be drawn upon.

5. RCUK funds excellent research wherever it is found, and this will continue to be the case in the future. Any TICs should be designed and established in such a way that they are able to exploit this excellent research, giving particular attention to interfaces with academic centres of excellence. One example could involve working in partnership with academics at research organisations which are eligible for RCUK funding. This is a model which is working successfully to encourage collaboration at the International Space Innovation Centre (ISIC). The RCUK complementary portfolio of investments has already created centres of excellence in research, facilities and

postgraduate skills and any TICs should be closely aligned with and draw on the outcomes from these investments. RCUK welcomes the potential for TICs to drive economic growth based upon this excellent research.

6. RCUK believes that world leading and cutting edge capability in the research base is a necessary but not sufficient requirement for a TIC. Industry and market ‘pull’ and the necessary conditions within the UK to allow exploitation of the technologies developed are of fundamental importance. It is vital that a progressive approach is taken to considering a wide range of sectors during the analysis of industry needs to ensure that all sectors with potential for significant growth are considered.

7. It should be recognised that a TIC will not be appropriate for all technology or sector areas and that a one-size-fits-all approach is unlikely to be successful. In order to show early success, the TIC programme should build initially upon previous investments and focus on technology or sector areas where there is significant potential for growth and where the public and private sectors are already closely engaged.

8. RCUK encourages the Technology Strategy Board and Government to put the development of TICs into the context of the governance of the innovation system as a whole. It is vital that TICs help reinforce links between parts of the system rather than adding fragmentation or complexity.

Research Councils UK

December 2010

Written evidence submitted by UK Computing Research Committee (UKCRC) (TIC 30)

TECHNOLOGY INNOVATION CENTRES

Declaration of interests

1. Our evidence covers UK research in computing, which is internationally strong and vigorous, and a major national asset.

2. The UK Computing Research Committee (UKCRC), an Expert Panel of the British Computer Society, the Institution of Engineering and Technology and the Council of Professors and Heads of Computing, was formed in November 2000 as a policy committee for computing research in the UK. Its members are leading computing researchers from UK academia and industry. Our evidence reflects the experience of researchers who each have an established international reputation in computing.

3. The UK has always been exceptionally strong in computing research: the first modern computer was developed at Manchester University and ran its first program in June 1948; since that time, the UK has played a part in almost all the scientific and engineering advances in computing. Computer systems have transformed modern life, but the world is still in the early stages of discovering, inventing and exploiting its full potential. UK computing research remains worldclass,1 and is a national asset that enhances the UK’s international prestige, attracts inwards investment, and supports innovation for wealth creation and improved quality of life.

4. Computing is at the heart of almost every Government policy because almost every such policy requires new, and usually very complex, IT systems.

What is the Fraunhofer model and would it be applicable to the UK?

5. The Fraunhofer Society is a collection of 59 Institutes in Germany, each institute being responsible for a particular area of applied research. The funding model for these Institutes has one third of income coming from government and the remaining two thirds coming from contract research derived from industry and the public sector. The 2009 Annual Report states: “… more than €1.3 billion is generated through contract research. Two thirds of the Fraunhofer Gesellschaft’s contract research revenue is derived from contracts with industry and from publicly financed research projects. Only one third is contributed by the German

1 This has been confirmed by successive EPSRC International Reviews, the latest of which reported in 2007.

federal and Länder governments in the form of base funding, enabling the institutes to work ahead on solutions to problems that will not become acutely relevant to industry and society until five or ten years from now”.

6. The Fraunhofer Institutes employ approximately 17,000 staff, mostly qualified scientists and engineers. Institutes working in related areas form Fraunhofer Groups. Current groups are (i) Information and Communication Technology (ICT), (ii) Life Sciences, (iii) Light and Surfaces, (iv) Microelectronics, (v) Production, (vi) Defense and Security, and (vii) Materials and Components.

7. The ICT Group claims to be largest ICT research group in Europe, and “serves as a one-stop shop for industrial customers and media enterprises”. Identified business areas within ICT include (i) digital media, (ii) e-business, (iii) egovernment, (iv) communications systems, (v) energy and sustainability, (vi) medicine, (vii) production, (viii) Security, (ix) financial service providers, and (x) automotive.

8. Patent license revenue was €78M, the majority of which is derived from the patents relating to the MP3 audio coder/decoder (e.g. MP3 players such as the iPod), the most common digital audio file format. We note that patent licensing does not provide a significant portion of the Fraunhofer budget.

9. The Fraunhofer Institutes now include international collaboration, including the location of Centres and Offices in Europe, Asia, the USA and the Middle East.

10. The UK has traditionally had a reputation for excellent research, but a poorer reputation for commercialization of this research. This has been long recognized and a number of initiatives have been introduced to address this issue. A Fraunhofer-like model would offer another means to address this issue.

11. We note that compared with Germany, the UK is weaker in manufacturing and stronger in applied ICT and services. The UK has a greater need for export-led growth, and there is therefore a need for an even stronger linkage with businesses capable of applying ICT.

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

12. The Hauser Report identified a number of Fraunhofer-type research centres in the UK, including the Manufacturing Technology Centre at Ansty, and the Advanced Manufacturing Research Centre. We are unaware of any such centres related to ICT. The Hauser Report identifies MediaCityUK as an example of a sector/market focused example of a Technology Innovation Centre (TIC) in the UK. However, while MediaCityUK offers a “purpose built home for creative and digital business”, i.e. it is a property development, it does not provide a funding mechanism for applied R&D.

13. The Hauser Report also correctly identifies the lack of a national strategy, national coordination, and unified branding. Moreover, because existing centres are funded from a variety of sources with different agendas, “[t]here is currently no overall framework of criteria and metrics for measuring the performance of TICs in the UK, and to assist in the benchmarking of their performance”.

14. We note that the TSB and other organisation have traditionally funded projects, and such a funding model is not suitable for establishing R&D institutes.

What other models are there for research centres oriented toward applications and results?

15. The UK’s universities have a significant effort directed towards technology transfer. However, this capability seldom extends beyond technology readiness level (TRL) 4, i.e. validation in laboratory environment. It is rare to include validation in a relevant environment, and prototype demonstrations.

16. The Media Institute is a model being established by a number of London Universities to create a Technology Innovation Centre for the UK’s Media Sector. The Institute’s researchers will be seconded from universities. This has the advantages of (i) no career disruption, (ii) guarantee of regular employment of fresh researchers with expert knowledge of specific, identified, industry issues, (iii) little or no competition in funding from Research Councils, (iv) close cooperation between the Institute and UK universities, and (v) ability to engage Ph.D.s in Institute research. Foreground IPR will be owned by the Media Institute and used as a means to quantify key performance indicators and to defend UK industry. The business plan specifically omits IPR licensing revenue to ensure a focus on public intent to promote national growth.

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

17. The Technology Strategy Board (TSB) ‘s role is to “stimulate technology-enabled innovation in the areas which offer the greatest scope for boosting UK growth and productivity. We promote, support and invest in technology research, development and commercialisation. We spread knowledge, bringing people together to solve problems or make new advances.” As such, it seems very well placed to coordinate and manage a UK-wide network of innovation centres.

18. However, the Fraunhofer model includes a core stream of 33% of income where such centres conduct basic research, even if such basic research is application- oriented. This overlaps with the remit of the UK Research Councils (UKRC). It is imperative that the respective Research Councils coordinate and manage such research. Moreover, funding for any Fraunhofer-based centres should not reduce funding for basic research, nor reduce the funding available to the UKRCs for fundamental research.

19. If “public sector research establishments” refer to, for example, NPL, AWE, Culham, and Dstl, we do not expect to see any affect with regard to ICT.

20. However, if “public sector research establishments” refer to UK universities, any effect would depend very much on the mission of such institutes. As stated above, the current Fraunhofer Institutes allocate approximately one third of their budget to “enable the institutes to work ahead on solutions to problems that will not become acutely relevant to industry and society until five or ten years from now”. This mission has considerable overlap with that of existing UKRCs. Great care should be taken to ensure that long range research remains under the control of the UKRCs and is not dispersed across other organizations.

21. The German Fraunhofer Institutes receive two-thirds of their income from contract research. This funding is a mixture of both public and private contract research. It is possible that Fraunhofer-like institutes could be in direct competition with UK universities for funding.

Evidence

22. UKCRC would be pleased to provide further detail of any of the issues raised above, either in writing or by way of oral evidence.

Ingemar J. Cox UK Computing Research Committee (UKCRC)

December 2010

Written evidence submitted by Professor L Gladden, University of Cambridge and Professor D Begg, Imperial College London (TIC 31)

TECHNOLOGY INNOVATION CENTRES

Imperial College London and Cambridge University have been preparing a proposal for a Technology and Innovation Centre (TIC) in the field of plastic electronics, in which the two universities have particular, recognized strengths and strong industrial relationships. We wish to make the following observations to the questions posed by the Select Committee.

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 The innovation landscape in Germany is more facetted than that in the UK. In between the universities and industry there is a dense network of several different intermediate institutions. These include the Max-Planck Society focussing on fundamental scientific research, the Leibniz Society, performing scientific research into major themes of strategic interest as well as providing scientific infrastructure, and the Helmholtz Society, which is responsible for the development of technological solutions to major societal challenges, such as energy or healthcare. The Fraunhofer institutes are at the most industry facing end of these intermediate institutions. They work closely with industry to develop technological solutions to today’s industrial problems and invest in the development of new technologies, which are considered important to address future industrial needs on a short to medium term timescale. In spite of their industry facing role many Fraunhofer institutes maintain close links to German universities. Directors of Fraunhofer institutes commonly hold professorships at universities and run academic research groups in parallel to their Fraunhofer roles. The institutes offer PhD projects in the applied sciences. Several Fraunhofer Institutes have departments that are embedded into university departments.

1.2 In the UK, universities are covering a wider part of the innovation chain than German universities and are engaged in important strategic as well as applied industry-facing research. It will be important to adapt the Fraunhofer model to take into account the role that UK universities already play in the innovation chain. Given the international level of excellence of UK universities in many areas of science it would be undesirable to reduce the effectiveness of technology transfer from universities to industry. TICs need to be structured such that they achieve maximum leverage from the academic excellence of leading UK universities, enhance the effectiveness of technology transfer but, at the same time, address the key weaknesses of the current UK innovation system, which, in our view, is the lack of

an efficient mechanism for translating specific inventions and research breakthroughs into integrated offerings to industry. Too often, inventions made in UK universities have as their only exploitation pathway the licensing route to large multinational companies at relatively low valuation, because UK bodies do not have the capabilities and resources to integrate these inventions into systems and demonstrate their value in the context of real-world applications. In contrast, the Fraunhofer institutes in Germany are able to deploy significant development resources in order to address major technological challenges and to develop integrated solutions to industrial needs that require addressing a range of technological requirements in a highly coordinated manner. They are able to develop broadly applicable technology platforms with high levels of integration, demonstration and prototyping capability. These provide industry with meaningful evaluation of technologies in the context of concrete application requirements.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 There are a number of University-hosted, intermediate organisations in specific areas of technology, and some of these institutes have indeed achieved a high level of international leadership. However, on average the international visibility of these institutions is not as high as that of the Fraunhofer institutes. This is demonstrated by the mere fact that the Select Committee is considering this question.

2.2. The need for more effective technology commercialisation from the excellent UK academic research base has been recognised by the Research Councils some time ago. EPSRC established Integrated Knowledge Centers (IKCs) which aim to bridge the gap between academic research and industrial technology and product development by providing universities with facilities for demonstration and prototyping and by developing best-practice models for more effective technology transfer and commercialisation. The IKCs operate very effectively and have had significant impact. The Cambridge Integrated Knowledge Center (CIKC), developing advanced manufacturing technologies for electronics and photonics, started in 2007 and has already led to one spin-off company and several follow-on projects drawing on commercial funding for demonstrators in applications with large market opportunities. At Imperial College London, the Centre for Plastic Electronics interacts with a large cluster of industrial partners and involves the research activities of 25 academic staff and some 150 students, postdocs and visitors.

2.3 However, many of the existing University-hosted, intermediate institutions, such as the IKCs, operate on a scale (in terms of annual budget or number of permanent staff) which is at least an order of magnitude below that of typical Fraunhofer institutes. This is not

necessarily an issue when commercialisation of specific technology components is concerned, for which industrial partners can be identified. However, it means that these institutions are limited in their ability to apply the same level of focus as Fraunhofer institutes to address major technological challenges and offer to industry complex integrated solutions and systems that address a range of important requirements. When integrated teams of 20- 50 engineers are required to develop next-generation technology and manufacturing platforms for emerging industries, current university-hosted intermediate institutions such as the IKCs are unable to compete with international centres such as the Fraunhofer Institutes. This risks leaving the UK at a disadvantage in technology areas where the UK has proven academic excellence and international leadership in early stage academic research and technology demonstration, but is unable to move as fast as other countries in integrating these technologies into technology platforms and systems that meet real-world application requirements.

3. What other models are there for research centres oriented toward applications and results ?

3.1. We note that Fraunhofer-style institutions exist in many countries with established and emerging high technology industries. In Taiwan the Industrial Technology Research Institute (ITRI http://www.itri.org.tw/eng/) has worked for 35 years to literally transform the Taiwanese economy. ITRI has an annual operating budget of ~ $500M (50% government, 50% industry) and its 6,000 employees work on advanced technology R&D, on IP business and new ventures and on the provision of industrial services. Of the 160,000 alumni of the Institute 140,000 are currently employed in the industry/business community. It generates 2000 patent applications per year and provides 30,000 Taiwanese companies per year with consulting and other technical services. ITRI also nurtures start-ups through its ‘Open Lab’ programme. Open Lab has assisted 150 start-ups (and 105 other companies) and ITRI has invested some £1 billion in this activity alone. Open Lab also provides entrepreneurship and related training. In specific relation to plastic electronics, in 2007 ITRI opened a Flexible Electronics pilot laboratory for ‘integrative tasks from material synthesis, development, product design, to trial production.

3.2. In Japan the National Institute for Advanced Industrial Science and Technology (AIST http://www.aist.go.jp), established in its current form in 2001, fulfills a similar role. It is has an ~ £830M annual budget (66% direct from government via METI, 6% direct from industry (intended to grow to 10%) and 28% competitive grant funding via NEDO, JST, etc with ~ 5,000 employees and ~ 4,000 secondees from universities and companies. 75% of AIST employees are based in Tsukuba. AIST has formal partnership agreements with

CNRS (France), KOCI (Korea), ITRI (Taiwan), CAS (China), A*STAR (Singapore), NSTDA and TISTR (Thailand), VAST (Vietnam), and various institutions in Germany and USA. It has no formal links with the UK because, in the words of a senior member of the 'international affairs division', there are no obvious organisations in the UK with which to work.

3.3 There is a similar organisation in Korea, namely the Korea Research Council for Industrial Science and Technology (IstK http://www.koci.re.kr) which is run by the Ministry of Knowledge Economy and oversees thirteen research institutes KITECH, ETRI, NSRI, KICT, KRRI, KFRI, KIGAM, KIMM, KIMS, KIER, KERI, KRICT, and KIT. IstK also cooperates internationally, including with the Fraunhofer Society in Germany, with China, Japan, Vietnam, Indonesia and the USA.

3.4 For TICs to be implemented successfully in the UK, they will have to recognize the strengths of the present UK innovation landscape and aim to achieve maximum leverage from the recognized research excellence of many UK universities. At the same time they will have to be strongly industry led, have a clear industrial discipline in technology selection and project management in order to become similarly effective as the Fraunhofer institutes in addressing pressing, short- and medium-term industrial needs. Over the last six months Imperial College and the University of Cambridge, as two of the leading research universities in the UK, have been developing a model for TICs, which we believe satisfies these important requirements. We aim to put this model to practice with a TIC in plastic electronics, a technology area where the two universities have particular strengths, including industrial partnerships with leading national and multinational players. We believe that, if successful, the model could be applied to other technology areas. Some of the key principles of the proposed organisation model are: a) Organisation structure: The TIC would be hosted by the two universities as a not-for- profit company limited by guarantee and owned initially by the two universities, but with independent management and governance structures. In this way we hope to achieve maximum leverage from the academic excellence of the two universities, but, at the same time, the centre will be strongly industry led and will not be a direct source of research funding for university groups. The TIC will be fully focussed on industrial needs and its technology programs will be run according to strict industrial discipline and best practice. b) Generation of business opportunities for industry: The centre will directly support industrial customers (with a focus on UK companies and on attracting inward investments) and will help these companies to open new business opportunities. It will

also support the formation and nurturing of spin-out companies. The centre will be able to effectively support industrial customers who are interested in collaborating with specific academic research groups in any UK university, but are also keen to have a route for system integration and technology prototyping. c) Intellectual Property: IP generated by the employees of the TIC will be owned by the centre and will contribute to the generation of a valuable pool of IP, with effective management for licensing. This will enable spin-outs, further supporting inward investment, and allowing a revenue stream. A TIC working with a number of sources of IP (self-generated, universities, government laboratories, SME and other companies) could assemble a portfolio of greater significance. An example of this approach in action is the Holst Centre in plastic electronics in the Netherlands (co-owned by IMEC (Belgium) and TNO (Netherlands)) which pools IP and offers it to a consortium of industrial partners who pay a subscription to have sight and opportunity to license. Holst appears to be very successful - it is growing rapidly. d) Skills: Flow of trained top quality engineering and science graduates/PhDs towards industry will be enabled by job/training opportunities in the Centre. This will enhance training opportunities which the universities can provide to their graduates, but will also allow the centre to recruit highly qualified engineers. Highly-skilled employees originating from the centre will generate employment for others. e) Income: Generation of income from commercial contracts is very important, and we anticipate that after an initial period reliant more strongly on government funding the centre will have income streams similar to those of the Fraunhofer institutes in Germany. f) Training: There is currently an overall skills shortage in emerging technology fields, such as plastic electronics, and one of the key outputs of the Centre will be the well-trained staff needed to stimulate and drive forward these emerging industries. Various schemes will be used to develop training including, (i) the presence of appropriate technical experts, (ii) the setting up of formal training programs (via SEMTA, COGENT and other agencies) and (iii) continued refinement of the EPSRC Doctoral Training Centre MRes programme at Imperial College London. g) Career paths: The Centre will expect to hire substantial numbers of early-career scientists and engineers whose ambitions will be to gain training at the Centre and then move through to industrial positions. An excellent route for this is the transfer of staff along with technology developed in the Centre to manufacturing. h) Involvement of other UK universities: The relationships of the TIC with universities will not be limited to the two hosting universities. The management of the TIC will be free to work with any academic research group in the UK and the selection of academic

partners will purely be based on the identification of the most capable partners, wherever they are based. 4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1. Individual Fraunhofer institutes enjoy a high level of independence and freedom in defining their strategies. The Fraunhofer Society provides an overarching governance structure with each institute being represented in the Senate. The Senate elects the Executive Board which is responsible for the coordination of the individual institutes, the definition of major strategic directions, external and international representation and the negotiation of the institutional funding, which is then distributed among the individual institutes. However, this organisation model evolved as the number of Fraunhofer institutes grew from 9 institutes in 1959 to about 60 institutes today

4.2. We believe that at an early stage, where the number of institutes is less than 10, a loose network of institutes that provides individual institutes with a high level of freedom to operate and to develop successful models is most appropriate. As the number of institutes grows it will become increasingly important to ensure effective coordination, in particular to exploit synergies between institutes that can offer complementary technological capabilities. The Fraunhofer Institutes are very good at this level of coordination and, as a result, they are very effective in bidding for European research funding, because they are able to offer a highly integrated set of competencies. The coordination role could be taken by a Fraunhofer Society-like independent body or by a government body such as the TSB. Whatever the nature of the coordinating organisation, however, it needs to report to an industrially-led board with broad representation from major UK companies in order to ensure that the focus of the organisation remains the addressing of major UK industrial needs.

4.3. Looking at the Japanese model, their equivalent of TSB, namely NEDO, does not run AIST. AIST reports directly to a government department, i.e. METI. AIST does however receive a significant budget from NEDO but via a competitive tendering for project grants. If TSB is going to operate funding calls for projects that a TIC would wish to bid for then there could be potential conflicts of interests if the TSB was both the governing body overseeing the TICs and the grant organisation. This might reduce the pressure on TICs to be suitably competitive in seeking funding via open calls for proposals.

5.1. As stated above it will be important to set up the TICs in a way that they do not compete with universities for industrial contracts or research grants and force UK universities to retrench to purely academic research. TICs should not be funded by reallocating existing research council funding which would damage our excellent UK research base, but rather from new money provided by the TSB. The university-linked TIC model outlined above should enhance the effectiveness of technology transfer from academia to industry. The close link between universities and TICs will enable the TICs to provide access to advanced prototyping facilities and allow universities to evaluate promising technologies that result from fundamental research in a more integrated manner. In very active technology fields it can be difficult to use isolated pieces of IP on their own. It often requires several pieces to be linked together to form something that is usefully exploitable. Pooling 'orphaned' pieces of IP that are difficult to exploit on their own with other IP and know-how within a TIC might be an attractive option for more effective exploitation. One potential advantage of a TIC in relation to IP is in concentrating sufficient pieces of a jigsaw to generate enhanced value.

5.2. Another benefit of the university-linked TIC model is to enable UK universities to bid more effectively for industrial research grants as well as large integrated research projects, such as those funded by the European Commission. Companies are often discouraged from engaging with academic research groups on particular subjects because they would prefer to work with partners that can offer a more integrated set of competencies. University-linked TICs could make it more attractive for companies to fund academic research since the TICs could offer a route to technology demonstration and prototyping. UK universities are also often effectively precluded from participating in large European framework projects as major partners because they cannot offer a competitive level of demonstration and prototyping capabilities to those of intermediate institutions in other European countries, such as the Fraunhofer Institutes in Germany or TNO in Holland. By linking the recognized excellent research of leading UK universities with the integration capability of TICs we predict that the UK will be more effective in taking up its fair share of European research funding and in partnering with organisations like the Fraunhofer Institutes and TNO.

5.3. Finally, we would not expect the existence of TICs to negatively impact on PSREs like RAL, Daresbury, Diamond and NPL. In Japan, Taiwan, Korea and Germany TIC-like organisations co-exist with large scale national facilities and with metrology centres.

Professor L Gladden, Pro-Vice-Chancellor (Research), University of Cambridge

Professor D Begg, Pro-Rector (Research), Imperial College London

01 December 2010

Written evidence submitted by University of Edinburgh (TIC 32)

Technology and Innovation Centres

Introduction i. We are pleased to participate in this important process and to comment on the Fraunhofer model and its relevance to research in the UK. We believe that, as one of the leading research‐intensive Universities in the UK with a long heritage and exceptional track record in commercialisation, the University of Edinburgh is well placed to comment on these issues. In 1969, the University of Edinburgh recognised that it needed to formalise the way it transfers new discoveries into industry to ensure that society can benefit, and hence established the Centre for Industrial Consultancy and Liaison, now known as Edinburgh Research and Innovation, to promote and encourage collaborations with industry. In the past 40 years, there has been an accelerating pace of scientific research underway at the University with significant technology discoveries that have been translated from the laboratory into industry. ii. The University of Edinburgh can lay claim to a notable series of research and innovation “firsts” during the past 40 years. These achievements have all made a major impact on the industrial world:

• The first automated industrial assembly robot • The first genetically engineered vaccine against Hepatitis B, still being used to save lives to this day • The first miniature digital camera which led to mobile camera phones. • The first prototype sensor–assisted ‘SMART’ wheelchair for children with severe and multiple disabilities – developed in 1987 by Paul Nisbet in the Communication And Language Learning (CALL) Centre. • The largest ever spin‐out from a Scottish university – MTEM Ltd which raised initial funding of £7.4M and was subsequently sold for $275M to PGS Ltd. iii. One of the highlights of the University of Edinburgh’s commercialisation activities has been the creation of new companies, and in the past 40 years over 200 new companies and businesses have been formed by the University, including a record total of 40 new companies in 2009/10. iv. In its annual survey comparing the exploitation performance of Scottish Universities against US Universities, the University of Edinburgh regularly outperforms key US universities when comparing key commercialisation statistics (including numbers of companies formed and numbers of licences concluded, per $M of research income received1).

Responses to Questions

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1. We welcome the UK Government’s initiative in allocating a substantial sum of money to the development of Technology Innovation Centres, and are keen to be involved in any trial of this or a related concept in Scotland. Nonetheless, the research landscape of the UK is quite distinct from that of Germany and a simplistic translation of the Fraunhofer model to the UK

1 http://www.research‐innovation.ed.ac.uk/information/Exploitation‐Efficiency‐Report‐2009.pdf might be unwise. In Germany, universities focus on higher education and basic research, and Fraunhofer Institutes undertake applied R&D and provide technology development services. In addition, Helmholtz Research Centres focus on long‐term strategic research on issues of national importance in areas such as energy, health, space, transport and the environment, and Max Planck institutes focus on specific areas of cutting‐edge interdisciplinary research and large‐scale research facilities.

1.2. In the UK we have a system that has the major research intensive Universities, of which Edinburgh is one, with a growing culture of spin‐outs and start‐up companies. It is an expansion of this process and the appropriate development of discovery science to a state that can be readily adopted by industry that is required. It is therefore possible for Scotland and the UK to build on and adapt, rather than simply adopt, the Fraunhofer concept, perhaps in a more integrated and agile way.

2. Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

2.1 In the UK while there are no specific Fraunhofer institutes there are a variety of specialist research centres more generally within the Universities. Indeed, this embedding enables a strong connection between the staff doing the fundamental research and those developing the outputs into commercialisable propositions.

2.2 The University of Edinburgh hosts a number of research centres which embody characteristics of Fraunhofer research centres, in that they undertake fundamental research as well as applied and collaborative research with business partners, support technology development, as well as providing incubators for spin‐out companies and small high‐tech start‐ups. Below are examples of centres that have been particularly effective in working with industry:

Centre for Regenerative Medicine, University of Edinburgh

2.2.1 The MRC Centre for Regenerative Medicine (MRC‐CRM) at the University of Edinburgh brings together world‐leading basic stem cell research with established clinical excellence aimed at developing new treatments for major diseases including cancer, heart disease, diabetes, degenerative diseases such as multiple sclerosis and Parkinson's disease, and liver failure. The centre stands next door to Edinburgh’s new teaching hospital (the Royal Infirmary of Edinburgh) providing the perfect basis for ‘bench‐to‐bedside’ translational development.

2.2.2 The MRC‐CRM is committed to building both strong industrial collaborative links, specifically companies who are seeking to develop technologies in any area of stem cell biology and therapy, interested in derivation and GMP production of new stem cell lines or interested in the development and use of stem cells for drug screening. In addition, Edinburgh is home to two complimentary companies specialised in the GMP manufacture of stem cells, Roslin Cells and Angel Biotechnology, the latter of which recently manufactured the product for Reneuron’s first fully regulated clinical trial of a neural stem cell therapy for stroke taking place in Scotland.

2.2.3 The Hauser Report intimated that stem cells and regenerative medicine was an obvious area where a UK TIC could lead the world. Scotland is currently ranked 1st in the world for citation impact of stem cell research; Edinburgh alone is 3rd.

Scottish MicroElectronics Centre (SMC)

2.2.4 The SMC is a world class Centre for Incubation, Research & Development in the semiconductor sector. A joint venture between the University of Edinburgh and

Scottish Enterprise. The SMC provides a dynamic environment that links academia and hi‐tech companies. This successful collaboration is at the leading edge of Scotland's semiconductor and MEMS activity. It aims is to provide a hothouse of companies and activity to supply the UK with a leading Centre of Excellence in the semiconductor field. The SMC delivers services in four key areas: Incubation, Analytical, Processing & Assembly.

Informatics – ProspeKT

2.2.5 The School of Informatics at the University of Edinburgh is the largest and arguably the best research grouping in the UK with worldwide alliances with Stanford, MIT and Cambridge in entrepreneurial education. The commercialisation and Knowledge Transfer effort within Informatics has been reinforced through a partnership with Scottish Enterprise in the ProspeKT Programme. ProspeKT ensures that the research delivers value to major IT companies as well as generating spin‐outs and start ups and seeks to deliver a complete innovation ecosystem.

2.2.6 The ProspeKT programme offers support in commercialisation through a dedicated support team and has delivered the creation of 33 start up companies over a four year period with a total investment of £11 Million.

Edinburgh BioQuarter (EBQ) – Translational Medicine

2.2.7 Translational medicine is not a speciality, but rather a way of approaching science to speed translation of medical knowledge to health and wealth gain. It has yet to be adopted widely by academics and companies in practice, but represents the current best approach to Cooksey’s first ‘translational gap’ that has bedevilled successful drug development in pharma/biotech. The US Government is expected imminently (Dec 2010) to announce investment of around $1bn in developing major centres in translational medicine to address this. EBQ provides an ideal infrastructure that drives translation of products from the laboratory bench to the clinic (‘bench‐to‐bedside’). Specifically it affords the near unique combination of a major acute teaching hospital, new medical school, massive interdisciplinary research institutes and commecial incubator and development space on a single cohesive integrated campus. In addition, mindset and approach are equally important as there is considerable commonality of process for translation between organ‐based specialities. EBQ is designed with these goals in mind and in this respect, can function as a showcase, or centre of excellence driving best practices.

2.2.8 EBQ has built a commercial management team with over 100 years of pharmaceutical and biotechnology company experience between them. This team is on hand to help bridge that gap between academic research and development of commercial clinical products. As well as helping to commercialise technology coming out of EBQ, this team is also actively courting industry to accelerate the commercialisation process. EBQ has already attracted major venture and private capital to support its efforts (>£12m) EBQ expects to spin‐out 11 companies over the next 2 years.

3. What other models are there for research centres oriented toward applications and results?

3.1 There is no one‐size‐fits‐all model for such centres; consequently it is clear that for any model to be successful flexibility will be key. This flexibility should allow for a variety of structures, for example a hub and spoke model that acknowledges regional strengths and exploits the strengths of multiple Universities as well as those associated with a single University; in areas

where the UK has no significant indigenous strength but where we have potential to grow significant businesses as well as those areas where the UK has companies of scale.

3.2 While connectivity with Universities that carry out world‐class research is vital, such centres focus on translating such research through to application. They should not focus only upon today’s industry but have an eye to what comes beyond. It should be a requirement that innovation centres promulgate the mechanisms used by them in the transfer of innovation.

3.3 It is necessary that such centres be located in proximity to and be connected with established world standard academic groups which have sufficient scale to grow and support such completely new structures and can provide the necessary well trained human capital.

3.4 Strong partnerships with both international Universities, research centres and companies, which acknowledge the existence of the UK in the global economy, will be necessary to ensure successful centres. In this respect, the development in Scotland of the various research pools, and their particular shift into knowledge exchange and engagement activities in the most recent phase, show a strong record of success.

4. Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

4.1 It is clear that appropriate mechanisms for the inputs of both public and private organisations will be necessary. This input should not constrain the flexibility that will be required for these centres to be autonomous or require unnecessary and duplicate reporting. There are two aspects to co‐ordination.

4.1.1 Co‐ordination nationally across all such centres.

It is clear that Technology Strategy Board is the appropriate body to provide this level of co‐ordination in collaboration with agencies such as RCUK, OSCHR and Scottish Enterprise as required. This co‐ordination will also need to take account of the major research intensive Universities who have considerable strength and experience in delivering innovation from their research base.

4.1.2 Co‐ordination within a centre.

The co‐ordination within a centre is the responsibility of the management of the centre with oversight from appropriate partners, both public and private.

5.1 There are a variety of existing centres within the UK which are in general publicly funded and which often have a focus on fundamental research. As such they have strong links with existing research‐intensive Universities. Where appropriate these centres will clearly be an integral part of innovation centres. However, we should not seek to divert the primary purpose of such centres, which is to drive innovation and accelerate the commercialisation of fundamental research.

University of Edinburgh 01 December 2010

Written evidence submitted by Brunel University (TIC 33)

Technology Innovation Centres (TICs)

Declaration of Brunel University Interest

1. Brunel University welcomes the emergence of permanent centres with distinctive missions and the commitment to strategic, applied research of benefit to the UK economy and society. 2. As a Higher Education Institute (HEI), Brunel University could not itself become a TIC; it is however interested in participating in any future decision process and in contributing to the success of the TICs. This response is written without preference as to the outcome of the inquiry. 3. Brunel University has a particular interest in the application of technology; it has strong research and teaching activity in engineering and design, leads two EPSRC Innovative Manufacturing Research Centres/Centres for Innovative Manufacturing, and has a strategic partnership with the Research and Technology Organisation TWI Limited.

Question 1 What is the Fraunhofer model and would it be applicable to the UK?

Model 4. The model is one of independent institutes which undertake applied research to transform scientific expertise into practical applications for the benefit of industry and society in general. Essential components are a long term focus, highly qualified and capable staff, a technology (rather than sector) focus and sometimes an association with a major university or groups of universities. There is a focus on being ahead of industrial needs, operating in areas which enables capitalisation on national strengths and where a difference can be made, for example where disruptive technology platforms result in emerging or fragmented markets. 5. The provision of contract (product) development services to businesses is the main method of operation, but in addition government and EU funded future‐oriented research is undertaken and both local and central government funding received. A key component of the knowledge‐transfer remit occurs through professional and practical training opportunities for staff who often go (back) out into industrial organisations.

Applicability to the UK: Various aspects of the UK industrial and social landscape could make the model highly suited for the UK 6. The UK’s flexible employment market should enable the transfer of knowledge and expertise via people to work well. Industry‐based people could transfer, for a few months, as fellows, to the Fraunhofer organisation, returning to their original employer and bringing back their new expertise. New labour/employment markets for such people could develop. 7. The UK’s flexible employment market should also enable a Fraunhofer organisation to make full use of the university’s student community in several ways, such as summer placements and part time employment for students, to mutual benefit. 8. The UK’s relatively well developed venture capital sector should ensure that a Fraunhofer organisation should be able to operate its own commercialisation activity (i.e. spin outs, licensing) of Intellectual Property (IP) arising from its own future‐oriented research, if there is no obvious UK company to take it up. 9. In the UK services account for approximately 70 per cent of the economy, including some of the country's most innovative and dynamic sectors. A Fraunhofer approach that incorporates the transformation of scientific expertise into both physical products and service delivery would be particularly beneficial. 10. The long‐term Fraunhofer approach will provide a much needed complement to the more general short term approach often seen in the UK. Even the 5 years of funding provided to EPSRC Innovative Manufacturing Research Centres is not sufficient to bring through fundamental research to practical application. 11. The choice of the subject is critical to success of Fraunhofer organisations. Where the UK is strong in emergent or fragmented markets a Fraunhofer organisation could provide significant leverage for UK businesses. In knowledge‐based cross disciplinary areas where a large (product or service) development investment is required but where the incremental production cost is low and there are increasing returns, the Fraunhofer model would be particularly applicable. 12. Diverse funding mechanisms would be valuable in underpinning the sustainability of the organisations while ensuring they can maintain world class, competitive research capabilities to develop a future pipeline of advanced technologies for entry into new markets. Expertise already available in knowledge transfer could contribute to generating other sources of income from appropriate activities such as training, courses, publications, and even a technical employment agency. Association with a university or group of universities could contribute to such activities.

Applicability to the UK: On the other hand the model may be less applicable to the UK for several reasons 13. There may be insufficient UK‐owned manufacturing companies to benefit from the activities (which even if provided on a contract basis, still benefit from the partial government funding). 14. Many UK companies do not tend to pay directly for product development and may not start doing so in the future. 15. ‘Applied’ research or development has a lower status in the UK than fundamental research. It may be difficult to attract staff of sufficient calibre for a Fraunhofer organisation to be successful; however high quality facilities and appropriate salary levels should ameliorate this issue. 16. In the future academic climate, a university association with a Fraunhofer organisation may need to provide direct financial benefit to the university, as well as the more general industrial and social benefits. Association with a number of universities may be more practical.

Question 2 Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

17. Some of the existing Research and Technology Organisations (RTOs) and Public Sector Research Establishments (PSREs) carry out some Fraunhofer‐type activities on a contract and/or membership basis. Most RTOs started out as sector‐based membership organisations, but a few, such as TWI, have moved more fully into the Fraunhofer space, although very few have a strong university association. 18. Some RTOs and PSREs provide some limited or small scale Fraunhofer‐type services and are effective in the area of transforming scientific expertise into practical applications, but often only into limited and/or niche markets relating to their specific area of expertise. For example the National Physical Laboratory has developed commercial instruments following fundamental research into new measurement techniques. 19. Most PSREs have a market‐failure or market‐support type remit; a Fraunhofer‐type focus on areas of UK potential market strength may be more effective.

Question 3 What other models are there for research centres oriented toward applications and results?

There are at least 6 other models: 20. Fully commercial organisations – contract research companies which undertake to develop an idea, or prototype, into a commercial product. This includes such development companies as Sagentia, PA Consulting, and Technology Partnership, other smaller or specialist consultancies, and possibly intellectual property companies such as IP Group and QED. Development companies and specialist consultancies are often used on a contract basis by the other organisations noted in this section. 21. Membership organisations, typically RTOs and Not for Profits, such as TWI, often sector‐oriented. 22. Charitable organisations such as The Wellcome Trust, which operates as a virtual centre in practice, funding and managing translational research and application development work carried out by others. 23. Public Sector Research Establishments (PSREs), such as NPL and HPA, which provide particular applications of known or new technologies to solve specific industrial problems. 24. Research Council, university‐based initiatives such as Centres for Innovative Manufacturing and Innovative Manufacturing Research Centres, which while being research based and short lived (5 years) are also application focused. 25. University commercialisation companies, such as Imperial Innovations (Imperial College), and ISIS (Oxford), which often work outside the university as well as within it. Although not centres, in‐house university commercialisation departments (typically a few people) may also manage internal or external product development for specific applications.

Question 4 Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

26. The issue of governance of the TICs is of crucial importance to their credibility and sustainability. Arrangements will need to ensure that: • TICS can operate with the necessary scientific autonomy to build and maintain international reputations for the quality and independence of their research; and • TICs benefit from an element of long‐term, reliable core funding to enable research programmes to come to fruition; whilst • Allowing for a far more strategic approach in setting overall research agendas, directed towards meeting the needs of the UK economy and society, than apply to HEIs or private sector RTOs. 27. The governance structures must therefore involve key stakeholders including Government, industry, RTOs and academia in a partnership which values the contributions of all parties. Ownership structures must allocate political and strategic responsibility but preserve the operational and research independence of the TICs. A detailed consideration of the various governance models used by leading international organisations of a similar kind would be necessary in order to identify best practice and the optimum model for the new centres.

Question 5 What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

28. Mixed effects are most likely. In areas where existing research centres are funded primarily through non‐ government routes, and where the focus is on fundamental research or specific problem solving, there are unlikely to be significant effects, positive or negative. This will apply to PSREs that are very highly focussed or which operate in mature technologies or sectors. 29. In areas where an existing research centre is considered to undertake significant Fraunhofer‐type activities, there may be either opportunity to become a ‘fully fledged’ Fraunhofer organisation or potential competition; the latter would only be the case if the PSRE operates in a technology or sector that is considered appropriate for additional Fraunhofer‐type activities, such as an emerging market. 30. Many PSREs are not in the Fraunhofer space at all (for example the British Antarctic Survey or the Medicines Control Agency), so there will be little or no effect. Some PSREs may have some overlap as new technologies are developed for new markets (for example new plant‐derived medicines from Kew Gardens could overlap with a Fraunhofer organisation in healthcare); these PSREs may in fact benefit from Fraunhofer‐type activities carried out elsewhere. Several have their own product development or commercialisation activities (for example the Veterinary Laboratories Agency or the Forensic Science Service) and may in fact benefit from using the contract offering of a Fraunhofer organisation. 31. Overall, there may be competition more generally for the direct‐government science budget although as the PSRE community is well distributed across government departments and has a wide variety of legal forms and funding mechanisms as well as objectives, this effect may be very diffuse.

Brunel University 01 December 2010

Written evidence submitted by the CBI (TIC 34)

Technology Innovation Centres

Summary

• There is a strong case for giving additional support and coordination to structures which facilitate commercial exploitation of research.

• A major priority is to ensure the numerous existing centres are more fully mobilised to contribute maximum benefit to the economy.

• The growing imbalance between the levels of public funding for research and for innovation causes a bottleneck which puts UK business at a competitive disadvantage internationally.

• This is exacerbated by the difficulty business encounters in seeking to locate sources of useful skills, knowledge and expertise within the university system.

• Strengths of the Fraunhofer model include:

o Explicit commitment to a core purpose of pursuing knowledge of practical utility o Substantial and stable long‐term core funding from government, enabling institutes to commit themselves to sustained investment in long lead‐time technologies

o Exposure to market‐driven incentives to provide services to business for which business is willing to pay.

• The Technology Strategy Board is well placed to oversee the machinery for promoting applied research in order to create economic benefit, but it is already inadequately resourced to fulfil its existing mission.

Introduction 1. The CBI welcomes the opportunity to submit evidence to the Committee’s inquiry. The CBI is the UK's leading business organisation, speaking for some 240,000 businesses that together employ around a third of the private sector workforce. CBI members also include about half of the UK’s universities, among them most of the more research‐intensive universities. 2. Both the Hauser Review and Ingenious Britain, the report of the Dyson review, highlighted the mismatch between the quality of the UK’s university research base and the weakness of the infrastructure for commercialising its output to give economic impact. There is a strong case for giving additional support and coordination to structures which perform the function of linking university research to commercial exploitation, though the need for a wholly new infrastructure of technology and innovation centres in the UK is less clear‐cut. 3. A major priority is to ensure the numerous existing centres are more fully mobilised and suitably structured to contribute maximum benefit to the economy. This should include improving access to facilities and expertise within existing publicly‐funded research establishments. New centres should be established if that is demonstrably the best solution, for example based around a large piece of shared physical infrastructure. 4. Part of the problem which the proposed technology and innovation centres are aimed at addressing is the balance of public funding between the substantial level of support for research and the much lower figure for innovation. The Technology Strategy Board, for example, currently enjoys core funding at a level which is about one‐twentieth of the budget for university research dispensed by the Research Councils and the higher education funding bodies such as HEFCE (the Higher Education Funding Council for England). The resulting bottleneck in exploitation of research outcomes puts UK business at a competitive disadvantage internationally, and this is likely to be exacerbated by the disappearance in England of the innovation funding support disbursed hitherto by the RDAs – a total of about £350m. 5. An obstacle to innovation which is regularly reported by CBI member companies, both large and small, is the difficulty of locating appropriate sources of suitable skills, knowledge and expertise within the university system – sometimes described as the lack of a ‘catalogue’. A more coherent landscape of support for commercialisation of technology and innovation could alleviate this problem by ensuring that an initial port of call is easier to identify.

Question 1: What is the Fraunhofer model and would it be applicable to the UK? 6. Others are likely to be better equipped to describe the Fraunhofer model in detail. From the CBI’s perspective the main relevant features include:

• Explicit commitment to a core purpose of pursuing knowledge of practical utility.

• Substantial and stable long‐term core funding from the federal and state governments, accounting for about one‐third of revenue, and enabling institutes to commit themselves to sustained investment in long lead‐time technologies.

• A similar proportion of revenue from public sector project income and from the EU.

• A further third of revenue earned through contract research for German and other companies.

• A core funding model which strongly incentivises institutes to earn between 25% and 55% of their revenues from contract research for industry, and gives additional rewards for income from the EU.

• A strong orientation towards working with SMEs, which account for one‐third of industrial contract research income.

• An important role in facilitating business engagement in the European Framework Programme for Research and Technological Development.

• Close links with universities while retaining distinct institutional character, identity, mission and incentives.

• Great breadth of scope in activities which support technology deployment, including technology assessment, training for customers’ staff, and other support services extending beyond the initial phases of a new process or product.

• A strong generic brand and corporate governance model combined with institutional autonomy. The strength of the brand may however distract attention from the great range of variation across institutes: this variation includes variation in effectiveness.

• Very positive perception by German science, engineering and technology students as a potential employer. 7. There are some aspects of the Fraunhofer model from which the UK can usefully learn, but the culture, history and innovation infrastructures of Germany and the UK are different, and an indiscriminate attempt to apply the model wholesale would be inadvisable even if it were practically possible and fiscally affordable.

Question 2: Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective? 8. There are many centres conducting contract research and collaborative research with industrial partners. Many but by no means all are based in, or attached to, universities. Centres which are wholly embedded in universities can sometimes have difficulty operating effectively in a commercial environment and adapting to market incentives. Many centres have been created with funding from RDAs, but even before the decision to abolish the RDAs it has never been possible for this support to be guaranteed over the kind of period for which Fraunhofer institutes’ core funding is stable. Lack of substantial and stable long‐term core funding has been an obstacle to the effectiveness of centres in the UK, as its existence has in general been a source of strength to the Fraunhofer institutes – though opinions vary about the extent to which some Fraunhofer institutes may have succumbed to the gradual decline in the relevance of their programmes which can afflict publicly funded laboratories. 9. The effectiveness of such centres varies widely – some of them are excellent, and benefit from the unique UK model of cooperation between Research Councils, RDAs, business‐facing universities and industry. A prominent example is the Advanced Manufacturing Research Centre (AMRC) in South Yorkshire, though this is not seen by all companies in the sectors concerned as a fully ‘open innovation centre’. A still better model may be exemplified by the National Composites Centre being developed in the Bristol area. 10. A merit of the Fraunhofer model is that institutes are obliged to earn a substantial proportion of their income by performing research for business customers: since such customers are free to choose where and whether to spend their money the system ensures that institutes have to be able to demonstrate the commercial value of their services. Research and technology organisations in the UK such as MIRA and C‐Tech Innovation are similarly obliged to demonstrate their effectiveness to business customers – but they are not funded to support the kind of long‐term investment in future technologies which the Fraunhofer model permits.

Question 3: What other models are there for research centres oriented toward applications and results? 11. A different model exists in the United States, where there is an extensive network of national laboratories such as those of the Department of Energy, Department of Defense, Department of Agriculture, and National Institute of Standards and Technology (NIST) of the Department of Commerce. Some of these laboratories are operated by the Battelle Memorial Institute, which is also part of the consortium managing the UK National Nuclear Laboratory, along with Serco and the University of Manchester, on behalf of DECC. Serco also manages the National Physical Laboratory under the GOCO (government‐owned, company‐operated) model, which has been demonstrated to provide significant operational efficiencies with strong scientific outputs.

Question 4: Whose role should it be to coordinate research in a UK‐wide network of innovation centres? 12. A measure of coordination could help avoid the risk of multiple centres in different sectors, regions or technologies, dissipating resources by pursuing parallel paths with sub‐critical mass. There is also scope for facilitation of innovation across centres, linking‐up research in complex areas, and coordination of skills development activities, as well as sharing and disseminating good practice of various kinds. 13. The national body which is best fitted to oversee the machinery for promoting applied research in order to create economic benefit is the Technology Strategy Board, which has rightly been given the role of investigating the potential for implementing recommendations of the Dyson and Hauser reviews in this regard. It is less clear that the TSB has been adequately resourced to fulfil this addition to its mission. 14. A point worth bearing in mind is that the branding or badging of an existing centre within a national framework, subject to appropriate quality and other controls, may convey benefit and enhance impact without the need to commit additional resources.

Question 5: What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 15. If existing centres are doing their job well and efficiently there is little obvious benefit in establishing and subsidising new competitors. Even if they are not functioning optimally there may be much more cost‐effective means of remedying this. But it is important to bear in mind that the prime merit of the Fraunhofer model from a business perspective is that the Fraunhofer institutes are designed to help reinforce the competitive strength of the economy through the work they do for industry. If one focuses on government‐sponsored research one risks losing sight of this fundamental fact. However, the example of the National Physical Laboratory shows that private sector operation can release the potential of government assets to support innovation in the economy based on government‐sponsored research.

Conclusion 16. Experience in the UK and overseas suggests that centres can only fulfil their mission if they are driven by business demand. The appropriate model is likely to vary according to business sector – a hub and spoke system with a small number of centres tapping into a much wider network works well for engineering and physical sciences, but in life sciences the most appropriate model may be one with many specialised research centres that business can tap into directly. But any new developments should take account of and build on the best of the existing apparatus and business models, and ensure that existing centres are fully mobilised to contribute maximum benefit to the economy.

Enterprise and Innovation Group CBI 30 November 2010 Written evidence submitted by Advanced Manufacturing Research Centre (AMRC), University of Sheffield (TIC 35)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK?

The Mission Statement reflects the Fraunhofer-Gesellschaft operation.

• The Fraunhofer-Gesellschaft promotes and undertakes applied research of direct utility to private and public enterprise and of wide benefit to society as a whole. • By developing technological innovations and novel systems solutions for their customers, the Fraunhofer Institutes help to reinforce the competitive strength of the economy in their region, throughout Germany and in Europe. Their research activities are aimed at promoting the economic development of our industrial society. • As an employer, the Fraunhofer-Gesellschaft offers a platform that enables its staff to develop the necessary professional and personal skills that will enable them to assume positions of responsibility within their institute, in industry and in other scientific domains.

It has long been recognised that the UK fails to create sufficient wealth from the world-class research carried out in its top universities. If a survey were to be conducted amongst its manufacturing companies, one would find only small percentage able to cite tangible benefits they had derived from academic/industrial collaboration.

Equally, one would find it difficult to identify a government backed ‘centre’ or organisation that could display massive sustainable UK wealth derived from its activities in this arena. There is little wrong with the UK’s curiosity-driven research, but there is a gap between what universities research and what industry can access and exploit in order to create sustainable wealth. That gap even extends to companies who organically develop their own initial ideas, only to abandon them as they struggle to maintain R&D costs and become disillusioned with difficulties in obtaining help. Everyone appreciates the wealth of expertise and experience within our academic base but equally, everyone knows how difficult it is for industry to tap into and exploit the same for commercial gain. This situation, though long recognised as a problem, has prevailed for decades despite numerous government initiatives spanning several administrations.

Most of the nation’s manufacturing companies – even those previously fat and resistant to change, are now lean. They would all cite their willingness to adopt or develop new tools, techniques and technologies if there was an affordable and timely means available to do so. The majority of UK firms suffer from a lack of significant funds required to implement the same, when compared to companies in countries where the state provides direct financial assistance and others where the banks have a mandate to take a longer-term view of return on investment.

As such, on the face of it, a government funded Fraunhofer type facility, with a mandate to actively ‘help’ industry grow through exploiting affordable applied research, would surely be beneficial to UK industry. However, one has to question why such model hasn’t been directly commissioned or created before?

Lord Heseltine, during his tenure as President of the Board of Trade, commissioned an extensive review of Fraunhofer Institutes to determine their applicability to the UK. The conclusion is summed up admirably in a statement from the then science minister Mr. William Waldergrave:

• “We have studied the Fraunhofer institutes closely, and Sir David Phillips has led a team to look at them. The House of Lords Select Committee, as the Hon. lady no doubt knows, also studied the subject, and it came down against setting up similar institutes. On balance, the Government took the view that the noble Lords were right in that decision. It is not true that all the German Fraunhofer institutes are successful. There is a wide variation among them. Some are, some are not. Our view was that, rather than doing the characteristically British thing of inventing new institutions, we should do the more difficult but far more important thing and get our science and engineering capacity more closely related to industry. We can do that.”

Hansard: Science, Engineering and Technology. HC Deb 26 May 1993 vol. 225 cc923-37.

In 1997 the first Faraday Partnerships were launched as the UK’s response to the German Fraunhofer Institutes. Unfortunately, despite ongoing government support they failed to achieve the level of buy-in from industry that was apparently enjoyed by the Fraunhofer Institutes. This can only be because the partnerships did not provide what industry required, despite the best efforts of the academics involved. The reason for this is that the university departments establishing the Faraday Partnerships did not change their priorities or indeed their way of going about business; they merely added a remit to work more ‘closely’ with business. In 2000, Sheffield University recognised this problem and followed a radical route creating the AMRC; a centre directed by a board of industrial partners with the sole aim of utilising applied research to identify technology driven solutions to create ongoing and sustainable wealth for all involved.

Since day one, in 2001 this centre has significantly grown its industrial partner base year on year achieving global recognition as ‘best in class’. Rolls Royce and Boeing have both promoted the AMRC as being the best university/industry collaborative model available anywhere in the world. Between them they have supported centres operating to the same model in 9 other countries. In all cases, these foreign centres have commissioned the AMRC to assist them and their governments in setting up the facilities. An example was last year, when Denmark opened its own Danish AMRC – a collaboration between Aarhus University, the Government and Vestas where the focus is on building their expertise in the wind Energy sector. The Danes investigated many models but chose the AMRC’s and commissioned over £100,000 of consultancy from the Sheffield team.

In 2008 the AMRC won the prestigious Queen’s Anniversary Prize for Education.

When other countries around the world are considering their prospective centres they always ask the AMRC’s founders what the ‘secret’ of success is. They all receive the same response: Agree and articulate a simple, clear Vision as to what exactly you hope to achieve over how long? Then instill an overriding guiding principle into all the work that is undertaken: ‘Is what I am doing or about to do, going to get the centre nearer its objective or create sustainable wealth for the partnership?

A unique feature of the model is that it requires every partner to buy into the benefits of funding and undertaking generic research, the fruits of which can be shared, on a free licence basis, by the whole partnership. The knowledge developed is also available to the wider industrial community but a commensurate charge is levied to contribute to the ongoing research costs.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

The AMRC asked its key industrial partners for their opinions on this question. They all cited the AMRC as being the only centre/model that could be mentioned as being comparable to the Fraunhofer.

Though not directly following the Fraunhofer model, the University of Sheffield’s AMRC has several similarities. But why has the AMRC achieved such success and provided the model for several look-alike centres around the UK and the world? What is different about the AMRC compared to all the other attempts to create wealth from the UK’s knowledge base? Why does it leverage considerably more private sector revenue than other centres and the Faraday Partnerships achieved?

Part of the answer must lie in the fact that the AMRC model entails a radical departure for university departments; traditionally, these are steeped in an academic culture where peer acceptance is a key motivating factor associated within curiosity-driven research. Wealth creation for all stakeholders is the driving force of the AMRC. The intention is not to replace blue-sky research groups, nor should they. Blue-sky will always underpin and be an integral part of the work undertaken by AMRC and the research must be regarded with equal status and funded accordingly. Blue-sky research will seldom be heavily supported in its infancy by industry as shareholders and board members have goals that are becoming increasingly near-sighted. However, blue-sky needs industry as its ultimate route to market. Industry also provides a motivation to accelerate the research’s outcome. This is where the AMRC’s model fits perfectly, as industry, academia and government all work together to create a ‘who shares wins’ approach to delivering affordable and effective solutions. Such a global solution is not realistic when parties work in isolation.

The AMRC leverages in huge private sector investment because companies feel they are an integral part of the centre, working alongside academics. They provide equipment, people, experience and, of course, funding. By following a research agenda they and other partners have an influence in, business becomes part of a team that collectively gains considerable returns on their investment – a problem shared is a cost halved!

They like the idea of creating both competitive and most importantly what the AMRC calls, ‘repetitive’ advantage.

3. What other models are there for research centres oriented toward applications and results?

As previously stated it is difficult if not impossible to identify a UK or indeed global university led ‘research’ centre that can be said to ‘orientated towards [industry] applications and [industry benefitting] results’.

It has long been the claim that UK universities or independent government backed consortia fail to significantly exploit [create mass wealth] from their internationally significant research. This is hardly surprising given that the measures of success from basic University driven research are more geared towards academic prowess than commercial exploitation. With Governmental led consortia/initiative the feeling from industry is that good news stories are the ‘measures of success’.

It is very rare that basic research, [rather than applied research] provides the oven-ready solutions that companies can incorporate immediately in to their manufacturing processes. However, today’s solutions are the bi-product of research undertaken in the past. Therefore, basic research is, of course, the foundation on which applied research now builds and the catalyst through which wealth is created. By neglecting either strand, sustainable wealth creation cannot be achieved. Future TICs must provide funding within their centres for both forms of research.

Business should and does contribute to some blue-sky research - particularly in the medical field. It will be noted that such a spend in global terms is in itself a major industry. It stands to reason that companies will invest where they see a world class centre – one with a reputation for delivering value and results. To create such a centre requires huge funding and even the largest companies in the world will not pay to a level that will totally fund a world-class research facility.

However, the AMRC has proved that once established, through a relatively modest public sector contribution to core activities, centres can develop the capacity and capability they require in order to attract and keep a more than fair share of the Global research and development budget of a given sector. Through Governmental ‘pump priming’, agreement of a simple clear Vision and the appointment of the correct leadership, a world class facility can be created, capable of attracting the best brains and the best companies committed to exploiting research to the mutual benefit of all involved.

There are several centres in the private sector and several who originated from or were legacies from the National Research Centres such as CTI, TWI, CERAM, NPL. These are essentially different to the AMRC model as they are not part of the UK wide University technology knowledge base – still a vast untapped resource. The AMRC is still fundamentally a University department and as such it operates as a neutral, unbiased, research/technology solution provider.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

This role should not be given to an existing so-called technology provider acting as a pseudo-intermediary. Nor should it be given to intermediaries working solely to support their own organisation’s well-being and stature. There needs to be an end to pursuing nonsense such as promoting the obvious, discussing “technology translation” as though there is an issue in breaking through an impenetrable barrier between academia and industry. Too often initiatives have failed because co-coordinating organisations have failed to understand or overcome the real problems faced by industry. TICs must understand this and have a Vision and motivation to actually do something rather than talk about it.

Centres capable of attracting considerable support from industry should be supported from the public purse as the government, along with all other partners, must provide monies if it expects to see a return on investment.

There should be a degree of freedom in the way public funding is spent in TICs as priorities will change depending on the industrial sector targeted and the length of time the centre has had to establish its niche. It has been the AMRC’s experience that a relatively modest grant of £5.9m over four years was sufficient to construct a new building and start the centre, allowing it to grow into a 70 staff entity. Further public sector support was given once results had been achieved – one of which was the centre’s fundamental role in help Dowty of Gloucester win a multi million contract on the new Boeing 787 aircraft program. This contract also benefits the dozens of UK based companies who supply into Dowty. Recent work on disk machining with Rolls-Royce (and funded by TSB) has justified the construction of a new disk manufacturing facility in Sunderland and there are numerous examples of SMEs in the Yorkshire and Humber Region benefiting and receiving large orders from blue chip companies.

All public sector support should be matched by the private sector, either cash or in kind. A public sector contribution of around £5m a year would, following the start-up phase, ensure a centre was capable of providing solutions comparable to anywhere in the world and encourage the most highly qualified academics to spend some time carrying out both Blue-sky and applied, wealth-creating research.

The organisation administering the public funding, should have a thorough knowledge of industry as a pre-requisite, which suggests the Technology Strategy Board is the most appropriate organisation as it host a wealth of in- house experts covering all aspects and sectors of manufacturing and industry.

They should agree a set of targets at the outset and then manage a level of core public funding to allow the centres to maintain their ‘world-class’ status whilst delivering the ‘goods’.

Funding should be provided in three-yearly installments and only continue beyond that point if results justify it. Those results must be wealth created by UK companies as a result of collaborating with the TIC.

There is also a major role for the research councils and they should work alongside TSB and make use of the resource provided within the TICs. Although applied research should always be a TIC’s primary focus, core funds should be made available to attract the world’s best researchers into the centres. World class status and the ongoing innovation within there requires that there opportunities to carry out industry and market driven related blue sky research. There is no reason why such research cannot ultimately be exploited by UK industry and what better place to facilitate this than an environment driven by results. Seeing basic ideas developed to a level of sophistication where they can be deployed in manufacturing companies in shortened time-scales should act as a wake-up call to all researchers.

Post-script and some facts

It should be noted that the AMRC does not create ‘direct’ wealth for the University of Sheffield. However, indirectly it creates great value through ensuring the institution gains worldwide recognition and respect for its world class facilities as well as its 5* research status. Partners have said that a key facet of a centre’s success dealing with industry is that it is able to react and respond to demands. Traditional University/government multi-layer reporting structures do not accommodate this. Centres must report directly to the Government body managing/auditing the funds.

Basic Facts: 1. The AMRC has 65 partner organisations. 2. Half the partnership are tier 1 member companies each paying £200k pa in cash or in-kind. 3. Half are tier 2 member companies each paying £30k pa in cash or in-kind. 4. Partner contributions fund generic research –Intellectual Property is held by the AMRC but is shared amongst the partnership but is also made available to the wider community at a commensurate cost. 5. The AMRC stated with just eight staff in 2001 6. The AMRC now has 150 staff –mostly highly qualified Masters or PhD researchers. On average 25 industry partners are also working in the centre each day. 7. Partners pay for additional research outside the collaborative agreement Intellectual Property is held by the company (or companies) commissioning the research. 8. Non-member companies can and do commission research from the AMRC. 9. AMRC membership is open to all companies. 10. The AMRC has raised industrial support at a ratio of 6/1 over Government funds. 11. The centre[s] would cost £45 million to build and equip at today’s prices. The buildings and the equipment are a University asset on the balance sheet. 12. The AMRC ‘model’ is working across other industrial sectors in the world e.g. Singapore: Surface engineering; Denmark: wind energy; Madrid: Air traffic controls; Germany: Rapid Prototyping / Manufacturing; Holland; Composite materials; Australia: Advanced Manufacturing.

Advanced Manufacturing Research Centre University of Sheffield

02 December 2010

Written evidence submitted by the University of the Arts London (TIC 36)

Written submission regarding the Technology and Innovation Centres and the future of innovation research in the UK

1. What is the Fraunhofer model and would it be applicable to the UK?

My understanding of the Fraunhofer model is of highly specialised centres of excellence with strong industry links where applied research is co‐ordinated with the intention of dealing with industry related opportunities. These projects have a high level of commercial value. The success of this model is demonstrated in Germany’s robust industrial environment and the state‐of‐the‐art facilities that exist in the Fraunhofer institutions. The rich cultural heritage of design driven, highly‐valued, engineered products makes this model currently more difficult to emulate in the UK.

2. Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective? Yes, in my experience C4D, a collaboration between Cranfield University and LCC University of the Arts is an example of Fraunhofer‐type research. C4D is an example of multidisciplinary collaboration working with industry, engineering, science and technology and the social science community. The limitations of C4D is its relatively newness: C4D has only been operating for two years but in that time it has achieved notable progress in areas of healthcare, public sector services, visualisation of complex data, and environmental issues.

The Fraunhofer model has, on the surface a greater singularity in its area of focus but this comes from a rich cultural basis predominantly of design, and engineering, which is intrinsic to all aspects of the German economic model. Design in the UK is frequently treated as an ‘add‐on’ which is not integral to all organisational processes and systems; technology alone is limited in its ability to generate commercial outcomes. In the UK, design is frequently placed within the Arts and Humanities and not viewed within the STEM (Science, Technology, Engineering and Medicine) subjects as a natural translator of technology and also essential, as a bridge builder throughout the supply chain. In C4D a more overt treatment of bringing industry, design, engineering and management has been achieved making it an unusually multi‐disciplinary collaboration.

3. What other models are there for research centres oriented toward applications and results? At the moment in addition to C4D other multi‐disciplinary collaborations such as those occurring at Northumbria University and Nottingham provide examples of applied design and technology, collaborating with industry to influence and deliver commercial outcomes. Elsewhere in Europe examples include Delft University in the Netherlands and in Finland Helsinki Aalto University.

4. Whose role should it be to coordinate research in a UK‐wide network of innovation centres? Co‐ordination of research within the UK is best undertaken by an independent body that understands the value of the different elements and contributions to successful innovation in services and products in the commercial and public sector. I believe that the role of industry is to initiate particular requirements and participate in an equitable relationship with academia and government to allow free exploration within a commercial context.

5. What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? There are already a number of institutions that provide substantial research contributions to industry and the public sector. It is important that new models of working build on these rather than re‐invent or compete with existing establishments. Furthermore, it is important to recognise that the cultural context within the UK although in itself is inherently creative, is different from the more structured German system where the in‐house design and engineering team are part of the normal landscape within business.

Declaration of Interest I am Deputy Director of C4D a Cox‐funded multidisciplinary collaboration between Cranfield University and the University of the Arts London. I have worked with scientists, engineers and social scientists as a design facilitator with technological developments at Cranfield and also within the public sector; I explore the opportunities of translating technology into commercial products, services and systems. I am interested to know how these discussions will unfold as there is huge opportunity to build and evolve current models and initiate new relationships.

Dr Alison Prendiville Deputy Director of C4D University of the Arts London

01 December 2010

Written evidence submitted by Universities Scotland (TIC 38)

Technology Innovation Centres

Introduction and Declaration of Interest

Universities Scotland is pleased to respond to this important inquiry on behalf of our 20 members, the Scottish Higher Education Institutions. We have consulted widely with them, but they may also choose to respond separately; a full list of our members is given on our website www.universities- scotland.ac.uk . While working closely and sharing draft responses with, Universities UK, we feel it is important to draw attention to the distinctive characteristics of the Scottish research and innovation landscape, and how this affects the views and needs of our members.

University of Aberdeen Edinburgh Napier University The Open University in Scotland University of St Andrews University of Abertay Dundee University of Glasgow Queen Margaret University, Edinburgh University of Stirling University of Dundee Glasgow Caledonian University The Robert Gordon University University of Strathclyde University of Edinburgh Glasgow School of Art Royal Scottish Academy of Music and Drama University of the West of Scotland Edinburgh College of Art Heriot-Watt University Scottish Agricultural College UHI Millennium Institute

1. What is the Fraunhofer model and would it be applicable to the UK?

According to their website, the Fraunhofer-Gesellschaft is Europe’s largest application-oriented research organisation. It was founded in 1949, as a complement to Germany’s Max Planck Institutes, which concentrate on basic research, and now includes 59 Fraunhofer Institutes which promote and undertake applied research “of direct utility to private and public enterprise”. They focus, almost exclusively, on STEMM (Science, Technology, Engineering, Maths and Medicine) disciplines. They have an annual budget of about €1.6 bn (£1.4bn), of which more than half comes from private businesses. The organisation has a decentralised structure, whose General Assembly includes Institute Directors, with overseas offices in Europe, USA, Asia and the Middle East.

The Fraunhofer model is one that has worked for Germany and has already been shown to work in other countries including US, Italy and Austria. We welcome the UK Government’s foresight in committing large sums of money to Technology Innovation Centres, and would welcome the opportunity to test the model in Scotland.

The benefits of innovation will only be realised in the long term, beyond the lifetime of any particular Government. TICs, as proposed by the Dyson and Hauser reports are intended to introduce long-term, predictable, and sustainable baseline funding for selected areas of translation of research. This would be very welcome, since the Scottish Funding Council, like HEFCE, currently funds such activities through formulaic funding, or by funding finite projects which aim to become self-funding.

In the UK, there are a number of initiatives and institutes with similar aims to the Fraunhofer Institutes, some with an even longer pedigree, but no overarching structure like the German Gesellschaft. We should not replicate the entire Fraunhofer model for fear of duplicating or even damaging the work of existing institutes or initiatives, but there is plenty of scope to establish new initiatives or institutes where there are gaps, and to better co-ordinate and promote existing ones. The creation of TICs must

be carefully scoped, recognising that the Fraunhofer model has been developed over decades and operates in a different economic climate and business culture. We should work with Fraunhofer rather than try to emulate them or even compete with them.

New TICs will need to build upon established brands or endeavour to build a brand quickly as the “Fraunhofer” brand is formidable and widely recognised in and, increasingly, beyond Europe. No other UK or European institution has achieved such industry pull in terms of funding and collaboration with industry. Moreover, the lobbying power of the Fraunhofer Institutes at the European level should not be underestimated and should be a force to be reckoned with if similar institutions wish to influence or benefit from European initiatives in Research and Development.

Our University research is highly regarded worldwide but UK, and particularly Scottish investment in business innovation substantially lags behind that of our major competitors. Universities already work directly with a variety of organisations across the spectrum of research, innovation and technology development. With 20 closely connected HEIs and a tradition of academic collaboration reaching back to the Enlightenment, Scotland is a well connected hub of world-leading research. Scotland’s research base is committed to the pull through of research to innovation, exploitation and subsequent benefits to society and the economy.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

There are many different approaches which have been developed in Scotland and the UK which have similar aims and objectives to the Fraunhofer model, namely to deliver technological innovation and solutions to problems which deliver impact and solve problems via applied STEMM research. A wide range of models have been developed to address this basic purpose which have not replicated the details of the Fraunhofer model, and which the TIC concept could build on. These are often highly innovative approaches aimed at delivering the same benefits to our industrial economies, capitalising on Scotland’s research leadership in areas such as Medicine, Energy, Manufacturing, Digital and Rural Economies; some of these are described below. Some distinctive aspects of the Scottish research and innovation landscape are: The continuing existence of our economic development agencies, Scottish Enterprise and Highlands and Islands Enterprise; a culture of strong collaboration between universities, business and the public sector; and the Community Health Index (CHI), a unique patient-related number used in Scotland for all health communications.

The University of Dundee’s Drug Discovery Unit (DDU) aims to translate basic science into lead compounds to validate drug targets, to use as tools to investigate disease pathways and, when appropriate, to advance to pre-clinical drug candidates. The DDU has two major research focuses, neglected tropical diseases and innovative targets and pathways. Approximately £22M of funding has been awarded to date, from a variety of funders including the Scottish Funding Council, Scottish Enterprise, the Scottish Universities Life Sciences Alliance, the University of Dundee and the Wellcome Trust. The DDU is a fully operational and integrated drug discovery team with the full range of disciplines required for early phase drug discovery.

Edinburgh Bioquarter is a unique Science Park that has attracted $1.2 billion public/private investment. It offers a large new teaching hospital, the University of Edinburgh’s world-renowned medical school and bespoke biomedical research and development facilities all on one site. The existing site hosts over 1,200 dedicated researchers, including the largest grouping of stem-cell researchers in the UK. The newly opened 100-acre site at BioQuarter will ultimately provide more than 500,000 square feet of further academic research space and an additional 900,000 square feet of accommodation for commercial research-based companies.

Established in 2003, Glasgow Biomedicine is a joint initiative between the University of Glasgow and NHS Greater Glasgow & Clyde. Six local hospitals are involved in an integrated, interdisciplinary centre of excellence for the management of non-commercial and commercial clinical trials research. Each year, it manages about 1500 existing trials and starts a further 600, with an average spend of £15.5M per annum.

The Division of Signal Transduction Therapy (DSTT) is a unique collaboration between the MRC Protein Phosphorylation Unit and the College of Life Sciences at the University of Dundee and five of the world's leading pharmaceutical companies. The aim of the collaboration is to develop inhibitors of kinases and phosphatases for the treatment of disease, and for the study of cell signalling. DSTT is in its 13th year and 3rd renewal and has attracted over £40M in funding. Companies share access to all unpublished results, technology, know-how and reagents in the participating laboratories and have the first rights to license the intellectual property generated. The DSTT is regarded by the major industrial partners as an extremely successful model for industry /academia collaboration.

Scotland is widely believed to have the greatest marine renewable energy resource in Europe if not the world. The European Marine Energy Centre (EMEC) is a test centre created to promote the development of the wave and tidal stream energy conversion industries. Based in Stromness on Orkney, EMEC was established as a limited company with funding of around £14.5 million/year and 18 staff. Since 2004, a wide range of commercial companies have taken advantage of the testing services and facilities provided by EMEC.

EMEC headquarters shares a building on the Heriot-Watt University Stromness Campus providing synergy in marine renewables and environmental research with a number of HWU spin out companies supporting the development of marine technologies. In May 2007 Heriot-Watt University Stromness and the nearby University of the Highlands and Islands’ Energy Research Institute in Thurso were jointly awarded £1 million to create a marine renewable energy research centre of excellence. In June 2009, the ERI secured a further £14 million to undertake three major renewables projects.

The Scottish European Green Energy Centre (SEGEC) in Aberdeen opened in May 2009 with £1.6m from the European Regional Development Fund, more than £1 million over three years from the Scottish Government, and £0.6m from the University of Aberdeen. SEGEC will focus on marine energy, offshore wind, long distance super grid development and smart distribution grids, carbon capture and storage, renewable heat and energy efficiency. It aims to help the Scottish green energy sector secure maximum benefits from engagement with Europe through developing partnerships with businesses and institutions, designing collaborative projects and accessing European funding.

The Centre of Engineering Excellence for Renewable Energy (CEERE) is a partnership with the University of Strathclyde to manage the development, design, engineering, project management, procurement and asset monitoring of Scottish & Southern Energy’s (SSE) portfolio of onshore and offshore wind farms in Europe, to be set up over the next three years at an estimated cost of £20 million. In July 2010, SSE signed a strategic agreement with Mitsubishi to explore a range of technologies including offshore wind farms, advanced technology for smart electricity grids and low carbon vehicles, carbon capture and storage and high-efficiency power generation.

The Power Networks Demonstration Centre (PNDC) is a collaborative project between Scottish Enterprise, the University of Strathclyde and various industry partners to create a world class facility to support the development and validation of future electrical power distribution technologies. The PNDC is expected to play a central role in accelerating the deployment of emerging “smart grid” technologies by enabling developers to demonstrate their functionality within a realistic, controllable grid environment. Scottish Enterprise has approved a £7.1 million grant to the University of Strathclyde to support the capital costs on a site owned by Scottish Power in Cumbernauld. In parallel, the

University is also negotiating a Membership Agreement with Scottish Power (SP) and Scottish & Southern Energy (SSE).

The National Subsea Research Institute (NSRI) based at the University of Aberdeen is an industry- led and demand-driven partnership between UK industry and academia to develop a co-ordinated research strategy for the subsea sector.

The James Watt Institute for High Value Manufacturing www.smi.hw.ac.uk at Heriot-Watt University, Edinburgh includes the only Innovative Research Manufacturing Centre (IMRC) in Scotland and the North of England. With accumulated funding over £11M from the EPSRC and £5M from industry since 2005, IMRC focuses on science-based development of novel high value manufacturing technologies, processes and products relevant to industry in the three themes of Photonics, Microsystems and Digital Tools. iSLI (Institute for System Level Integration) http://www.sli-institute.ac.uk/index.php is a unique academic collaborative venture of four of the UK’s leading universities: Edinburgh, Heriot-Watt, Glasgow and Strathclyde, and with links to the University of the West of Scotland and Lancaster University who bring key skills in the use of MEMS technology. iSLI sits at the critical interface between the academic and commercial engineering worlds. Funding for iSLI is underpinned by a financial commitment from Scottish Enterprise.

The £25 million Advanced Forming Research Centre (AFRC) is a collaborative venture between the University of Strathclyde, Scottish Enterprise and engineering firms including Boeing, Mettis Aerospace and Rolls Royce. It aims to create state-of-the-art manufacturing technologies for the UK's aerospace, energy, marine and automobile industries. The Centre, which opened in June 2009, is the first of its kind in the UK and is intended to become a beacon for engineering and manufacturing excellence.

Dundee’s reputation as a global centre for digital media originated with the Lemmings computer game series, written by Dave Jones, a graduate of Abertay University. To build on such success, Abertay University launched the world’s first computer games course in 1997. Now a brownfield site in Dundee City Centre is being transformed into a new creative media district. Seabraes Yards is a £50 million collaboration between Scottish Enterprise and private and public sector partners, to support start-up companies, local businesses and inward investors. The first facility, Seabraes House, houses several digital media businesses including Proper Games, which develops games for Playstation 3, Xbox and Wii.

Within the Victoria & Albert Museum (V&A) in Dundee, planned to be completed in 2014, Design in Action (DIA) will develop products, services and processes where design is a concurrent process of conceptualisation and planning. Researchers and the design and manufacturing industry will form partnerships to fast track design driven new product and process development that supports economic and cultural growth. The V&A in Dundee is supported by the University of Dundee, the University of Abertay Dundee, Scottish Enterprise, Dundee City Council and the V&A.

Finally, we would like to stress the importance of strategic alliances between universities and multinational corporations. For example Heriot-Watt University has Strategic Alliances with Renishaw, Selex Galileo, BAE Systems Surface Ships and AWE that facilitate research for the companies, research income for the University and knowledge exchange between them. Technology Innovation Centres need to replicate the best of these Alliances while allowing universities and companies to maintain individual relationships which have taken many years to build.

3. What other models are there for research centres oriented toward applications and results?

The Fraunhofer Institutes concentrate on collaboration with industry on research applied to industrial aims. One should not ignore applied research collaborations with charities which have aims for the public good. Briefing documents produced by the Association of Medical Research Charities (http://www.amrc.org.uk/news-policy--debate_pawg-scotland ) provide some excellent examples of such collaborations in Scotland.

A number of Scottish initiatives in this area rely on virtual networks and project or programme support rather than physical infrastructure.

Research Pools

The research pooling initiative was created by the Scottish Funding Council in 2003 to encourage researchers across Scottish higher education to pool their resources and respond to increasing international competition. By concentrating investment on networks of excellence, this has created powerful, well resourced communities that are now attracting research talent from across the world. These dynamic collaborations between research departments can provide Scotland’s universities with a competitive advantage which other countries would find difficult to replicate.

The research pools undertake basic and applied research, and most also aim to commercialise research in partnership with business.

The current Pooling initiatives are:

■ Scottish Universities Physics Alliance (www.supa.ac.uk ) ■ ScotCHEM (Chemistry, www.scotchem.ac.uk ) ■ Edinburgh Research Partnership in Engineering and Mathematics (www.erp.ac.uk ) ■ Glasgow Research Partnership in Engineering (www.grpeng.ac.uk ) ■ Marine Alliance for Science & Technology for Scotland (www.masts.ac.uk ) ■ Northern Research Partnership in engineering (www.northscotland-research.ac.uk ) ■ Scottish Alliance for Geoscience, Environment and Society (www.sages.ac.uk ) ■ Scottish Institute for Research in Economics (www.sire.ac.uk ) ■ Scottish Universities Life Sciences Alliance (www.sulsa.ac.uk ) ■ Scottish Imaging Network: A Platform for Scientific Excellence (www.sinapse.ac.uk ) ■ Scottish Informatics and Computer Science Alliance (www.sicsa.ac.uk) ■ Energy Technology Partnership (www.etp-scotland.ac.uk )

There are similar initiatives, including partners outside the university sector, in Applied Education Research, Nursing, Midwifery and Allied Health Professions Research, Criminal Justice, and Policing Research

The Chief Scientist’s Office of the Scottish Government’s Health Directorate funds over £60m of applied research in Scotland, including the NMAHP research collaboration, and the Scottish Academic Health Sciences Collaboration, which is accessible to researchers throughout Scotland, but based around the four Scottish medical schools in the Universities of Edinburgh, Glasgow, Aberdeen and Dundee. They also fund NHS Research Scotland, which offers a portal for fast, efficient approval of multi-centre clinical research studies; this has resulted in a reduction of median approval time for clinical trials from 53 working days in 2008 to 20 working days in June 2010.

The Scottish Government spends approximately £45 million each year on agricultural, biological and environmental research, managed by the Rural and Environment Research and Analysis Directorate

(RERAD) and conducted primarily through its Main Research Providers (MRPs). They also compete for funding from other sources in the public and private sectors. They are companies limited by guarantee governed by independently appointed Boards.

The MRPs are collaborating on a new initiative, knowledgescotland, to help deliver key outputs from the scientific community to policymakers in Scotland and beyond. The knowledgescotland website can be found at http://www.knowledgescotland.org/.

The main research providers are:

Biomathematics and Statistics Scotland (BioSS) provides support and research on mathematics and statistics to the other Main Research Providers.

University of Aberdeen, Rowett Institute of Nutrition and Health carries out research on how nutrition can prevent disease, improve human and animal health and enhance the quality of food production in agriculture.

Scottish Agricultural College (SAC) carries out research to meet the needs of the land based industries focusing on sustainable crop and livestock systems, animal health and welfare, economics, socio-economics and the environment. It is also a member of Universities Scotland, providing a unique combination of teaching, consultancy and research.

Scottish Crop Research Institute (SCRI) is a major centre for research on agricultural, horticultural and industrial crops, in particular, potatoes, barley and soft fruit. It works very closely with the University of Dundee.

Macaulay Land Use Research Institute carries out research to meet the needs of sustainable rural development and environmental management in Scotland and similar areas worldwide. From April 2011 the institute will merge with SCRI to form the James Hutton Institute; the Moredun Research Institute, which carries out research on diseases of livestock, will be affiliated.

The Royal Botanic Garden, Edinburgh has a mission to explore and explain the world of plants; its functions include research, education, collections and public access.

Universities Scotland particularly welcomes the Scottish Government’s recent initiative to support 3 Centres of Expertise between the MRPs and other research institutions:

• Reducing the Impact of Animal Disease Outbreaks • Water • Climate Change including risk and uncertainty and two strategic partnerships between the MRPs and Universities in:

• Animal Science Excellence • Food and Drink Science

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

The obvious candidate for this role would be the Technology Strategy Board.

Other respondents will be better placed than Universities Scotland to comment on this. However, as shown by many of the examples above, our members are very keen to strengthen links with such research centres; indeed, some of them are now embedded within universities.

Universities Scotland

02 December 2010

Written evidence submitted by University Alliance (TIC 39)

Science and Technology Committee Inquiry into the suitability of the Fraunhofer model for Technology Innovation Centres

Alliance universities: innovation and knowledge exchange built on genuine partnership with business and the professions

1. University Alliance represents 22 major, business focussed universities at the heart of the sector. The approach in these universities to business engagement, civic regeneration and local communities means that they work with partners across their region, the UK and internationally, to ensure that the benefits of higher education and more specifically their entrepreneurial approach have a direct economic impact - for example the automotive industry in Manchester, the Aeronautical industry in Bristol, the High-tech industries around Hertfordshire and the Maritime industry in Plymouth and Portsmouth.

2. As University Alliance has consistently argued, universities are not just part of a growth strategy, they are central to it, driving growth and innovation in new sectors and markets. The quality and scale of higher education (delivering highly skilled graduates), science and research is crucial to determining the future pattern of economic growth in any innovation-driven economy, locally, regionally and nationally.1

3. This ethos is central to the focus within Alliance universities and it is based on this approach that they are well placed to deliver on the Government’s priorities for sustainable growth:

• to leverage private sector investment and encourage businesses to start, grow and thrive

• to assimilate and exploit leading-edge research

• to foster the exchange of new knowledge between universities and business

The Fraunhofer model and approach to the Technology Innovation Centres

4. There has been increasing interest in the German Fraunhofer model over recent years as a way of maximising the exploitation of the UK’s research and innovation. We are fully supportive of the need to ensure that we have the best environment to maximise the impact of our research endeavours but as with any imported model, the key to success will be to develop an approach that builds on the existing strengths and structures already in place across the UK.

1 L Aston and L Shutt, 21st Century Universities: engines of an innovation driven economy, September 2010 (http://www.university- alliance.ac.uk/downloads/Publication_21st_Century_universities_engines_of_an_innovation_driven_economy.pdf) 5. The Fraunhofer model incorporates a network of institutes spread across the country, each focussing on different fields of applied science. This model has already influenced the proposed development of Technology Innovation Centres (TICs) in the UK following the publication of Dr Hermann Hauser’s report to government last year. 2 Hauser’s report set out the following parameters for the development of the TICs:

• The mission of TICs is to help bridge the gap between research findings and outputs, and their development into commercial propositions.

• The programme of activity in each TIC should be overseen by a business led steering group, comprised of business and academic experts in the technology.

• The Technology Strategy Board (TSB) should establish a new UK Technology and Innovation Centres Management Board to oversee the network of national TICs, with representation from industry, the research base and wider Government. This group should report on performance and prioritise investments/monitor strategy.

6. In addition, the Hauser report suggested that TICs should only be invested in when they met the following criteria:

• the potential global markets are predicted to be worth billions of pounds per annum

• the UK has truly world-leading research and potential business capability and absorptive capacity to make use of increased investment

• the UK has the ability to capture a significant share of high value activity

• TICs can enable the UK to attract and anchor the knowledge intensive activities of globally mobile companies

7. University Alliance is supportive of the leading role that the Technology Strategy Board has been instructed to take in relation to the TICs. We would hope that this means a joined up policy approach will be taken given the remit of the TSB in other areas such as Knowledge Transfer Networks, Knowledge Transfer Partnerships and collaborative research and development.

8. We would also hope that the approach that is eventually developed builds on the existing and significant expertise that has been developed across the sector in relation to commercialisation and university – business collaboration.

2 H Hauser, The Current and Future Role of Technology and Innovation Centres in the UK, March 2010 http://www.bis.gov.uk/assets/biscore/innovation/docs/10-843-role-of-technology-innovation-centres-hauser-review Developing a model based on knowledge exchange and existing approaches to working with business

“A business-facing university has a revolving door with business - not an interface or a portal but a true interaction. Employers know that the university will deliver - whether it be high-level skills, applied research, knowledge exchange or process improvement, short courses for their staff or expert consultancy services.” Professor Tim Wilson, Vice Chancellor, University of Hertfordshire

9. The focus in Alliance universities is on knowledge exchange rather than knowledge transfer – wealth creation and business engagement are not an add-on once the research has taken place. Rather, they are intricately part of the university’s fabric. Innovation and knowledge creation is formed on the basis of this mutual partnership and is therefore directly linked to economic need. In addition:

• These are universities with 4* and 3* departments that have a major impact largely based on their strong links with industry.

• They typically have research strengths in innovation, typically in areas of importance to the new economy.

• There is a focus on near-market solutions with a large proportion of highly rated STEM departments.

• They are focussed and strategic in the investment of resource in their research strengths.3

Figure 1: Knowledge transfer vs. knowledge exchange

Knowledge transfer Knowledge exchange

University

University & Business Collaboration Knowledge Transfer Knowledge Exchange

Business • More traditional more traditional linear • The university works in partnership with model businesses across a number of areas of • Knowledge held within research department business engagement (R&D, knowledge / university goes through a process of transfer, consultancy, CPD etc) through transfer to business. established relationships. • Process often takes place over longer • Innovation and knowledge creation is periods of time and can result in major formed from this mutual partnership and is impact /breakthrough if successful. therefore directly linked to economic need.

3See L Aston and L Shutt, ‘Efficiency, leadership and partnership: an approach that delivers shared economic priorities', available at: http://www.university-alliance.ac.uk/research-publications.htm 10. Alliance universities have found that the most successful approach is one where business links and engagement are embedded across a range of university activities. These universities have developed strong partnerships with both national and international business to the extent that there is active businesses engagement in curriculum design, collaboration on specific programmes to embed graduate skills.

11. In relation to research and innovation we would highlight the following examples with relevance for the development of TICs. In each case the link with the university is an important feature because of the way innovation and knowledge is formed as a result of relationships formed across the institution through the knowledge exchange approach.

University of Hertfordshire – Bio-park

12. BioPark is a thriving scientific community of biopharmaceutical, medical technology, diagnostics and the biomedical businesses together with specialist service providers, forming an important component of the South Hertfordshire BioCluster. BioPark ensures that strong links are developed between regional universities, research institutes and the private sector and, as one of a network of Regional Enterprise Hubs, assists in developing high-level skills to support the knowledge economy.

13. The University of Hertfordshire led the development of Bio-park, which opened in February 2006. Prior to the development of the park, Roche Products had announced its intention to pull out of the region and all stakeholders were keen to ensure that these valuable facilities were safeguarded for future use.

14. 93% of the space has now been let with plans underway for further expansion and investment by the university along with its partners equalling £2.2 million. Not only is BioPark demonstrative of the leading role the university is playing in terms of the regions economic development, BioPark is run on a commercial basis for the university and therefore effectively brings private revenue in.

University of Plymouth – Leading Marine Institute

15. Research Fortnight’s RAE 2008 Power Table showed that the University of Plymouth was ranked at number 50, with the highest increase in ranking (15 places) from 2001 to 2008. The University's largest Unit of Assessment for the 2008 RAE, with 36.5 staff submitted, was Earth Systems and Environmental Sciences (UOA17), which includes the marine physical sciences and chemistry. In this unit 95% of the research was judged to be at least internationally recognised, with 50% being internationally excellent or world leading.

16. It is on the basis of this expertise that one of the largest Marine Institutes in Europe has been established. The University is working in partnership to invest £25 million in the Plymouth Science and Innovation Programme (PSIP) to build a new world- class marine facility which will house state-of-the-art research facilities including new wave tank testing equipment that will be unique to the UK. PSIP builds on expertise in the City and provides a solid innovation infrastructure which expects to create 500 jobs and 30 new businesses in the next five years. PSIP is expected to drive up the city's Gross Value Added, an indicator of economic performance, by £130million over the next 10 years.

University of Bradford – Research and Knowledge Transfer Centres

17. The University of Bradford has made a strategic decision to invest more than £4 million in developing its key areas of research and knowledge transfer strength. Following an extensive review of its research base, external business markets and funding opportunities the university has developed its strategy to focus on 10 Research and Knowledge Transfer Centres including: Micro and Nano Technologies, Advanced Materials Engineering, Pharmaceutical Engineering, Sustainable Living, Skin Sciences, Visual Computing, Automotive Engineering and Medical Infection.

18. All centres are delivering high quality research, an academic drive and a commitment to business markets. The centres are all driving innovation and working towards business solutions - strengthening partnerships with business and industry such as Jaguar cars, Reckitt Benckiser, Smith and Nephew and public sector organisations such as NHS trusts and the Department of Health.

Bournemouth University – National Centre for Computer Animation

19. Bournemouth University’s National Centre for Computer Animation (NCCA) is working with the University of Bath to create the first Industrial Doctoral Centre for the Computer Animation industry. This pioneering project has been awarded nearly £6 million by the Engineering and Physical Sciences Research Council (EPSRC).

20. With an annual turnover of approx £7 billion the computer animation industry is of increasing importance to the UK economy. The Centre aims to improve knowledge transfer between academia and industry and provide training in the technical, artistic, research and management skills needed by the next generation of industry leaders.

21. For the past two years, 3D World magazine has rated the NCCA as the best place to study computer animation in the UK. The publication also rated the Centre as number eight in the world. Other recent grant successes include £290,000 over three years from the EPSRC to improve the realism of animated virtual humans. These characters will be used by partners Lancaster, UCL and the Metropolitan Police to study psychological responses to street violence. University of the West of England - Institute of Biosensing Technology

22. The Institute of Biosensing Technology is the first of its type using Bio-sensing technology in non-invasive detection of disease, healthcare (being able to detect metal fatigue in hip replacements before they hurt), security and many other applications. This attracts inward investment from overseas.

23. IBST was formalised in 2008 and has already secured major research contracts such as a £1 million project in collaboration with DePuy (a Johnson+Johnson company) and Gwent Electronic Materials, funded by the Technology Strategy Board. The project aims to develop a new rapid, point-of-care diagnostic system for the measurement of metal ions after joint replacement. This will inform clinical decision making around the need for pre-emptive revision in case of high levels of metal wear.

24. IBST has also become an affiliate member of the Sensors & Instrumentation Knowledge Transfer Network (SIKTN), a government funded initiative to develop a joined-up approach to the bio-sensing and instrumentation community. The Institute is already working with the SIKTN on a project to develop a National Directory of UK companies working in bio-sensing.

University Alliance

02 December 2010 Written evidence submitted by the University of Sheffield and University of Sheffield’s AMRC with Boeing (TIC 40)

Technology Innovation Centres

SUMMARY

The University of Sheffield welcomes the opportunity to present evidence to the House of Commons Science and Technology Committee. Our submission is based on the experience of over a decade of pioneering a very successful engineering translational research centre, the University of Sheffield’s Advanced Manufacturing Research Centre (AMRC) with Boeing, which could well form one model for the proposed Technology Innovation Centres (TIC).

1.0 INTRODUCTION

1.1 The University of Sheffield is a research intensive university with research income of circa £100m per annum from a broad portfolio of sources, including research councils, charities, government departments, industry and EU Framework programmes. The University’s AMRC with Boeing is a £60million partnership, which builds on the shared scientific excellence, expertise and technological innovation of the world’s leading aerospace company, Boeing, and world‐class research within the University of Sheffield’s Faculty of Engineering. It develops innovative and advanced technology solutions for materials forming, metal working and castings. It also has internationally acknowledged research in the field of composite materials, an area crucial to the development of Boeing’s new generation planes.

2.0 RESPONSE TO THE INQUIRY

2.1 Applicability of the Fraunhofer model to the UK

2.1.1 The attractiveness of the application of the Fraunhofer model to the UK is the market pull as opposed to technology push driving the research undertaken, as it could be argued, that Fraunhofer institutes represent the co‐location of R&D departments of a group of companies within a given supply chain.

2.1.2 However, the status of Fraunhofer Institutes as legally separate entities from the Universities could be seen, in the UK context, as inhibiting the free flow of knowledge, expertise and know‐how between industrial researchers and the fundamental research base, which in the UK is located largely in the Universities. UK Universities are already highly successful in interacting directly with industry, and it is important that this aspect of the UK innovation system is strengthened by the introduction of Technology Innovation Centres, rather than being inadvertently weakened.

2.1.3 The typical Fraunhofer funding model of being 1/3rd core state funding, 1/3rd sponsored research grants, and 1/3rd industrial membership, is very different to the UK research funding landscape, which emphasises time‐limited project based funding. The Fraunhofer funding model, through an explicit component of core funding shared between the private sector and the state, does assure long‐term sustainability.

2.1.4 A perceived strength of the Fraunhofer type model is the flexibility in governance and constitution as a legal entity in order to best serve the interests of the participating organisations, as it is our understanding is that not all Fraunhofer institutes are constituted in the same way.

2.1.5 A perceived drawback of the Fraunhofer model is its separate legal entity status and geographical proximity to the participating University, which could mean that the University is competing for research income and business partnerships with Fraunhofer institutes.

2.1.6 A Technology Innovation Centre that is fully incorporated within a University with a strong University base is likely to benefit from technology transfer from the research base and, in return, favourably affect the research culture of the University in question. However, this arrangement potentially exposes the University to financial risk. It is likely that the University would need to underwrite the establishment and running costs, putting downward pressure on already constrained resources. This risk would be mitigated if the balance of funding were to shift from an emphasis entirely on project based funding with recovery of full economic costs to one with a larger element of core funding.

2.2 The AMRC with Boeing: Example of an Existing Fraunhofer‐type institute

2.2.1 In our experience, The University of Sheffield’s AMRC with Boeing represents an example of an existing and successful Fraunhofer-type institute operating in the UK, in terms of the nature of its research and its interactions with industry. The AMRC identifies, researches and solves advanced manufacturing problems. Researchers work with individual companies on specific projects, and collaborate on generic projects for the benefit of all members. R&D topics at the AMRC are determined by the board of industrial partners. This ensures that work is focused on industrial commercial requirements, and provides lasting value to members. However, unlike the Fraunhofer Institutes, the University of Sheffield AMRC with Boeing is an integral part of the University with no separate legal status.

2.2.2 The University of Sheffield’s AMRC with Boeing now employs around 150 highly qualified researchers and engineers from around the globe. It works with businesses, from global aerospace giants to local SMEs, on a consortium basis.

2.2.3 Consortium members pay an annual fee to access the resources and expertise of the centre. Tier One members (currently about 20 which includes Boeing, Rolls-Royce, Siemens and BAE Systems) collaboratively determine the R&D agenda. Around 45 Tier Two members pay a lower fee and have access to all the AMRC's generic research projects.

2.2.4 Members and non-members can also work with the AMRC on individually sponsored research projects.

2.2.5 Further examples of Fraunhofer-type institutes, i.e. those that focus on a specific technology where there is a large global market and significant UK capability, include the Siemens core competence centers for wind turbine R&D in Sheffield (UK), Keele (UK), Copenhagen (Denmark), Aachen (Germany), Delft (Netherlands) Boulder, Colorado (USA).

2.2.6 The Sheffield-Siemens Wind Power Research Centre (S²WP), located at the University’s Kroto Innovation Centre directly employs 20 people and focuses on developing the most reliable, innovative and efficient wind turbine generators that will be at the forefront of future onshore and offshore wind power systems.

2.2.7 The University of Sheffield-Siemens partnership to develop next generation wind turbine technologies will not only help the company, and its connecting businesses to serve the global market more competitively but also enable wind power to make a major contribution to the UK´s energy needs.

2.2.8 The University of Sheffield was chosen following Siemens´ long-term partnership with the University´s Department of Electronic and Electrical Engineering, which includes the Electrical Machines and Drives Group. Headed-up by Professor Qiang Zhu, the group undertakes world-leading research on technologies that are vital to future developments in electrical power engineering. A fundamental element of the collaboration is access to the group´s 70 academic and research personnel, as well as the University´s state-of-the-art facilities.

2.3 Central Co‐ordinating Role for a UK‐wide network of innovation centres

2.3.1 The Technology Strategy Board would seem to be the most appropriate federal body to oversee a network of innovation centres. The structure for governance overseen by the TSB should include a Board of decision‐makers with representatives from the TICs.

2.3.2 Individual TICs should have a high degree of autonomy in matters of research direction, which should be strongly driven by the University‐business partnership.

2.3.3 The role of the TSB should encourage and facilitate the sustained funding from industry for the TICs. It is important that public investment is not seen to displace private sector support.

2.4 Effect of the introduction of Fraunhofer‐type institutes on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research

2.4.1 If Fraunhofer‐type institutes were established to operate in the same science and innovation space as existing Government funded research centres, there would be considerable competition between the centres, which in itself, is likely to detract somewhat from translational speed to market which the TICs could make possible.

3.0 CONCLUSIONS AND RECOMMENDATIONS 3.1 In order to introduce the proposed TICs in a timely and effective way, the following recommendations are made:

3.2 • TICs should be established on the basis of existing strong business‐University partnerships. • Care should be taken to ensure that the University hosts for TICs are not competing internally for the same research and innovation markets. • Consideration should be given to the balance between core and project‐based funding in order to assure the long‐term sustainability and stability of the centres. • Recognition and support should be given to universities and companies that have already established partnerships that facilitate market pull for technical R&D. • Financial support from companies for existing Fraunhofer‐type institutes should be encouraged by TSB.

By presenting the above evidence The University wishes to draw the Committee's attention to the considerable strengths the UK already has in translational research. In doing this we would like to ensure that the Government and particularly TSB continue to recognise and support this role and indeed enhance their provision for doing so through the introduction of TICs.

University of Sheffield

University of Sheffield’s AMRC with Boeing

November 2010 Written evidence submitted by HDR Architecture (TIC 41)

Technology Innovation Centres

1.0 Declaration of Interests

1.1 HDR Architecture is a US owned architecture, engineering and planning practice. It is the world’s largest practice dedicated to science, technology and healthcare facilities and has a number of international offices, including London.

1.2 The Company has master planned many science park campuses across the globe and completed the design of related science park facilities, including research laboratories, business incubation units and training support facilities in support of the creation of dynamic environments for knowledge transfer and technology commercialisation.

1.3 We are active members of - and contributors to - such organisations as the UK Science Park Association (UKSPA), the International Association of Science Parks (IASP) and the Association of University Research Parks (AURP) in the US. We were the principal sponsor of UKSPA over 2006-2009.

1.4 This depth of experience has given us, we believe, a sound understanding of the challenges for a successful ‘Technology Innovation Centre’, such as the Fraunhofer Institutes model, and how such designs – physical, structural and virtual – can be developed to the benefit of the UK research economy.

1.5 HDR would be pleased to offer its expert personnel to support future discussions on this matter.

2.0 Our Submission

2.1 Technology innovation can drive economic recovery and strengthen competitiveness. Consequently, such innovation has become a national imperative in many nations around the world. Three key aspects to be considered in relation to applied research and technology transfer for successful ‘innovation to commercialisation’ models include:

• Virtual and Networks (global) • Knowledge Transfer Conferences (regional but can also be global) • Physical (the campus)

2.2 The approach set out by the Research Councils UK (RCUK) in its Large Facilities Roadmap 2010 and Delivery Plan 2008/09 to 2010/11, in relation to research and the benefits of collaboration, is impressive and undoubtedly demonstrates the UK’s leading research capabilities. Arguably, the complementary structures (political / organisational / physical) are not ideal to maximise the great efforts of the RCUK and enhance commercialisation opportunities. In such circumstances, the Inquiry into Technology Innovation Centres, such as the Fraunhofer Institutes, has great merit.

2.3 Whilst acknowledging the current, challenging (public) financial environment, it should be recognised that the UK’s % of GDP invested in science and technology is low compared to other nations. In addition, it has been demonstrated (in Silicon Valley and elsewhere) that tough economic times do not halt the evolution of technologies and their applications. In consideration of potential, increased investment in the UK, it would be important to look at improvement of the ‘return’; this can be enhanced with appropriate exploitation of:

• more global networking for technology transfer, e.g. satellite locations around the world • more global corporate R&D (private) JV’s for development • focus on applied research (e.g. the Fraunhofer Institute model in Germany) • a portion of funding should go to commercialisation

2.4 The demonstrable improvement of technology transfer demands an appropriate measure. Whilst a number of measures of success are currently employed, this is a new field and success indicators are not yet uniformly established. Various measures include: the number of inventions disclosed; the number of patent applications filed, patents issued and licenses consummated; the amount of licensing income; and the number of commercial products produced and sold. Some institutions track the number of industrial interactions and research projects funded as a direct result of marketing initiatives. In the US, others point to spin-off industries and related incubation facilities, which tend to grow next to highly innovative universities: Silicon Valley, Research Triangle Park and Route 128 are well known examples.

2.5 In terms of helping to secure public support to such future investment, it is interesting to note that marketplace products in the US are recognised by the public as a tangible outgrowth of its support of basic research. An example of the impact of university technology transfer on the marketplace is found in the biotechnology industry. This entire industry - and ten thousands of new jobs it created - is based upon university research. The Cohen-Boyer patent, licensed by Stanford University, is used by all biotechnology companies. In addition, many of these companies were founded to develop university inventions, whether related to specific genes, monoclonal antibodies or potential drugs.

2.6 A recommended and proven environment for enhanced commercialisation combines the best of the physical and virtual worlds. Organisational aspects (satellite locations, communication infrastructures, etc.) should be complemented with a focal location and physical building (knowledge base, central data repository, information ‘node’, etc.). This is often accommodated with urban links to University and Corporate R&D (as seen in Cambridge, MA; Cambridge, UK; Silicon Valley; and Route 128, Boston). Arguably, most of the UK’s science parks are too remote/disparate other than those (clusters) in such locations as Manchester and Cambridge. The (academic) research undertaken in, for example, Oxford and London could, potentially, be better exploited with appropriate and local Technology Innovation Centres or such equivalents.

2.7 As reported in a recent IASP conference, regional technology centres, from Brazil to Bangalore, are finding that technology development thrives in an environment of creative intellectual energy that offers a networked economy, proximity to research institutions and universities, unique intellectual property development, a diverse base of high-tech talent, access to investment capital and complementary infrastructure. Innovative businesses and regions are appearing and flourishing by making global connections, tapping into virtual opportunities and building regional innovation engines – what IASP keynoters termed "future knowledge ecosystems."

2.8 But as technology development centres in places like China, the Gulf states, India, Israel, Korea, Russia, South America, Southeast Asia and Taiwan become stronger links in the new, complex technology innovation chain, there is increasing concern in the US that foreign students graduating in science and engineering from US universities are leaving to pursue job opportunities in their home countries. This has prompted a Duke University report, entitled "Losing the World’s Best and Brightest", which highlights the likely negative impact on the US economy. The concern that UK graduates and researchers could follow this trend should be considered.

2.9 The internal and external environment of the Technology Innovation Centre will be an important consideration. A study of biology technology companies in the Boston Cambridge area was undertaken by the MIT Sloan School of Management to test whether the geographic clustering of start-up, high technology companies had any benefits. The study found that communication and knowledge transfer was very effective in close proximity and fell away rapidly with distance, showing that broadband communication is still not a substitute for frequent face-to-face interaction. Similarly, a physical, central space – recreational square, restaurants, common car parking, transit station, etc. – provides an environment for serendipitous contact where “a lot of knowledge was transferred” and, more importantly, future collaborations were set in motion.

2.10 In addition to the benefits of knowledge transfer, the social interaction of researchers in a campus or cluster setting has been demonstrated to assist individuals’ transition from rivalry to collaboration. Social places can help with getting scientists to see each other less as competitors and more as partners, to the potential benefit of their respective organisations.

2.11 The Boston Cambridge study data also supported the importance of major pharmaceutical companies (industrial / commercial partners?) being within the cluster. Whilst the cluster was built around a major university, the large companies, both biotechnology and traditional pharmaceutical companies, appeared to play a significant role. In particular, they had central positions in the network that were also critical to developing not only the network but also the communication, helping to make the cluster effective. Thus, the role of potential industrial / commercial ‘partners’ within a cluster or Technology Innovation area should not be under-estimated.

2.12 An adjacent ‘research hotel’ may offer an economic development tool for commercialisation whist also acting as a physical attraction to the Technology Innovation Centre for both academic/research and corporate organisations. A research hotel may be modelled on traditional hotels to encourage the development of science partnerships. National or local economic development would benefit by branding these research hotels as innovation focal points and encourage local participants “to make reservations” as a means to supplement their existing science agendas. The research hotel would offer research and development spaces with a flexible and transformable ‘kit of parts’ in addition to amenities to rival a hotel’s offering, such as conferencing facilities.

2.13 With reference to the internal environment of a Technology Innovation Centre, many past research facilities have a hierarchy of private offices, few places for casual, impromptu meetings and obsolete video conferencing facilities. Today, this should be considered an outdated type of work environment, previously based on a cellular business model with a stratified business culture, which does not foster inter-office connectivity. It is important – and challenging - to develop a workplace design strategy that aligns with the organisation’s business goals and its research effort. In particular, it has to be designed for the ‘next generation’ of researchers – a generation that is comfortable with all forms of technology, can handle multi-tasking, is multi-cultural and is less hierarchical.

2.14 It must be remembered that balancing fiscal responsibility with the need to attract the best talent of the next generation requires an understanding of potential employees’ diverse life styles, familiarity with and reliance on new technology and their global perspective.

2.15 Even with the Fraunhofer Institute model, it must be noted that commercialisation can be slow and other complementary mechanisms (e.g. technology exchange and legal agreements) have to be pre-empted and put in place to ensure speed and efficiency in the ‘bench to market’ life cycle. One of the most recent, well-known successes of Fraunhofer Institutes is the MP3 digital audio encoding format but this success did not happen overnight. It started in the 1970’s through the research of Dieter Seitzer, a professor at the University of Erlangen and culminated with the development of MP3 technology by Fraunhofer-Gesellshaft in 1996. While Fraunhofer-Gesellshaft now licenses the patent rights to the audio compression technology, it was a 20+ year process which got them there. In summary, the ‘macro environment’ of applied research has to be acknowledged and addressed, wherever possible.

HDR Architecture

1 December 2010

Written evidence submitted by Imperial College London (TIC 42)

Technology Innovation Centres

Context 1. Imperial College London is the only university in the UK to focus exclusively on science, technology, engineering, medicine and business. Core to our mission since our foundation has been the application of our research and education for the benefit of industry, commerce and healthcare. Through a critical mass of expertise in relevant core disciplines, we foster multidisciplinary teams able to investigate and find solutions to social, economic and industrial challenges.

2. The College translates its work into practice by, for example, partnering with industry and the NHS, engaging internationally, commercialising its research findings and providing a dedicated consultancy service. During 2009-10, the College secured £39.5million research income from UK and global industrial sources, Imperial Innovations Group plc. attracted investment for the College’s portfolio of spin-out companies to the value of £75million and Imperial Consultants provided advice to over 250 companies, including SMEs. Notable industrial partners include Servier, Qatar Petroleum, Pfizer, GlaxoSmithKline, BP, Rolls- Royce, Shell, BAE Systems, IBM, Statoil and Microsoft.

Introduction 3. Excellent scientific research, and its continued advancement, is of vital importance to the UK’s economy. The UK is fortunate to have world-leading universities, of which three (including Imperial College London) are in the top ten globally. The most successful research intensive universities are also successful at turning their research into companies and products for application in industrial, healthcare and other settings. Nevertheless, more needs to be done to capture the value of applied research and spin-out activities for the benefit of UK businesses, employment and wealth generation.

4. There are already examples of successful technology innovation clusters in operation within the UK. Imperial College serves as one, leveraging a critical mass of scientific, medical and engineering expertise with innovation and entrepreneurship support provided by Imperial College Business School and Imperial Innovations Group plc. Other examples include Silicon Fen, based around the University of Cambridge, and Warwick Science Park, linked to the University of Warwick. Despite these examples of good practice, the UK as a whole needs to be more efficient and effective at exploiting research findings for the benefit of UK technology industries.

5. Accelerating the organic development of innovation clusters is intrinsically difficult. Technology Innovation Centres (TICs) will therefore be most successful if they build upon existing platforms of innovation. Key to achieving this will be ensuring that TICs are scientifically, technically and geographically contiguous with areas of research excellence, talent generation and industrial concentration. Venture capital will also be required and will depend upon the development of a widely accepted and coherent strategy that meets the needs of industry.

What is the Fraunhofer model and would it be applicable to the UK? 6. German universities tend to concentrate on basic and theoretical research, with a dense network of intermediate institutions operating in the space between them and industry. These include the Max-Planck Society, focusing on fundamental scientific research; the Leibniz Society, performing scientific research into major themes and providing strategic infrastructure; and the Helmholtz Society, which is responsible for the development of technological solutions to major societal challenges. The Fraunhofer Institutes are at the most industrial-facing end of these intermediate institutions but maintain close links to German universities, with several having departments that are embedded into, or share facilities with, universities. In contrast, the innovation landscape in the UK is much less facetted. For example, the UK’s world-leading universities cover a much wider part of the innovation chain than German universities, combining fundamental and applied approaches with extensive industrial-facing activities.

7. The Fraunhofer Institutes undertake contract research on behalf of companies, develop products and processes through to technical or commercial maturity, generate patents and licences and operate in the world’s major economic regions. These activities are already being delivered successfully by some of the UK’s world-leading universities. Particular examples of the College’s achievements are provided below.

Contract research a. During 2009-10, the College’s income from research grants and contracts was £297million, 13% of which coming from industrial partners. Significant industrial awards during this period included a new five-year partnership with Sainsbury’s (£1.3million) to research and deliver innovative and practical solutions to mitigate the future impacts of climate change and reduce Sainsbury’s carbon footprint. The College also became a partner in the ScottishPower Academic Alliance, with ScottishPower and the University of Edinburgh. Funded by Scottish Power (£5million), it will focus on carbon capture and storage with the aim of finding technical solutions to the removal of carbon from exhaust gases at fossil fuelled power stations.

Developing products and processes through to technical or commercial maturity b. Through Imperial Innovations Group plc, the College creates, builds and invests in pioneering technologies. Proof-of-concept and incubation support provides the bridge from research ideas to the point where they can attract seed investment and be transformed into useful and commercial applications. For example, spin-out company Respivert attracted £13million of venture capital funding prior to its acquisition by Centorcor (a subsidiary of Johnson & Johnson), retaining its team in the UK for next stage development. c. The Imperial College Academic Health Science Centre (AHSC) is an example of how the healthcare translation pipeline is being accelerated in a university environment. A partnership between the College and Imperial College Healthcare NHS Trust, the AHSC aims to transform the health and quality of life of patients and populations in London, the UK and globally by integrating healthcare research, innovation, teaching and practice. These activities are supported currently by the National Institute for Health Research through its Comprehensive Biomedical Research Centre designation, worth around £100million over five years. Recent successes include the development a faster TB diagnostic tool, vascular robotic surgery to treat complex aneurysms and a digital plaster for real-time monitoring of a range of vital signs.

Patents and licenses d. In 2008-09, the College’s cumulative patent portfolio was 1,476.

International engagement e. Through international collaboration, the College is able to access applied research locations which require specific research solutions and to extend the reach and impact of its research findings. For example, building on our longstanding relationship with Shell, in collaboration with Qatar Petroleum and Qatar Science and Technology Park, we have formed the Qatar Carbonates and Carbon Storage Research Centre. Through this 10-year, $70million research programme, we are helping to develop fundamental and applied strategies for enhanced natural gas production and carbon dioxide abatement in complex carbonate reserves.

8. The College agrees that scientific research and innovation should address national priorities and deliver sustainable economic benefits to the UK. The underpinning purpose of the Fraunhofer Institutes is therefore of direct relevance. Nevertheless, the Fraunhofer business model needs to be adapted to the specific circumstances of the UK and take account of the role that UK universities already play in the innovation chain. TICs should therefore be structured so as to achieve maximum leverage from the academic excellence and technology transfer activities of some of the UK’s world-leading universities. Bespoke business models for individual TICs may also be necessary so that they address particular sector and industrial needs.

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 9. Existing centres of applied research excellence and innovation embedded within university structures provide the essential ingredients from which TICs can be developed. For example, the College’s Centre for Plastic Electronics (PE) brings together fundamental and applied expertise in the departments of Physics, Chemistry and Materials to address the design, synthesis and characterisation of PE materials, the design and fabrication of PE devices and the modelling of both. The Centre interacts with a cluster of industrial partners, currently including AZ Electronic Products, BASF, Bayer, CDT, Crystal Global, CSEM (Brasil), De la Rue, Dupont, Teijin Films, Flexink, G24i, Kurt Lesker, Merck, Molecular Vision, Ossila, Philips, Pilkington, Plastic Logic, Plextronics, Polyera, Solar Press, Solenne, Solvay, Sumitomo, Toshiba and VTT. The Centre has a current grant portfolio of some £34million and involves over 150 students, postdoctoral researchers and visitors. Molecular Vision Limited, which has developed a diagnostic technology platform, was spun-out from the Centre’s work. Since 2004, it has secured non-dilutive funding of £2.3million in the form of joint-development, contract research and grant income and issued equity in return for £2.17million. Cambridge Integrated Knowledge Centre, University of Cambridge, is a similar centre of excellence in PE. The combined expertise and industrial networks based around these two centres provide an attractive platform on which to base a TIC in Plastic Electronics.1

10. Over 600 academic staff and researchers are involved in energy-related research at the College. Building on this capacity, the College’s Energy Futures Lab (EFL) supports the deployment of low carbon energy technologies, generates new energy solutions and provides robust strategic and policy advice to industry and government. Hosting a Doctoral Training Centre, it works with various industrial partners including BP, Shell and Qatar Petroleum. It is also guided by strategic, scientific and technical advisory boards comprising both senior academic staff and experienced practitioners from the energy sector including McLaren Group, Deutsche Bank, the National Grid, Centrica, Mainstream Renewable Power, Rolls Royce, International Power and Shell. Since its formation in 2005, EFL has generated new research investment of £67million, £60million of which came from industry. Spin-outs include Novacem, which has developed a carbon-negative cement and was recently awarded a £1.5million TSB project in collaboration with RioTinto, Laing O’Rourke and WSP Group. In July 2010, Novacem announced the first closing of a £1million Green Cement Bond, together with the participation of Lafarge as the first subscriber, and has received over £1million equity funding from Imperial Innovations Group plc, Royal Society Enterprise Fund and the London Technology Fund. Other successful energy spin-outs include Ceres Power, an AIM listed fuel cell company employing over 120 staff and with a

1 Declaration of interests: Imperial College and the University of Cambridge are developing a joint proposal for a TIC in Plastic Electronics. product manufacturing facility in Horsham, together with Nexeon (novel Li-ion batteries) and Evo-electric (motors for electric and hybrid vehicles).

11. The College’s Institute of Biomedical Engineering (IBME) draws together scientists, medics and engineers to apply their extensive expertise to the development of medical diagnosis and treatment solutions. With purpose built laboratories and state of the art facilities, IBME attracts early career researchers from across the UK and around the world. Collaborating with industry, government and healthcare providers to guide technology development priorities and ensure proof-of-concept and early stage product development, notable partners include GE Medical, Cardinal Healthcare and companies spun out of IBME’s work, such as DNA Electronics and Toumaz Technologies. Recent solutions developed by IBME include a real-time gene testing innovation to indicate how patients are likely to respond to different drugs, novel approaches to tissue engineering and a new type of retinal prosthesis. RepRegen Limited, is an example of a spin-out company emerging from IBME’s work. Specialising in the field of regenerative medicine with initial applications in orthopaedics and oral care, it completed a funding round of £1.2million in 2009.

12. The UK’s world-leading universities have developed sophisticated technology transfer infrastructure with proven track records of engaging professionally with industry and of commercialising technology. For example, over 150 professionals are involved in such activity across Imperial, Oxford, Cambridge and UCL. Imperial Innovations Group plc has assisted in the development of all the spin-out companies discuss above. Other examples of successful businesses generated with its support include Circassia (medicines to control immune system responses), which has raised £32.5million investment since 2007; Plaxica (polymers derived from sustainable resources), with investors including Invesco Perpetual, NESTA and the Carbon Trust; and Cell Medica (cell therapies) with collaborative research funding projects supported by the TSB and Leukaemia and Lymphoma Research totalling over £2million.

What other models are there for research centres oriented toward applications and results? 13. TIC-like organisations in Taiwan, Japan, Korea and Germany are delivered on a significant scale and involve levels of public funding that would not be possible in the UK under present economic conditions. For example, the National Institute for Advanced Industrial Science and Technology in Japan, has an annual budget of £830million, 66% of which is provided by government. The only way that the UK will be able to compete globally, is to ensure that its strategy for TICs builds upon those areas in which it is already world- leading and is aligned closely to the needs of businesses within the UK.

14. Technology innovation clusters comprise geographical areas in which industry, world- leading research-intensive universities and university spin-out companies are based. Silicon Valley and Stanford University is an example of how innovative businesses are attracted by, and emerge from, environments where there is a critical mass of multidisciplinary expertise. There is also a need for a continuous supply of new talent with experience of excellent research. Hence, innovation is enhanced and developed further by proximity to the broader science base and areas of doctoral and postdoctoral training.

15. Laura Abramovsky’s and Helen Simpson’s research underscores the importance of geographical location. It found that certain sectors locate their R&D facilities near to excellent research departments. The presence of science parks, themselves likely to be linked to university presence, was also found to be an important factor. In the case of those industries with less evidence of immediate co-location with universities, the study identified that firms that did locate near to relevant research departments were more likely to interact with universities.2

16. A national TIC strategy should not be used as an instrument of social policy. A regionally focused approach will dilute funding and is unlikely to ensure that TIC locations will resonate with industrial need.

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

17. It is likely that individual TICs will be most successful if they are able to adapt to the particular circumstances in which they operate. To achieve this, a sufficient level of autonomy and flexibility will be required. Decision making should therefore be informed by a stakeholder board with significant industrial and academic knowledge and experience.

18. Various streams of government funding support university-industry engagement. For example, work by Jonathan Haskel and Gavin Wallis provides strong evidence of market sector productivity benefits from public R&D spend on Research Councils.3 HEFCE Higher Education Innovation Funding (HEIF) also plays a valuable role. Whilst increased national benefit would be gained if investment was targeted towards those institutions with the most successful track records in these areas, HEIF provides vital support in the development and delivery of the College’s industrial-facing, proof-of-concept and incubation activities. Similarly, a significant proportion of the College’s industrial partnerships are co-funded by public sources, with the involvement of the industrial partner sometimes being conditional upon a matched funded element. The allocated TIC resource should therefore be managed carefully so that the sustainability of any new initiative is not maintained at the expense of other excellent research and innovation activities, or the valuable relationships universities already have with UK and global industry.

19. Excellent research and innovation requires world leading facilities, which are becoming increasingly expensive and sophisticated. TICs will also need to be of a significant scale and scope to have a sufficient critical mass with which to be world-leading and attract industrial and venture capital investment. Hence, the resource committed at present is likely to support only a small number of high-quality TICs.

20. It should be noted there are six Fraunhofer Centres in the USA and Representative Offices in Japan, China, Indonesia, Korea and the United Arab Emirates. This international dimension ensures access to world-leading research, global industry and applied locations. It will be important for the UK model to maintain an international outlook and collaborate globally where this will add value.

2 Laura Abramovsky and Helen Simpson, Geographic proximity and firm-university innovation linkages: evidence from Great Britain, The Centre for Market and Public Organisation, working paper no. 08/200 (June 2008). 3 Jonathan Haskel and Gavin Wallis, Public Support for Innovation, Intangible Investment and Productivity Growth in the UK Market Sector, IZA discussion papers series no. 4772 (February 2010)

What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 21. Public Sector Research Establishments (PSREs) play an important role within UK research and innovation, providing specialist facilities, capacity and expertise that might not be possible within universities and industry. Significant aspects of the College’s research rely upon access to PSRE facilities, such as the STFC’s Rutherford Appleton and Daresbury laboratories. Our research is also enhanced through partnerships with PSREs, including the National Physical Laboratory and Atomic Weapons Establishment. TIC-like organisations in Japan, Taiwan, Korea and Germany co-exist with, and work alongside, large scale national facilities. As such, UK TICs should be integrated fully within the UK’s existing research and innovation network and should not lead to a reallocation of public resource.

22. TICs offer an important opportunity to build upon the UK’s existing strengths in research and innovation and translate them into sustainable economic returns for the nation. However, if implemented without due regard to the UK’s particular circumstances, they also have the potential to cause harm. To ensure that TICs complement, rather than detract from, the UK’s existing strengths, they will need to augment the work of the very best UK universities and other leading innovation assets. Of central importance is the need to create a meaningful community and network that links basic and applied research, talent, enterprise and venture capital.

Imperial College London

December 2010 Written evidence submitted by University of Bristol (TIC 43)

TECHNOLOGY INNOVATION CENTRES

A. As one of the UK’s leading research-intensive Universities, the University of Bristol welcomes the opportunity to submit evidence to the Committee’s enquiry. We believe that our experience as the host University for the National Composites Centre (NCC), announced in November 2009 and due to open in the summer of 2011, gives valuable insight into the model design for the recently announced Technology and Innovation Centres (TICs).

B. The Hauser and Dyson reviews both highlight the need for additional mechanisms and infrastructure for commercialising the UK university research bases’ world leading output to achieve more significant economic impact. We believe that there is a case for providing additional support and coordination to existing structures which perform the function of linking the science base with, and undertaking more applied research for and with, industry partners to increase economic impact, but that there is no clear need for the direct transplantation of the Fraunhofer model into the UK.

C. Government’s priority should be to ensure that existing centres that demonstrate the key characteristics of a Technology and Innovation Centre and that operate in a technological field where UK industry has appropriate absorptive capacity are fully developed and resourced to contribute maximum benefit to the economy. New centres should only be established if that is demonstrably the best solution, for example based around shared physical research infrastructure, as exemplified by the NCC.

What is the Fraunhofer model and would it be applicable to the UK?

1. When national innovations systems are reviewed and new mechanisms proposed to maximise the efficiency of the national research and innovation capability, the German Fraunhofer system is often held up as an exemplar. It is of vital importance that such a system is considered both in its historical context and in the light of existing research and innovation capability, both within the public and private sectors. As the OECD has noted, attempts to transplant elements of productive innovation systems from other economies are usually unsuccessful.

2. The Fraunhofer network, which currently numbers some 59 Institutes each with a specific industry oriented technology focus, has a total annual budget of more than 1.3bn euro (2009). Founded in 1949, by representatives of industry, academia and the new Federal Government, the Fraunhofer Society originated as a driver in the post war reconstruction period and was designed to accelerate German industry’s recovery following its virtual destruction at the end of World War Two. At the same time the German University system underwent reform and reconstruction.

3. The Fraunhofer Institute network design was a primary element of the economic revival of the German economy, from a base of near total destruction of its industrial infrastructure, with strong professional management drive. This must be contrasted with the proposals for TICs, which will form only one part of a vibrant and extant 21st century innovation ecosystem, with fundamentally different starting characteristics.

4. The German economic system is characterised not just by strong native manufacturing giants competitive at a world scale in a wide variety of sectors such as BMW, Volkswagen, Siemens, BASF and others, but by a vibrant ‘mittelstand’, so called mid-sized independent companies of 500-1000 employees, which are either world leading in their own niche sectors, (machine tools, semiconductor process equipment etc.), or are major systems level suppliers to the giants of the German economic sector. They themselves support a further layer of smaller, innovative companies within their own supply chains. Mittelstand companies are very export intensive, are frequently technology leaders in their fields and employ approximately 70% of the German workforce (2003 data).

5. This middle sized company structure is, for various historic reasons, almost completely absent in the UK economy, which is dominated by a small number of very large multinationals and more than 99.5% of companies with less than 250 employees. Many companies with the potential to form this ‘middle strand’ have been acquired, often by international companies or have withered in the face of international competition and inadequate investment strategies.

6. The German Mittelstand’ is very important in the context of the Fraunhofer model as these are the companies that are very commonly the funders, customers and economic beneficiaries of the work of each of the Fraunhofer Institutes, alongside the smaller number of industrial giants. Without a vibrant population of such companies with a strong innovation culture and the absorptive capacity to participate in and adopt the results of the work of Centres, it is difficult to see how a TIC in an emergent sector could possible operate in a sustainable way, unless it was to be the recipient of a very significant proportion of its funding from the state for some considerable time.

7. Without specialist middle-sized companies to act as the ultimate exploiters of the applied research knowledge and technology developed by such a centre and to grow in part as a result of a TIC's impact, its ultimate impact on the UK economy will take a considerable time to develop. Such companies will have to emerge and grow alongside the centre. The creation and implantation of associated clusters of such companies is often cited as an aim of economic development programmes but in most cases they fail spectacularly.

8. Over the past two decades, in the main because of public budgetary pressures Fraunhofer funding has moved from a majority publicly funded regime to one where approximately 69% of the budget is derived from industry (25%) and industry linked public research grant funding with 23% made up of State and Landar funding as core institutional funds. This shift to a stronger direct dependence on industry funding has led to the Institutes moving to a portfolio of activity which is much more near market technology development and industry problem solving than was historically the case. This has been cause for concern in some quarters in Germany, as it is viewed as risking the key translational role the Institutes have had in moving fundamental research (Technology Readiness Level 1-3) into a nearer market demonstration phase (TRL 6-7).

9. Whilst Fraunhofer Institutes operate under a common model, it offers considerable operational freedom, dependent on the status of a centre's specialist technology area and of the strength of German industry in that area. It is normal for the Director of a Fraunhofer Institute to be a Professor, and whilst nearly all Institutes have links to one or more host academic institutions these links are often little more than ceremonial.

10. This leads to the second key structural difference in the German innovation ecosystem when compared to that of the UK – the role of Higher Education Institutions.

11. The UK has 14 HE institutions in the world top 100 and Germany has three (THES, 2010). Recently the World Bank stated that Germany’s Universities are ‘hardly recognized as elite institutions’ and that they trail behind the UK’s world- class universities. German University policy has recently shifted to try to develop clusters of research excellence, in an attempt to reverse this position. The UK’s universities are embedded in the national innovation system; this is not the case in Germany.

12. An analysis of the post war development of publicly funded research in Germany explains this well and also demonstrates a second reason why the Fraunhofer model is not directly translatable into the UK.

13. As part of post-war reconstruction the German research system design implemented was highly stratified and this structure remains. Universities focus on higher education and basic research, and Fraunhofer Institutes undertake applied R&D and provide technology development services. In addition, Helmholtz Research Centres focus on long-term strategic research on issues of national importance in areas such as energy, health, space, transport and the environment, and Max Planck institutes focus on specific areas of cutting-edge interdisciplinary research and large-scale research facilities.

14. In part as a measure to maintain this stratified approach universities in Germany are subject to rules governing their engagement with entrepreneurial activities, which restricts their ability to engage with business and to secure industry funding. The levels of interaction between the Universities and the Fraunhofer Institutes are by their nature limited and constrained, meaning that the fundamental ‘knowledge feedback loops’ from and more importantly back into fundamental research do not exist as they increasingly do in the UK innovation system, where the research intensive Universities play a more central role.

15. In addition Fraunhofer Institutes, Helmholtz Centres and Max Planck Institutes are seen as the more prestigious institutions when compared to the University sector, this tends to mean that fundamental research in the Universities does not attract the highest calibre of postgraduate researcher.

16. In the UK, research-intensive universities undertake a much broader range of research activities than in Germany, including basic research, applied R&D, long-term strategic research, interdisciplinary research and technology development services. Complementary R&D and innovation related activities are undertaken in a range of independent research institutes. These include the Research Council Institutes, Government laboratories, technology intermediaries and a small but vibrant group of private sector R&D and technical design consultancies. The latter are often credited with being a major component that has led to the so-called ‘Cambridge Phenomenon‘, perhaps even more so than the University itself.

17. Up until the early 1990s the UK also had a vibrant network of independent sector orientated Research and Technology Organisations (RTOs), funded by a mix of member companies and public grant funding. A subtle series of policy shifts removed public support for these bodies, meaning their impact has shrunk drastically with only a small number such as TWI (formally The Welding Institute) and MIRA (the Motor Industry Research Association) surviving as significant bodies.

18. Over the past decade the role of the UK research-intensive Universities in the national innovation ecosystem has been transformed. In England activity supported by the Higher Education Innovation Fund has improved performance in a wide range of measurable areas, from the levels of research income won from industry to the companies created to take forward new innovation and to work with the so called gazelle companies, those that grow disproportionately rapidly. Alongside these performance measures a very professional cadre of specialists supporting knowledge transfer, relationship management, research project management and delivery has developed, giving the lie to the historical view that universities are unable to deliver in a more commercially intense environment. Evidence is very strong that the UK Higher Education sector performance is on a par with the US in many of these areas and leads in a number. It is highly inaccurate to characterise the past decade as one focused only on patenting of IP and the creation of sub critical spinout companies.

19. Strategic long-term relationships with major UK companies are now a common feature within all UK research-intensive Universities and it is these relationships that offer very significant potential in the deployment of a TIC model. As can be seen from the above we do not believe that in these times of constrained public spending, and with such fundamental differences in our native innovation ecosystem, that slavishly follows the German model would be successful.

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

20. There is a range of Centres within the UK that have many of the key characteristics of a successful TIC. Examples include the Advanced Manufacturing Research Centre in Sheffield, one of a number established and funded by Regional Development Agencies, often with significant levels of European Regional Development Funding. Others of this type include those created by One North East. In addition many research intensive universities have specialist industry focused research units, which provide many of the functions of a TIC or Fraunhofer. Many are excellent resources for their client companies and are highly regarded. Finally, a small number of RTOs survive and these do provide a valuable resource to their member companies.

What other models are there for research centres oriented toward applications and results?

21. We believe it is telling that the US has not adopted a rigid model for such Centres. The UK innovation ecosystem is much more closely aligned to that in the US than the German model and there are more lessons to be learned from US experiences.

22. A range of US centre of excellence exist in the translational TIC space, including CalIT2, one of five centres in individual key technology areas, each funded with in excess of $100m by the Californian State and in this case based at the University of California, San Diego. The University of Bristol, through the SETsquared Partnership has a partnership with UCSD and has observed the development of these centres. There are a number of other Centres in the US that exhibit similar characteristics. In nearly all cases they are hosted by or very closely linked to US research-intensive Universities.

23. At the University of Bristol, we have over the last 18 months worked with our partners, in particular major industrial companies such as Airbus, Rolls Royce, Vestas, GKN, GE and Augusta Westland to develop the National Composites Centre and its operating model.

24. This builds on the award of £25m of funding from the previous administration's Special Investment Fund, the European Regional Development Fund and SWRDA. This funding supports the capital investment in a new building together with world leading equipment. The short and medium term sustainability of the centre rests on member company subscriptions and the direct commissioning of work by companies. The Centre is not yet operational but will be opening on schedule in the summer of 2011

25. We believe that key elements of our model are directly relevant to the TIC debates and moves the model perhaps best exemplified at the AMRC in Sheffield to a further level.

26. The first essential component of such a centre is the provision of key (nationally rare) physical infrastructure, making this resource available to multiple companies and both using it and developing it in a real life demonstration environment. This moves theoretical and lab scale research findings through that critical scale-up phase, whilst also allowing key companies to develop, explore and learn the characteristics of new techniques and methodologies before introducing them into production.

27. A second component is that of co-location and co-creation. This is exemplified by company staff being based in the Centre, working alongside and with centre researchers and those directly from the academic research base. This offers all involved the most rapid learning and development environment and puts in place the essential ‘feedback loops’ between the research user and the fundamental research base that are evidently lacking in the Fraunhofer model. This creates a truly operational exemplar of ‘open innovation’. Such a model requires sophisticated IP management methodologies, but these are not a barrier to success.

28. Linked to the above is a coordination role for such a Centre, linking all the centres of excellence in the field, whether in specialist centres, industry or academia and helping develop specialisms whilst avoiding duplication and wasting of national resources. The host University should take on the explicit role of bringing the national academic capability relevant to the Centre to bear, thus ensuring the most effective connectivity. Such a model must not reduce academic activity in the field to only that at the host institution, the maintenance of a diversity of academic research groups in institutions across the UK is vital as a feedstock into such Centres.

29. Industry direction and demand is key and the role of an active and engaged industry steering group is essential. Experience in the UK and elsewhere shows that such Centres only fulfil their mission if they are driven by business demand linked to appropriate absorptive capacity. We would advise that the role of a research intensive University as the neutral host/’owner’ for such a centre is a key factor. This does provide some challenges for host Universities but leading UK Universities and their leadership are now sufficiently entrepreneurial and business like to take on the challenges. We do recognise that this is yet to be universally accepted by leading companies as an essential component.

30. Finally there is an essential skills related component. Without associated high level skills development UK industry will not be in a position to deploy the outputs of such a centre effectively and will not have the appropriate absorptive capacity to maximise benefits for the UK economy.

31. A key component currently missing from the NCC model, but which we believe would be of great value for industry partners and would accelerate the rate of development and adoption of technology would be a core revenue research budget for a Centre, focused on the key common industry level challenges through a core research programme with shared access to intellectual property developed. This is provided within the Fraunhofer model and in US exemplars but is lacking in most current UK Centres.

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

32. The Government has proposed that the Technology Strategy Board should undertake the development and co-ordination of the network of Centres. This is a difficult but essential role and we support this recommendation. For it to be effectively delivered requires that the TSB is adequately resourced and we question if sufficient funds have been allocated for this demanding role and to adequately fund a network of TICs.

33. One area that we would like to see developed rapidly is that of the branding for TICs, which will also be crucial, in order to raise their and the UK’s international profile and help provide global competitive advantage.

34. The Centres themselves must play a major role in the co-ordination and networking of research in their specialist areas, linking with centres of excellence in academia and elsewhere, as well as research funding bodies such as the Research Councils and playing a role in co-ordinating and maximising the UK role in linked EU research programmes.

35. It will be imperative for TICs to work together with existing effective public sector research establishments, and relevant university based research centres, forming partnerships and networks as appropriate, so as to ensure synergies are generated and duplication of effort is minimised in the generation and application of research for the benefit of industry and the UK economy. Existing centres that are effective and well regarded have well-established relationships with industry and considerable activity focused on the adoption and commercialisation of research outcomes.

36. We conclude that there is a serious risk that an imposed TIC system (of competitors), which is not sensitive to the existing effective and sophisticated environment occupied by such centres could cause considerable and long lasting damage to the national innovation infrastructure.

University of Bristol

02 December 2010

Written evidence submitted by PraxisUnico (TIC 44)

Introduction 1. PraxisUnico welcomes the government’s commitment to exploring new ways of working to make knowledge transfer even more effective and its desire to invest further in strengthening effective links between academia and industry. Nevertheless, there is a danger that we may be returning to the “nothing works, we need a big fix” approach and ignoring the many successes that have been achieved over the last decade. New initiatives need to be built on existing successes, rather than carried out in isolation.

2. The most successful of these initiatives are firmly embedded both in academia and in industry. Anything that is detached from either of these is, we feel, unlikely to achieve the aim of enhancing knowledge transfer for the good of the economy.

3. We believe that there are lessons to be learned from Fraunhofer institutes, but that much of the structure is not compatible with the way UK research and innovation has evolved. Structures must fit the UK environment. It is critical that we build on the substantial success of university knowledge transfer, developed over the last ten years, to remain competitive in the global knowledge economy.

1. Background on PraxisUnico PraxisUnico makes this submission as a key representative body of the UK’s research and development and technology transfer profession. PraxisUnico was formed in 2009 from two separate organisations ‐ Praxis (committed to training for technology transfer officers in universities and research centres) and Unico which was a membership organisation including universities and PSREs (Public Sector Research Establishments). PraxisUnico has over 2600 members from 117 universities and research organisations and 52 commercial concerns, patent agents and intellectual property lawyers are associate members. PraxisUnico holds an annual conference and has delivered professional training to around 2500 individuals from 40 countries. PraxisUnico makes this submission having consulted its board and members.

Although originally focused solely on “technology transfer” (commercial deals involving intellectual property generated by universities), PraxisUnico members are engaged across the whole range of knowledge exchange activities, promoting the transfer of knowledge in all its forms across the boundaries of universities and into society.

2. Technology and knowledge transfer PraxisUnico is committed to improving the contribution that universities and PSREs can make to the economic and social well‐being of the UK. From the Higher Education Business and Community Interaction Survey (HEBCIS), carried out annually by Higher Education Funding Council for England, the visible contributions of universities have increased considerably since 2003/04 (see Table 1 below).

Table 1

Table of UK key data from the survey

Indicators from the HE-BCI survey (all UK) Academic year

% UK HEIs that provide: 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Enquiry point for SMEs n/a 89% 90% 91% 91% 93% 91%

Short bespoke courses on client's premises n/a 78% 80% 84% 83% 88% 83%

Distance learning for businesses n/a 66% 66% 68% 68% 68% 74%

Required contracting system for all consultancy n/a 66% 68% 73% 75% 75% 71%

Income from all sources (£000,000,000s) 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Collaborative research 0.614 0.587 0.645 0.703 0.713 0.732 n/a

Contract research 0.655 0.683 0.705 0.823 0.854 0.937 n/a

Consultancy contracts 0.239 0.248 0.262 0.303 0.343 0.332 n/a

Facilities and equipment related services 0.091 0.084 0.097 0.098 0.106 0.110 n/a

CPD 0.248 0.306 0.310 0.369 0.393 0.383 n/a

CPD and CE 0.087 0.112 0.126 0.141 0.157 0.176 n/a

Regeneration and development programmes 0.245 0.230 0.246 0.279 0.244 0.172 n/a

IP income 0.043 0.063 0.063 0.061 0.068 0.124 n/a

Outputs from UK HEIs 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Patent applications 1,308 1,648 1,536 1,913 1,898 2,097 n/a

Patents granted 463 711 577 647 590 653 n/a

Formal spin-offs established 167 148 187 226 219 191 n/a

Formal spin-offs still active after three years 688 661 746 844 923 982 n/a

Source: Higher Education Funding Council for England, Higher Education – Business and Community Interaction Survey (2008‐09)

The invisible contribution, including the very important contribution made through the development of highly skilled individuals, will make the contribution far more significant.

Universities and PSREs undertake technology transfer for five principal reasons: • To see the fruits of research activity transferred into practice; • As a service to individual researchers; • To fulfil their commitment to public sector funders and charities which require universities and PSREs to generate a return on the investment of public and charitable funds; • As part of their public benefit mission as universities • To generate uncommitted funds for their institution for further investment in teaching and research.

Although it is a relatively small part of knowledge transfer activity undertaken by universities, a notable success has been the generation of new businesses. Since 2003, 1138 spin‐out companies have been formed (see Table 1).

Investment in university technology transfer in the UK predates the efforts to develop knowledge broader knowledge transfer for some years, so it might be expected that the hard commercial transfer effort has borne more obvious fruit. The sector has also engaged in significant and sustained efforts to professionalise the broader knowledge transfer community with the intention of ensuring that all universities deliver the benefits of business and community interaction in ways appropriate to their individual academic mission. PraxisUnico firmly believes that with continued effort we can build on past progress so that an even more significant contribution can be made by the research community to the economic and social well‐being of the UK.

PraxisUnico members have been at the forefront of change in the world of knowledge transfer in the UK. We welcome the government’s commitment to exploring new ways of working which would make knowledge transfer even more effective, but we would caution that new initiatives need to be built on existing successes, rather than carried out in isolation.

3. This submission seeks to answer the questions raised for the inquiry into Technology Innovation Centres

3.1 What is the Fraunhofer model and would it be applicable to the UK? Fraunhofer is a state‐subsidised organisation comprising around 60 autonomous institutes providing applied research and technology development in Germany and around the globe. Some is delivered “privately” in response to market demand and some receives public funding in recognition that the market will not pay for it. Of their €1200m revenues €452m are received from industry so there is a significant government subsidy. Fraunhofer is structurally separate from the university system, which is much weaker in terms of both research quality than in the UK. They are very flexible and are free to develop their own scientific direction.

The need to raise the ability of the research base to deliver applied R&D and technology development activities exists also in the UK. However, the knowledge base which is required to underpin such an effort in the UK resides in the universities, not in separate institutes. The UK has invested in enabling universities to connect better with industry for many years, with a great deal of success. Any attempt to import the Fraunhofer model in a way which was detached from our existing, university‐based research system is, unlikely to succeed.

3.2 Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective? There are many institutes and units within UK universities that deliver applied research and technology support within UK universities. Some are funded by individual companies to meet their bespoke requirements (such as the various Rolls‐Royce University Technology Centres in a number of universities) to institutes which aim to meet sector‐wide requirements (such as the Structural Genomics Consortium in Oxford). These are generally effective as they are designed by knowledgeable and enthusiastic individuals, usually within the academic institutions themselves, to meet a particular need identified within a company or sector.

Rather than looking solely at large institutes, however, it should be noted that most if not all universities within the UK have developed bespoke units delivering R&D and services to someone. Often these are niche, and small scale (motion capture for the computer games industry at Bournemouth or surface

analysis at Oxford). They can also be very large scale – the Warwick manufacturing group employes 300 staff in state of the art buildings.

The creation of new institutes should be seen as part of, not separate from, the rich landscape of knowledge transfer activities that has been created by universities over the last decade.

3. 3 What other models are there for research centres oriented toward applications and results? As noted above, institutes with such a remit exist on a variety of scales and models, suiting themselves to the needs of their own industry and region. We believe that there are great dangers in looking for “one size fits all” solutions. There is a role for large institutes, but a collection of smaller institutes connected through a smaller university might also be fit‐for‐purpose. The Warwick Manufacturing group is an excellent example of a large applied research organisation within a university. A different model again was described by the Prime Minister in his speech of the 4th November outlining the creation of the East London Tech City, a network of smaller scale activities in which local universities are intimately involved.

The same speech outlined an important principle: “This teaches government some simple things. Go with the grain of what is already there. Don’t interfere so much that you smother. But do help out wherever you can.”

The government’s vision of the East London Tech City is an example of the level of government intervention required to encourage research and development, knowledge transfer and growth. This technology centre will bring high growth start‐ups, universities, investors and global companies together with the infrastructure and services to support technology businesses.

Whatever model is adopted in the UK must build on what has already been built. We would also urge caution over the assumption that any institute should be focused on a particular technology or business sector. The committee should also consider the possibility of broadly‐based mechanisms covering a variety of technologies and applications which instead map on to the expertise footprint of the UK’s great universities.

A model under much discussion at the moment is the hub and spoke approach to technology transfer. When applied to the type of knowledge transfer anticipated in the TICs, this is also relevant.

A very effective and long standing hub is Cancer Research Technology (CRT). CRT acts as a hub for University recipients of funding from both Cancer Research UK and Leukaemia and Lymphoma Research. CRT was established in 1982 and works with 30 universities across the UK. CRT has built up a major specialism in the development of cancer therapies and diagnostics and now has agreements in place with six other cancer charities and a major European research funder. CRT works as the sole commercialisation partner of an Australian Government supported research centre. It also has a wholly owned subsidiary in Boston, USA. CRT has run its own drug discovery programme since 1994. At the present time CRT has 327 projects in development of which 119 are developed in partnership. CRT has the second highest number of licensing deals in oncology ahead of Roche, GSK and Genentech. Since 1982 CRT has been involved in 22 new ventures. Unless universities have substantial capacity for technology transfer the possibility of them having a cancer specialist is limited. CRT also has dedicated funds that it can commit to the early stages of technology development in line with the case made above. CRT’s primary goal is to effect the cancer research into effective treatments for the benefit of patients.

CRT works very closely with its partner universities, with emphasis on partnership. A hub and spoke model often implies a senior and junior component, but that is something the CRT model seeks to avoid. CRT has significant strengths in taking technologies into early stage clinical trial and university Technology Transfer Offices (TTOs) have skills in working with the academic community to identify research with value as a potential application. In recent developments, trialled at Newcastle University, CRT seconds a member of their staff into 2 research institutes and 2 universities. The secondee then has responsibility to ensure that they look after the interests of both the ‘hub’ and the ‘spoke’. This has been well received not just by the institutions, but by the researchers themselves.

3.4 Whose role should it be to coordinate research in a UK‐wide network of innovation centres? We believe that the addition of a new structure to the many we already have would be a mistake. Both the Technology Strategy Board and the Research Councils should be involved in the management of the process by which any institutes are created, not least as a means of ensuring that they are accountable for the way they spend public money without the need to create new bodies. The management of the institutes should be relatively free to make decisions based on new developments in science and technology in order to remain at the cutting edge of innovation. In order to ensure this, the management of institutes must include both academic and industry representatives, and not be dominated by either one.

3.5 What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? PraxisUnico notes the response of the Health Protection Agency to the effect of Fraunhofer‐type institutes on the work of Public Sector Research Establishments. In addition, a lot depends on whether the process of government procurement of research can be reformed to truly deliver value both to the government and to the research base.

4. Further observations

4.1 The Importance of Fundamental Research Universities have always been committed to the advancement of knowledge through research. In recent years, universities have been expected to demonstrate more directly their contribution to economic and social good. Although the expectation is relatively new, the activity associated with it has been growing for a long time and application is frequently seen as the logical extension of research activity. It is important to ensure that the new emphasis on knowledge exchange is not at the expense of the UK maintaining its leading international position in fundamental research across most disciplines. The answer for most countries is both strong fundamental research and increased innovation activity, not either one or the other. The two are mutually reinforcing, not mutually exclusive; blue skies research has a habit of leading to the disruptive leap technology or process that defines industrial change for some portion of the UK economy. This will continue to be the case, and should continue to be encouraged and supported.

Dedicated public funds to commercialisation and societal engagement have played a critical role in assisting this change. Public funds committed to technology transfer have increased (for example, the annual contribution from HEROBC/HEIF in England grew from £20 million per annum in 1999/2000 to £150 million in 2010/11 and this has played a critical role in delivering a more professional system. It would be a mistake to believe that all such funds are wholly dedicated to technology transfer (in the sense of formal licensing of IP and creation of new companies) as most of the funding supports a much broader range of knowledge exchange activity.

4.2 The nature of UK investment in business R&D1. The UK invests 1.9% of GDP in research and development of which the private sector provides 0.9% and the public sector 0.6%, with the remainder made up of foreign and non‐profit investment. This compares to 2.54% in Germany and 2.02% in France. Not only is UK investment in R&D lower than many of our peers it is highly skewed towards particular sectors. In many research disciplines where the UK is internationally competitive the absorptive capacity of the industrial base is very low. Recent work by NESTA2,3has underlined the key challenges in re‐balancing the economy and targeting business support. In order to grow the economy, we cannot rely on existing large companies to increase their R&D spend (in the current climate much is being cut or off‐shored. Instead, interventions must actively encourage the growth, or move to the UK, of new knowledge intensive firms to raise the R&D spend and absorptive capacity of UK industry overall.

Any policy developments need to be mindful of the absorptive capacity of UK industry. Publically funded business support should be focussed at growth oriented businesses and technology companies. In consulting the private sector the Government should ensure a voice for the experienced members of the private sector from small and medium sized technology oriented businesses as well as consulting larger multi‐nationals.

5. Summary PraxisUnico welcomes the desire of the government to invest further in effective links between academic and industry. We believe that there are lessons to be learned from Fraunhofer, but that much of the structure is not compatible with the way UK research and Innovation has evolved. Any structure needs to be intimately involved with the UK’s world‐leading research base and knowledge exchange structures, centred around the university system. Care should be taken that TICs are designed in a way to stimulate the growth of UK industry, including by encouraging new entrants, rather than solely to provide a subsidy to incumbents.

Sectoral specificity of Technology and Innovation Centres will be critical if the new policy is to make a significant contribution. It is also in those areas where the absorptive capacity of industry is low that the

1 UNESCO data, 2008 2 Rebalancing Act NESTA REPORT June 2010 Shantha Shanmugalingam, Ruth Puttick and Stian Westlake 3 The Vital six per cent NESTA REPORT September 2009

role of spin‐out company development can be a significant factor. Policy developments will need to consider very carefully the development of the appropriate skill sets to employ within T Innovation Centres. The teams will need to be experienced in the middle levels of technology readiness. It would be a mistake to believe that those skilled in effective decision‐making at early or late technology readiness levels are equipped to manage these challenging areas. This skill set is in short supply in the UK as a consequence of the low volume of R and D intensive businesses. The TIC programme should be combined with a major skill development programme to ensure that the staff recruited are appropriately equipped.

Prepared on behalf of PraxisUnico Board and Committees Dr Douglas Robertson, Chair Elect, PraxisUnico and Director of Business Development & Regional Affairs, Newcastle University Dr Phil Clare, Chair, PraxisUnico and Associate Director, Research Services, University of Oxford

Declaration of Interests

Dr Douglas Robertson and Dr Phil Clare are directly involved in the operations of university research commercialisation functions.

November 2010

Written evidence submitted by N8 Research Partnership (TIC 45)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK? 1. The Fraunhofer Institutes perform applied research and technology transfer in specialised areas, for example biomedical engineering and applied polymer research. They focus on applied research (TRL 3-8), and are funded through a combination of core public and private contract financing. 2. There are over 50 Institutes in Germany, and each has autonomy over the research programme and finances. The Institutes are located in key industrial regions in the country, but are not geographically restricted, and serve clients on a national and international basis. They have strong relationships with their partner universities. 3. The starting point for the UK should be the policy objective: maximising the translation of scientific ideas and our world class science base into new industries and commercial opportunities. 4. The Fraunhofer model is one policy response to serve this objective: creating specific, physical centres focused on technologies or sectors to bridge the gap between discovery and commercialisation. 5. This model could be developed in the UK, involving significant core funds to create new organisations, which would then be supplemented by public and private contract research funding. This approach may be result in an infrastructure which is detached and isolated from the UKs world class research base. 6. Other models to serve the policy objective could include creating critical mass and a concentration of expertise through; - Coordinating a virtual network of research centres / expertise that currently exist in RTOs and universities - Enhancing university based translational research centres, to ensure the co-location of research activity along the technology readiness scales 7. It is important to take account of the context of national research and innovation systems. The decentralised and autonomous model of the Fraunofer Institutes reflects the nature of the dispersed innovation, governance and political systems in Germany. It is important that the design of any national Institutes or Centres in the UK, are context specific to the national innovation system and the key actors within it - large companies, small businesses and research intensive universities.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 1. Firstly, there are centres operating in the UK that are effective in undertaking translational research and development. Examples are cited in the Hauser report, including the Advanced Manufacturing Research Centre, co located with leading materials and metals research expertise at Sheffield University. 2. It is clear that Centres are most effective when there is a co-location of research and development activities across technology levels 1-3 and 4-7 (see the Hauser report page 5). This avoids the artificial and organisational separation of fundamental research from development and ensures cross fertilisation and maximisation of spillovers from a research portfolio which is addressing technology challenges at a basic and applied level. 3. As the UK has effective translational research centres that exist, policy objectives in this area could be better served by building on existing capability where best practice exists for research organisations and universities to collaborate with industry. Setting up new research institutes may inadvertently create new organisational boundaries, and the models that are developed need to ensure we maximise existing capability, relationships and best practice 4. Secondly, for translational Research Centres to be effective in achieving a step change in commercialisation, they need to be embedded and operate within a broader context. This would incorporate large scale collaborative R&D, with the engagement of actors in the supply chains; and provision of collective business services. The link and alignment to the proposed Growth Hubs is critical, while the mix and engagement of key actors- large and small business, across supply chains, plus linkages to universities and skills providers is critical in ensuring the effective translation of research.

3. What other models are there for research centres oriented toward applications and results? 1. The N8 universities have worked to implement alternative models, aligning “best with best” researchers from across number of institutions to create multi disciplinary teams of critical mass and scale to work with industry. 2. This maximises capability and creates a “premier league” of UK research assets, to work with industry partners on a range of research challenges, creating the model of a “virtual corporate lab” for large and small businesses. 3. Our universities are involved in a number of these Centres including · Advanced Manufacturing Nuclear Research Centre – Rolls Royce, Sheffield and Manchester (2 physical sites and virtual network) · N8 research centres – Regenerative Medicine and METRC – have maximised research capability and expertise wherever it is located across the North to allow companies to access multi disciplinary teams through a single point 4. This is potentially a more efficient and effective model as it is focused on maximising the capabilities that exist and supporting the flow of ideas and people rather than establishing new organisations and structures which inhibit these spillovers and artificially separates research at TR1-3 and 4-7. These Centres operate with basic science as a key driver of technology, supporting the cross fertilisation of ideas through a fluid fundamental and applied research portfolio. 5. To support innovation and application of basic research, it is important to recognise that a rigid linear model of innovation will inhibit the flow of people, ideas and resources. Alternatively focusing on our existing assets and capabilities, will require minimal additional investment in new structures and process, and focuses resource on enhancing the world class research and tech transfer capabilities that are already in place. 4. Whose role should it be to coordinate research in a UK-wide network of innovation centres? 1. The coordination of the network of Centres through Technology Strategy Board would seem sensible route and maximising existing delivery infrastructure and networks that have been created. 2. The governance of the Centres should involve the range of stakeholders on a Management Board including large and small businesses, universities and international partners.

3. Both the TSB and the Centre Board should oversee a well developed and resourced evaluation system which includes standard reporting methods as well as client surveys, international reviews and technical specific studies that act to both promote and manage the Centres. 5. What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

1.The PSRE need to be effectively connected to the network of TICs (and growth hubs) or they may become separated from the technology direction set by Government and essential to the recovery of UK business.

2. Too narrow a technology focus for the TICs could lead to less investment in broader (enabling) research and innovation.

3. An inclusive collaborative approach (virtual) is essential to ensure that significant public investment in research is successfully translated into commercial success.

Declaration of interests

N8 is a group of the eight most research-intensive universities in the North of England: Durham, Lancaster, Leeds, Liverpool, Manchester, Newcastle, Sheffield and York. The partnership can access significant research capability – together the N8 universities employ over 8,200 academic staff and generate more than £650m in research income per anum. 90% of the research at N8 universities is rates as international quality or above (RAE 2008). Several of the examples detailed in the report by Dr Hermann Hauser feature universities in the N8 partnership.

Sarah Jackson Director N8 Research Partnership

02 December 2010

Written evidence submitted by Maddison Product Design (TIC 46)

Technology Innovation Centres

How a ‘Designer-In-Residence’ raises the value of Technology Transfer projects

1 With David Maddison’s appointment as ‘Designer in Residence’ at Manchester University’s Technology Transfer Office (UMIP), we present a model that can be used to improve the commercialisation value of IP from university research.

1.1 The recent economic crisis in the UK has focused minds on the need for new high technology businesses to help build national prosperity and decrease economic dependency on the financial sector.

1.2 There is no doubting the quality of the UK research capability, but the process of commercialising this research to achieve maximum value does not always work as well as it could. There can be a disconnect between good research and the commercial development that will bring technology breakthroughs successfully to the market.

1.3 The government plan to back the introduction of ‘Technology Innovation Centres’ should boost opportunities for the hundreds of technology ‘Start Ups’ attempting to ‘spin out’ of University Tech Transfer companies throughout the UK. Technology Transfer is a complex business involving many highly developed skill sets coming together as a jigsaw to complete the process. Our experience over the last five years working with Oxford, Manchester and others clearly shows that strategic design thinking in the physical sciences has been a missing piece of that jigsaw.

1.4 Maddison is a product design company which has been developing medical, consumer and healthcare products for over twenty years. Possessing a blend of user insight, design and engineering skills we bring a wealth of experience to bear on a problem. The company has a long track record of working with medical and high-tech spin-outs from UK universities, and this has been crucial to the success of significant start-ups, such as Vivacta and Zilico.

1.5 In 2006 ISIS, the technology transfer office (TTO) of Oxford University, appointed David Maddison to mentor three new physical science technology projects to assess the value of strategic design input. Over that year he met regularly with each team and helped them to refocus their efforts and develop their ideas. Since then Geni-e Meter has successfully ‘spun out’ in record time and raised several million pounds in funding. David Churchman, the ISIS project leader said of the experience: “We’ve learned a lot and we have a much better idea of how design can make a difference and generate real returns for academia plc.” The process was shadowed by the Design Council and helped form the template for their programme ‘Innovate for Universities’.

1.6 Maddison already had a successful development relationship with Manchester, helping them to develop a number of early stage technologies through ‘Proof of Principle’ to a commercial stage. Encouraged by the successful experiment at ISIS, Clive Rowland, UMIP’s Chief Executive, and David Maddison discussed how strategic design input could be incorporated into the Technology Transfer (TT) process at Manchester. In June 2010, David Maddison was appointed ‘Designer in Residence’ at Manchester University’s commercialisation company, UMIP, and at MIMIT, (Manchester Integrating Medicine and Innovative Technology).

1.7 Of the many skills that interact in the technology commercialisation process, strategic product design input is novel. However, experienced product designers have a surprisingly broad knowledge of the issues affecting the translation of technology from the research laboratory to the commercial world. This spans not only the IP, research and development aspects but also, most importantly, end user focus and the need to create an early technology vision for the team and potential investors.

1.8 The ‘Designer in Residence’ role at Manchester is unique and still in its infancy, but we can show that this approach is of great benefit to the TTOs working to commercialise UK technology.

1.9 Our model is to run a regular one-day clinic where TT managers, academics and other project team members can introduce their project, its background, objectives and the issues affecting its progression. This allows the designer to gain a quick overall picture and understand development-related issues that will affect how the project is progressed and the team’s ability to raise funding. Immediate feedback and an interplay of ideas can lead to immediate insights and opportunities. Over a series of regular meetings the designer can work with the team to develop ideas and identify challenges.

1.10 Perhaps an unexpected outcome of this process at Manchester is the value to the TT Manager of being able to hold totally unbiased development discussions on areas that are normally outside of the core team’s skill set.

1.11 No two projects are the same and the outcomes and actions agreed by the team vary substantially. However, through our work we have seen how the following strategic design support can improve the commercial outcome. • Understanding the ‘end user’ • Explore barriers (or paths) to adoption • Check against reality • Create an early vision • Outline a development plan • Assess commercial viability.

2 Understand the user

2.1 Strategic product designers have a surprisingly broad knowledge of (and empathy for) ‘end users’, be they patients, consumers or professionals. This is due to constant interface with these groups during the research and the product testing process. Often research groups need help to understand (or even to realise that there is) a process or environment in which the technology will need to operate. For example, a point of care diagnostic device will need to fit into the environment of a doctor’s surgery. Where will it be stored? Can perishable consumables be kept in a fridge? Will the disposable element need special handling? Can we expect nurses to remember how to use the device if they haven’t used it for three months?

2.2 A common epiphany for our research groups is to realise that the person the device or service needs to engage with is not just the end-user. Often there is an array of stakeholders, in particular the gatekeeper, who control the process of procurement, be they parent, administrator or supervising clinician.

3 Barriers / paths to adoption

3.1 Even the most beneficial or innovative technology can be stymied if potential barriers to adoption are not addressed. For example, new products or pharmaceuticals in Europe face a bewildering patchwork of use and procurement practices. Adoption practices vary enormously from country to country. These need to be understood and addressed if a product is to be broadly successful.

4 Reality check

4.1 Anyone can become blinkered during intensive development and academics/researchers can certainly miss important checks like anyone else. With our knowledge of technology, manufacturing, user interface, etc., designers have a good skill set to appraise technologies and spot opportunities or identify pitfalls.

5 Visualisation

5.1 Experience at ISIS and UMIP has shown that the research team can have differing views on the nature of the product they are aiming for. Developing a Vision of the technology helps the team to agree a focus, and allocate resources and finance accordingly.

5.2 Visual communication aids are a crucial tool for a start-up team to explain the concept and build confidence in both the efficacy of the system and the capabilities of the team. In our experience this exercise has the dual benefit of focusing the ideas of the team on a ‘tangible’ representation of the final product, as well as creating a vehicle to communicate the concept to external groups such as potential users and investors.

5.3 The general rule is, that the closer to the market a technology appears, the greater the licence or ‘spinout’ value. So design can be used to allow a business plan to ‘punch above its weight’ by showcasing the technology in the most favourable light.

6 Development plan

6.1 The commercial product development process is understandably poorly understood by many academics. It has been our role to guide groups through the steps necessary to turn a laboratory demonstrator into a commercial product. A development proposal which demonstrates an understanding of realistic development steps will enhance the credibility of a Business Plan and raise confidence amongst prospective funding partners.

7 Commercial Viability

7.1 Most of a designer’s work with the technology transfer process is in some way related to the technology’s commercial viability. This might include such considerations as:

• Can the product be manufactured, and at the right cost? Conventionally, a technology will be developed in some detail so that components can be specified and costed. With very early stage technology you have to get a ‘best estimate’ before incurring the costs of reaching product specification. • Is it better (from the users, or market, perspective) than the competition? Some solutions can be overly complex, almost intended to showcase a technology, rather than solve a real problem.

7.2 It is often the case that designers can also spot other commercial opportunities for the technology. We frequently make connections between clients and researchers, who we feel may have synergy.

8 Summary

8.1 Our unique opportunity to interact with tech transfer at two leading UK universities over the past few years convinces us that the small step of incorporating strategic design early into the commercialisation process has exponential benefits.

9 Declaration of Interest

9.1 Through David Maddison's work with a number of university tech transfer offices, we have proven that the UK commercial design industry can add important value to tech transfer. We therefore believe it is imperative that experienced commercial product designers be included within the early stage development of the Technology Innovation Centres. David Maddison is uniquely qualified and available to help with this process and can offer advice.

David Maddison Managing Director, Maddison Limited and Designer in Residence UMIP/MIMIT (University of Manchester's commercialisation company and Manchester: Integrating Medicine and Innovative Technology)

December 2010

Written evidence submitted by the Royal Society of Chemistry (TIC 47)

Technology Innovation Centres

The Royal Society of Chemistry (RSC) welcomes the opportunity to respond to the Science and Technology Committee’s consultation on Technology Innovation Centres.

The RSC is the largest organisation in Europe for advancing the chemical sciences. Supported by a network of 46,000 members worldwide and an internationally acclaimed publishing business, its activities span education and training, conferences and science policy, and the promotion of the chemical sciences to the public.

This document represents the views of the RSC. The RSC has a duty under its Royal Charter "to serve the public interest" by acting in an independent advisory capacity, and it is in this spirit that this submission is made.

1. What is the Fraunhofer model and would it be applicable to the UK?

1. The Fraunhofer Institutes are a network of independent, not-for-profit Technology Innovation Centres (TICs) in Germany. They operate with the aim of carrying out applied research for use by both public and private sector, developing technologies from the research stage until they are ready for market. This area is sometimes referred to as the intermediate sector due to the space that it occupies between basic research and commercialisation. This focus aims to drive areas of economic growth, as well as benefit wider society.1 They are funded mainly through contract research; in 2009, approximately a third of their funding came in the form of base funding from the government. The remaining two-thirds is equally split between public contract research (Federal, regional government and EC) and private contract research (industry).2

2. This model has evolved to generate a network of institutions, which serve both industry and government by providing technological solutions and facilitating knowledge transfer. The Institutes are grouped into a series of Networks and Alliances under broad themes. The central seven areas are Information and Communication Technology, Life Sciences, Materials and Components, Microelectronics, Production, Lights and Surfaces and Defence and Security.3 This system allows for collaboration on the basis of shared technological outputs, as opposed to the narrow confines of subject-driven research. The extensive internal reviewing of the Networks ensures that this structure is constantly revised, as the research landscape progresses. It also allows for the identification of gaps for the foundation of new institutions, in response to market growth areas.

1 Profile of the Fraunhofer-Gesellschaft 2 Fraunhofer-Gesellschaft Annual Report, 2009 3 Structure and Organization – Fraunhofer-Gesellschaft

3. This method of organisation is advantageous to industry, particularly in comparison to traditional industry-academia collaborations, as it ensures that customers have access to an entire network of researchers in their area of interest, rather than a single institution. The Institutes actively co-operate to provide solutions to large-scale projects. The contract research carried out for industry is of particular value to small and medium enterprises (SMEs) who form half of their industrial customer base.4 The availability of this service is often critical for the growth of small companies who have limited internal research capability.

4. The Fraunhofer governance system involves a complex series of boards.5 Ordinary membership is open to individuals and organisations that make up the Assembly of Members. The senior governance bodies contain representatives elected by the assembly, as well as representatives from the management boards of the institutes, federal and regional government. These bodies set the overall scientific and business agenda of the organisation autonomously, but they do take account of the role of the network in the national innovation framework.

5. The Fraunhofer Institutes follow a technology-focused model. Their approach of carrying out research ‘directly aimed at promoting industrial performance’ enables businesses across a range of sectors to bring new technologies to market. This system could be applicable in the UK. The UK has a strong research base, yet falls short in terms of translating this into outputs of economic benefit.6

6. The Hauser report on ‘The Current and Future Role of Technology Innovation Centres’ in the UK recommended that a network of TICs could be created to bridge this gap by carrying out research with the specific aim of generating economic benefit.7 The role of SMEs has been recognised as essential in the growth of the UK economy.8 A network of TICs would support the growth of SMEs by providing the expertise, research infrastructure and specialist knowledge that many small businesses may not have in-house. These types of specialist research centre will also play a pivotal role in meeting future skills challenges such as the low-carbon economy.9

4 International Comparison of Five Institute Systems – T. Astrom, M. Eriksson, L. Niklasson, E. Arnold, December 2008 5 Statute of the Fraunhofer-Gesellschaft, Revised 2003 6 A Vision for UK Research – Council for Science and Technology, March 2010 7 The Current and Future Role of Technology and Innovation Centres in the UK, H. Hauser, March 2010 8 Backing Small Business, BIS, November 2010 9 RSC Response to Meeting the Low Carbon Skills Challenge, June 2010

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

7. The UK has a large number of Research and Technology Organisations (RTOs). Some of these were originally government-funded Research Associations, which evolved, as funding mechanisms changed. A number of these are now part of the Association of Independent Research and Technology Organisations (AIRTO). These organisations aim to provide the knowledge and skills to enable the development of new technologies. Like the Fraunhofer Institutes, RTOs serve both industry and government. A recent Oxford Economics report commissioned by AIRTO highlighted the economic benefits of RTOs within the intermediate sector.10 The report highlighted the sector’s ability to take research and transfer this to commercial applications, directly contributing £1.2 billion to UK GDP in 2006.

8. Some existing Technology Innovation Centres (TICs) in the UK follow a model similar to the Fraunhofer Institutes, focussing on specific sectors. For instance, the Centre for Process Innovation (CPI) is an organisation split into two main business units. One is the Sustainable Processing and Advance Manufacturing Centre (SUSPROC), which provides process solutions for industry. The second is the Printable Electronics Technology Centre (PETEC) which focuses on developing early stage research in this area into products for market.

9. Both units of the CPI, like the Fraunhofer Institutes, predominantly carry out contract-based research for industry. It has also benefited from significant government investment at both national and regional level to sustain growth. In 2009, PETEC was awarded £20 million from the Advanced Manufacturing Strategy and One North East Regional Development Agency. The CPI has been effective in delivering its vision to help ‘companies and universities who aim to develop and commercialise new products and processes’.11 Since, it’s inception in 2004, it has established linkages with over 400 SMEs and attracted £473 million in private sector leveraged investment.12

10. In adapting the Fraunhofer model to the needs of the UK, the following issues regarding selection of technology areas need to be addressed: • Who will identify the technology areas? • How will the technology areas be identified? • How transparent will the process be by which the decisions are made and areas identified?

10 Study of the Impact of the Intermediate Research and Technology Sector on the UK Economy, Oxford Economics, May 2008 11 CPI Vision 12 CPI Annual Report, Financial Year 2008 - 2009

11. Identifying and concentrating on key national strengths to improve capabilities in these sectors is one option. The Hauser report has already identified a number of candidate areas of national strength for new TIC networks to focus on, such as regenerative medicine, plastic electronics and advanced manufacturing.

12. Innovative Manufacturing has also been highlighted as a priority area by the Chemistry Innovation Knowledge Transfer Network (CIKTN).13 Knowledge Transfer Networks (KTNs) are a crucial tool in the delivery of the Technology Strategy Board’s (TSB) innovation platforms.14

13. SUSPROC’s focus on manufacturing is important in developing the UK’s existing strength in this highly competitive market. Despite the recent financial downturn, the manufacturing sector is still one of the UK’s key strengths.15 A sector-by-sector analysis showed that the chemicals manufacturing sector is the second largest manufacturing exporter.16 In 2007, this sector directly contributed £17 billion to the UK’s GDP. 17 Of the six other manufacturing sub-sectors identified, four have been specifically identified as downstream industries where chemistry is necessary for their operation.

3. What other models are there for research centres oriented toward applications and results?

14. Other European TICs in Denmark, the Netherlands, Sweden and Norway have models which are similar to the German model of technology-focussed capability. However, unlike the Fraunhofer Institutes which host a range of organisations across different subject areas, these networks all place greater focus on areas of national strength and strategic economic importance.4

15. An alternative model is the challenge-driven model. This approach involves taking an overall challenge area and using a network of TICs to provide input at different stages. This methodology is particularly pertinent in addressing global challenges which will face society in the future. These overarching challenges will require an interdisciplinary approach and require an infrastructure to bring together researchers in different areas.

16. The RSC roadmap for the chemical sciences, Chemistry for Tomorrow’s World, has identified seven key priority areas and the challenges in these areas which face society.18 Chemistry has a vital role to play in solving these and is a key underpinning science in the interdisciplinary approach required to tackle these challenges.

13 Chemistry Innovation - Overview 14 Technology Strategy Board | Our strategy | Innovation Platforms 15 The Future of UK Manufacturing, PriceWaterhouseCoopers, April 2009 16 The Future of UK Manufacturing: Sector-by-Sector Analysis, PriceWaterhouseCoopers, April 2009 17 The Economic Benefits of Chemistry Research to the UK, RSC & EPSRC, September 2010 18 Chemistry for Tomorrow's World, RSC, July 2009

17. The Telemedicine and Advanced Technology Research Centre in the US (funded by the Department of Defence) is an example of a group of research organisations set up with a challenge-driven focus. Their broad aims lie in the area of medical research and this is sub-divided into a range of portfolios. These portfolios include large share of research for the Department of Defence, as well as innovative basic research. The centre uses a network of other organisations to feed into their overall research programme.19 The range of areas covered by the research centre and its partner institutions is extensive and whilst its primary function is to carry out research for the Department of Defence, much of their research has potential application in health research.

18. Challenge-driven TICs in the UK could be used to deliver the TSB’s innovation platforms. As these are based upon specific societal challenges, TICs in these areas could offer a mechanism by which stakeholders in these areas could come together. They would also offer the infrastructure needed to implement technological advances to deal with these challenges. KTNs are vital in constructing networks of TICs to address the challenges identified in the innovation platforms.

19. A common factor between all of the TICs discussed is the strong branding that identifies these networks as leading research collaborators to both public and private sector. A strong brand across a network can stimulate cross-institute collaboration, further reinforcing the overall brand. The Hauser report recommended that any future UK network of TICs should carry a brand recognising a noteworthy UK contribution to the sciences.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

20. Coordination of research in an innovation network is important in ensuring that TICs are effectively integrated into the national innovation system. The Hauser report found that a weakness of the current UK system is the lack of formal coordination between organisations. It recommended that the TSB should be charged with setting up a management board to oversee the activities of all TICs across the UK and devise future strategies for the network. Following the recent announcement of a £200 million investment in a future UK network of TICs, the TSB is in the process of formulating a strategy for this network.

19 Telemedicine and Advanced Technology Research Centre, Annual Report, 2009

21. In creating a strategy, the scale, purpose and evaluation of the system needs to be examined: • Is the £200 million over 4 years proposed by the government sufficient for the number of centres proposed? • What criteria will be used to evaluate the network? • Is the 4-year framework proposed by the government a suitable timescale? • If TICs are to be effective, should the framework not be significantly longer than 4 years?

22. The question of funding is dependent on a number of other factors, such as whether these networks will incorporate existing centres or involve the creation of new centres, thus requiring greater capital expenditure. In determining whether a four-year timescale is appropriate, the evaluation of these networks needs to be explored. Four years may be sufficient to foster initial links between centres and commence research programmes. However, as outlined the Hauser report, a time scale of 3-5 years to achieve commercial viability is too short.

23. The structure for coordinating these networks needs to incorporate a mechanism whereby the input of all stakeholders, including government, academia, research councils and industry can be included. The RSC agrees that the TSB is well-placed to coordinate a UK-wide innovation network. Their Knowledge Transfer Networks (KTNs) can bring together the stakeholders in different technology areas. They are an ideal tool for extending current collaborative networks, as well as ensuring that new networks incorporate the correct means to deliver innovative solutions. In creating new networks, consideration needs to be given to the location of any new centres: • Will there be a regional strategy to locate TICs? • In the absence of Regional Development Agencies (RDAs), will the networks focus on geographic areas of existing excellence? • Will the networks create new geographic areas of excellence?

24. CIKTN currently supports a range of collaborative projects; it is a partner in the Knowledge Centre for Materials Chemistry.20 The KCMC is a ‘virtual centre of expertise’ and brings together a number of establishments in the North-West ‘to drive product innovation in the chemistry-using industries by the application of materials chemistry’. To date, the centre has worked on a range of projects to help deliver solutions for industry, including fuel cells and semiconductors. The success of this existing system can be used to realize a national network of innovation centres that feed into an overall framework.

20 Knowledge Centre for Materials Chemistry

25. Creation of new institutes will provide current Public Sector Research Establishments (PSREs) with new bodies to collaborate with. The core objectives of PSREs and TICs vary slightly. PSREs are concerned with government research in the interests of informing government policy and exploring key areas of research in relation to national strategy.21 Whilst some outcomes from research in these environments do reach the commercialisation stage, this is not the core aim of these institutions. In the case of TICs, their main aim is to take research and translate this into technology for the market.

26. In creating a new elite network of research centres, the role of existing centres needs to be taken into consideration. • Should existing research centres remain separate from the new networks? • If not, how will their work be coordinated with the new networks?

27. It is essential that the knowledge base in existing PSREs is taken into account when formulating new innovation networks. An integrated system that incorporates all stakeholders, including PSREs, industry and academia will be key to advancing innovation. The KTNs are ideally placed to facilitate this. Their role in bringing together industry, academia and government is important in ensuring a cohesive innovation strategy.

The Royal Society of Chemistry

2 December 2010

21 Fifth Annual Survey of Knowledge Transfer Activities in Public Sector Research Establishments, DIUS, November 2009 Written evidence submitted by the Health Protection Agency (TIC 48)

TECHNOLOGY INNOVATION CENTRES

1.0 Introduction

1.1 The Health Protection Agency was established with a prime duty "to protect the community (or any part of the community) against infectious diseases and other dangers to health" (Health Protection Agency Act 2004). In carrying out its prime duty the agency is organised to provide a wide range of services and public health actions that in turn deliver the following key strategic health outcomes:

a) Reduce key infections b) Minimise the health impact from environmental hazards, including radiation, chemicals and poisons c) Promote safe and effective biological medicines.

1.2 These health outcomes are achieved through the detection and monitoring of threats, the provision of appropriate, independent and expert scientific advice and effective public health actions at local, national and international level. The agency generates scientific knowledge through primary and applied research, health surveillance and the analysis of information; it undertakes commercial activity on an international scale that generates knowledge, enhances UK capacity and produces income in support of the agency’s functions; and it converts that knowledge into expert advice and action at the right level to improve public health - from individuals making choices about their own actions to government developing policy.

2.0 Submission to the Inquiry Questions

2.1 Health Protection Agency notes the response of PraxisUnico to the broader issue of technology transfer and innovation in the UK and therefore limits its response to the following comments on Question 5: “What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments (PSRE) and other existing research centres that undertake Government sponsored research?”

2.2 Fraunhofer-type institutes undertake applied and translational research and technology development, providing a link between fundamental research and industrial applications. As such, they undoubtedly make an important contribution, particularly in facilitating the interface between German universities, government and industry in that country.

2.3 As has been noted in a number of reports and ministerial statements, applied and translational research is relatively weak in the UK, and measures to strengthen the translation of research into improved health outcomes and economic benefits would be welcomed by HPA. The key question is whether the formation of Fraunhofer-type institutes would accelerate or distract from this goal.

2.4 By international standards, the UK has relatively sophisticated models for bridging the gap between PSRE research and industry. Although not as well- established or well-funded as technology transfer in the academic sector, most PSREs are encouraged to develop co-operative links with industry and many have benefited from government funding in order to facilitate this, most notably through the PSRE Exploitation Fund, which has been one of the few available sources of proof-of-concept funding and support for technology transfer. Some PSREs have proved highly entrepreneurial, generating start- up companies, embedding business skills within the organisation, and employing innovative business models.

2.5 In addition, programmes such as those funded by Technology Strategy Board (TSB), have encouraged innovative companies to seek partners in the PSRE community, while a number of initiatives within the NHS have sought to build links between the NHS and industry, both as sources and users of innovative technology.

2.6 Despite the progress noted above, funding for innovation, industry liaison, and technology transfer in the public sector has been patchy at best. For example, funding under the PSRE Exploitation Fund will end in March 2011 and it is unclear whether or when this will resume. The funding of such activities within the NHS is equally uncertain. In reality, the main limitations to the ability of HPA to offer a broader range of translational and applied research to services to UK industry are facilities and funding rather than a lack of enthusiasm; emerging biotechnology, vaccines and diagnostics companies find it difficult to meet the full cost of research carried out in highly- specialised facilities such of those of HPA laboratories. Our laboratories themselves are, in some cases, aging and can struggle to meet modern standards.

2.7 Consequently, while we would seek to develop productive relationships with Fraunhofer-type institutes if established in the UK, our concern would be that these could cause further dilution of the very limited funding pool for applied and translational research. Our conclusion is that it would prove more cost- effective to build on existing structures and programmes, in particular selective investment in PSRE facilities that are targeted in order to meet the needs of industry, support for work with high growth innovative companies unable to meet the full economic cost of PSRE research, enhancement of funding for proof-of-concept studies designed to bridge the gap between PSREs and industry, continuing support for TSB initiatives designed to stimulate innovation in small companies, and an extension of programmes designed to facilitate technology transfer from PSREs.

3.0 Declaration of Interests

Health Protection Agency currently benefits, directly and indirectly, from UK government funding for applied research and technology transfer.

Dr David Rhodes Head of Business Development Health Protection Agency

02 December 2010 Written evidence submitted by the National Composites Centre (NCC) (TIC 49)

Technology Innovation Centres

Introduction

1. The National Composites Centre (NCC) welcomes the opportunity to submit evidence to the select committee enquiry on the use of the Fraunhofer model for the creation of Technology and Innovation Centres in the UK. Launched as a result of the UK Composites Strategy, published by the Department of Business Innovation and Skills (BIS) in November 2009, the NCC is presently under construction. The NCC supports the key messages of the Hauser and Dyson reports on technology and innovation centres. The NCC believes that it is critical for UK industry, that TICs are created to facilitate the commercialisation of University research outputs for maximum economic impact. 2. As defined today, the NCC’s remit is to provide industrial customers with access to expert resources and state of the art composite manufacturing facilities at an industrial scale. The NCC will develop new technology based design solutions and rapid manufacturing processes, and be capable of building prototypes and validating concepts. It will be the hub of the UK’s effort to develop and implement rapid composite manufacturing technologies and systems. The NCC will lead the co-ordination of a strengthened network of pre-existing regional centres of composites excellence, and partner with other related technology centres in cognate fields. It will provide direction and focus for engaging industry with fundamental research and building collaborative links with UK universities. The Centre is tasked to contribute to the development and co-ordination of training to support the skills base necessary for applying advanced and specialist composite technologies. As such the NCC’s stated objectives are broadly aligned with the Fraunhofer model of engaging the research base with industrial needs. 3. The NCC is owned by the University of Bristol and operated on behalf of UK industry in delivery of the strategy. Its activities are overseen by an industry-led Steering Board. The present contribution has been prepared by the NCC Steering Board with input from AgustaWestland, Airbus, GE, GKN, Rolls Royce, Vestas and the SWRDA and the University of Bristol. 4. As it is already well aligned with the general principles expressed by Hauser and is in a formative stage, the NCC has to declare an interest in the output of the select committee as it believes it has the potential to be a Technology and Innovation Centre.

Question 1: What is the Fraunhofer model and would it be applicable to the UK?

5. The Fraunhofer-Gesellschaft (F-G) is Europe’s largest application-oriented research organization. It operates as a “community” (Gesellschaft) of more than 80 research units, including 59 Fraunhofer Institutes, at different locations in Germany, with other facilities in Europe, USA, Asia and the Middle-

East. It is a not for profit organisation with a largely devolved organisational structure, with each research unit managing its own operations, overseen by central organisation that ensures strategic orientation on the basis of centralized control mechanisms.

6. The stated key objective of the F-G is to transform scientific expertise into applications of practical utility The F-G develops technology products and processes from basic research up to commercial maturity. Individual solutions are sought in direct contact with the customer.

7. The F-G has an annual research budget of circa € 1.6 billion. Two thirds of this is derived from contracts with industry and publicly financed research projects. One third is directly contributed by the German government as institutional funding. The majority of the 17,000 staff are qualified scientists and engineers. 8. The Fraunhofer Institutes undertake two key types of research:

a. Contract research in the service of industry and government. Each Fraunhofer Institute develops solutions of direct practical value to technical and organizational problems and contributes to the wide-scale implementation of new technologies. b. Application-oriented basic research funded by the German federal ministry of education and research enables the F-G to conduct non-contract advanced research into technological fields which hold high promise for the future. This paves the way for entry into new markets. Expertise acquired through this research by the Fraunhofer Institutes is of course made available to industry through collaborative projects.

9. Companies of all sizes in the manufacturing and service sectors benefit from contract research. The F-G represents an important source of innovative know- how for small and medium-sized companies that do not maintain their own R&D departments. 10. Although research is at the heart of their operation, each Fraunhofer's mission is to ensure successful commercialisation of new technology, and to this end they provide a wide variety of services to assist businesses in the successful deployment of new technology. If necessary, several Fraunhofer Institutes will work together to produce more complex system solutions. The following services can be provided: a. Product development and optimization through to prototype manufacturing b. Development and optimization of technologies and production processes c. Support with the introduction of new technologies, by – conducting trials in demonstration centres equipped with state-of-the-art test facilities – training the customer’s staff on site or at the Fraunhofer Academy – providing support services that extend beyond the initial phases of a new process or product d. Technology assessment support, in the form of – feasibility studies – market surveys – trend analysis reports

– environmental audits – pre-investment analysis reports e. Supplementary services, e.g. – advice on sources of funding, especially for small and medium-sized enterprises – accredited test services, including issue of test certificates 11. The NCC believes that the basic principles of the Fraunhofer centres would be applicable in the UK. For fast moving, high value, growth technologies it is highly beneficial to entrust and empower a knowledgeable organisation, together with relevant industrial partners, with the responsibility for delivering the future technology vision for commercial and economic benefits. Such organisations would need to be able to nurture technologies that show high promise for the future, and also provide direct assistance to industrial customers in successfully maturing technology and providing all the support necessary in deploying it into their products and processes. With appropriate adaptations to UK needs and cultural landscape, the NCC believes that the key principles of the Fraunhofer model are applicable to the UK, TIC’s: a. Providing the opportunity for UK industry to gain access to state-of-the-art equipment and skills which are beyond the means of any one company. b. Providing an environment in which companies and their supply chains can develop ideas, products and IP together and accelerate getting products and services to market. c. Reducing duplication of public and private investment across the UK by aligning PV funds, and public funding through sources such as TSB, RCUK and FP7 and provide centres and programmes of international significance. This could contribute to the UK meeting its stated intention of investing 2.5% of GDP in R&D, registering more patents and attracting more FDI. d. Becoming the focus of effective ‘clusters’ of centres focussed on technologies with natural synergy. 12. A TIC model where users can contribute to a generic programme and share IP (as with the the NCC) provides excellent leverage for the users and encourages collaboration

Question 2: Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

13. The NCC is limiting its response in this section to centres in the fields of high value manufacturing, composites and advanced materials applications as these are where it feels it is competent to comment. The NCC is aware that there are organisations in other technological fields, but is not able to comment on them. 14. The NCC is aware of a number of other research centres in the high value manufacturing, composites and advanced materials applications fields which capture some of the principles defined by Hauser. These include Advanced Forming Research Centre (AFRC) in Strathclyde, the Manufacturing Technology Centre (MTC) at Anstey, the Nuclear Advanced Manufacturing Research Centre (NAMRC) and Advanced Manufacturing Research Centre (AMRC) in Sheffield.

15. Each of these centres focuses on developing new technologies & processes in specific advanced metallic manufacturing fields. AMRC in particular has a successful research record in supporting a number of businesses, notably Rolls-Royce and Boeing, to improve their capability and efficiency in machining of hard metals. In recent years AMRC has branched out into a small number of new fields, including some aspects of composites. MTC is still in formation, with three industrial partners signed up so far. Its focus is on a number of general manufacturing fields, including assembly, net shape manufacture, advanced tooling and intelligent automation. AFRC is a recently opened centre focussing on metallic forming and forging. The NAMRC is a recent announcement (Q1 2010).. NAMRC/AMRC will also have a technology transfer & training centre built alongside to allow a wider service offering to its customers. None of the existing centres provide the breadth of service offering included in the F-G portfolio 16. Each of the above centres is owned by Universities, by means of a variety of not-for-profit constructs. This is differs from the F-G model and brings a number of real and perceived advantages and disadvantages. The close connection with the providers of fundamental research is clearly beneficial as the centres can provide the means to mature University research through to commercial application, whilst at the same time exerting a “pull” on future research to deliver solutions to known industrial challenges and also the connection with the wider HE sector 17. The above centres are considered to be successful within the scope of their offering – each has a strong membership base, with a number of common members across all centres. Each is typically very focussed on technology expertise and offers little of the wider offering provided for within the Fraunhofer model. Although most of the centres can identify SME users, there is rarely a strong engagement with the wider SME community. As a result existing centres are considered by some to be somewhat insular, but this is certainly solvable. They have a largely common approach and philosophy as Rolls-Royce has influenced each of them, building upon the initial model of the AMRC. 18. There are a number of organisations that provide the broader service and business assist elements of technology transfer and commercialisation support, but without providing the core technology development aspect. One example of this is NAMTEC, the National Metals Technology Centre which operates as an independent organisation & provides technical consultancy, strategic analyses, design and simulation services, education and training and assorted business support functions, as well as organising technical conferences and events. 19. The NCC considers its own intended mission to be broadly aligned with the Fraunhofer model, although it is currently only funded for technology development activities. The NCC believes it could offer even greater value if it was supported to offer an extended remit of services addressing the wider issues of skills improvement and technology/knowledge transfer. Focussed on developing a key high-growth technology, the NCC is positioned between University research and Industry. Interest is intense and ranges from materials suppliers, tooling companies, design consultancies, and manufacturers in the automotive, renewable energy, aerospace, marine and construction sectors as well as organisations interested in recycling and disposal. The NCC will be

equipped with state-of-the-art equipment and manned by world class expertise, offering access to resources beyond the means of any one company. The strong interest from multiple sectors, the full supply chain and engagement with Universities offers opportunities for collaborative development programmes that will improve UK capability both within, and across sectors. In the UK there are already a number of other small composite centres, each somewhat localised, either in the companies it supports and/or the technology it provides. These centres are now becoming spokes within the NCC Hub and spoke model. This ensures a coordinated whole UK approach, removing overlaps, filling gaps and providing a more complete and harmonised offering to UK industry

Question 3: What other models are there for research centres oriented toward applications and results

20. The NCC is aware of a number of other UK research organisations oriented to application and results, which at least in part, undertake work in the fields of advanced manufacturing, composites and advanced materials application. There does not seem to be a standard model for these as some are commercial enterprises, others are state owned and run. These include, but are not limited to QinetiQ, National Physical Laboratories, DSTL, Energy Technology Institute (ETI), Motor Industries research Organisation (MIRA), Buildings Research Establishment (BRE), TWI. 21. Globally there are certainly other models, many of which are fully state-owned and controlled. The NCC is aware that a different model exists in the United States, where there is an extensive network of national laboratories such as those of the Department of Energy, Department of Agriculture, and National Institute of Standards and Technology (NIST) of the Department of Commerce, National Aeronautical and Space Administration (NASA) laboratories, Air Force Research Laboratories (AFRL) and many more.

Question 4: Whose role should it be to coordinate research in a UK-wide network of innovation centres?

22. As the mission of the TICs is to deliver and assist in the commercialisation of technology and innovation to meet industry needs, the NCC believes that the TSB should provide high-level leadership and sponsorship of the complete network of centres; setting the overall technology strategy and objectives, defining the governance and supporting the technology visions of each centre both with funding and other mechanisms as appropriate. 23. In some fields of critical strategic and economic national importance, such as composites, a national leadership group should exist. This group should be chaired by a senior minister, be attended by contributors from industry, academia and Government and non-government organisations, and: a. Develop an industry sector strategy and identify key actions to enable it to grasp the commercial opportunities created through global shifts (e.g. environmental improvements created via composites enabled light- weighting )

b. Encourage the development of new industrial collaborations and the development of supply chains and networks c. Encourage and provide direction to the national development of new manufacturing processes and materials (and hence guide priorities for the TIC) d. Monitor delivery of the commitments in the composites strategy. 24. Connection to all relevant UK Universities is critical to ensure a. University-developed technology can be “pushed” through the TIC’s to help ensure a route to market. b. The TICs have a mechanism to create a “pull” that will shape future fundamental research to meet industry needs. 25. If the current concept of University ownership of individual centres is continued, Universities will need different incentives to ensure TICs output meets Hauser objectives, and to be able to clearly identify quantifiable benefits to balance the risks taken in their ownership. Universities are not naturally entrepreneurial or commercial in their culture or operation, whereas these TICs will need an approach which is very focused on new opportunities, growth and commercial risk taking. Understanding the customer, agility, and a focus on delivery of results to industry will be critical and this may produce some tensions with a University ownership based system. 26. Where a number of current centres work in the same topic area, they should be clustered as one TIC, in a “Hub and Spoke model”. It needs to be clear which centre is the hub, and it should be empowered through funding control and other means, to ensure it can operate this way and provide overall leadership of the cluster. 27. It would seem sensible, as for the Fraunhofer model, for centres to manage themselves within a centralised framework which sets high level strategy, overall objectives, defines processes, provides shared services, and undertakes funding/lobbying.

Question 5: What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

28. The effects might be various and hard to predict but in a world of growing focus on value contribution and industrial customers it should be expected that the existing centres would come under some challenge. If existing centres are doing their job effectively and efficiently there is little obvious benefit in establishing and subsidising new competitors; however it is important to bear in mind that the prime merit of the Fraunhofer model is that it is designed to help reinforce the competitive strength of the economy through the work they do for industry. It might be expected therefore that existing public sector research establishments, which are working on close-to-application research, will have to increase and better align their work and output with industry – and in effect start to align themselves with the Fraunhofer model. 29. During the NCC proposal phase, strong support was provided by a number of public sector research establishments, notably DSTL. This suggests that such

organisations would recognise a beneficial relationship with TIC type organisations.

Conclusion and Final remarks

30. The successful Fraunhofer model and the two reports from Hauser and Dyson provide strong cases for creating Technology and Innovation Centres in the UK, as a means to enhance the UK economy through strengthening our industrial competitiveness. 31. If centres such as the NCC were to become TICs and align with the Fraunhofer model it may be necessary to extend the technology scope from the current Technology Readiness Level (TRL) 3-6/7 to at least 7/8 to ensure greater involvement in solving more issues around commercialisation & in production support. Clearly caution would have to be exercised not to contravene state aid issues for work at higher TRL’s 32. It would be important to support, enable and fund the TIC to provide the variety of business assist/supplementary services as defined within the F-G list above in the answers to Question 1. The skills delivery part of this would need to be coordinated with other providers, for example with the HE sector in creating Doctoral Training Centres. 33. In line with the Fraunhofer model it would be essential to put in place the mechanisms for providing the public funds for the nurturing of technologies with high promise but lacking an immediately visible application. These would later be made available (through IP licensing) to a wide range of UK industry.

National Composites Centre

02 December 2010

Written evidence submitted by the Food and Environment Research Agency (TIC 50)

Technology Innovation Centres in the UK

1. The Fraunhofer model has clearly worked well in Germany. It is an applied research organisation jointly funded by state and industry, and segmentsed along particular research lines. Previous attempts to run similar enterprises in the UK through the Faraday partnership schemes have been variably unsuccessful. If the technology innovation centres (TICs) are to be successful industrial engagement on a large scale across several sectors will be needed at a time when many major companies are already stretched. This may mean consortia of companies allied to a specific sector will need to work together to provide adequate industrial funding to support the venture. 2. Several government research laboratories, notably members of the Public Sector Research Establishment (PSRE) sector, such as the Food and Environment Research Agency, already carry out applied research with the backing of industrial sponsors. The framework of partnership between the private and public sectors is therefore already in place and the investment in building and facilities already available for the development of a wealth creating applied research centre. Such an expansion in existing public‐private activity to include more strategic joint research would follow a well tried path and minimize the risk of failure of a new enterprise. The innovation agenda would be best developed as an applied science campus, based around an existing national facility and drawing in groups from Universities as well as private sector research labs. Such an approach is particularly cost‐ effective on well serviced sites which have spare capacity. The development of the Science and Technology Facilities Council Daresbury site has shown the merits of such an initiative. 3. While each TIC should have a sectoral theme, its governance should reflect the business environment in which it operates. While many of the Fraunhofer institutes in Germany are allied to high tech manufacturing and a small number of major industrial players as partners, other UK‐critical technology are better aligned with many smaller companies. In this instance an ‘industry club’ where several companies contribute to develop generic enabling science may offer a better match to UK industry needs. 4. The TIC exercise should attempt to populate sectors which historically the Fraunhofer model does not support. For example, it is interesting that the new joint Fraunhofer Center for Systems Biotechnology opened in October 2010 in Chile as a joint enterprise has a focus on agriculture, aquiculture and the sustainable use of renewable resources, which is quite distinct from the centres operating in Germany. 5. On the basis of mapping onto existing activities in the UK, the TICs should utlize the research facilities present in PSRE government agencies and institutes rather than duplicate their activities on a new site. These national facilities house much of our current strengths in applied research, with redirection of their science mission and the drawing in of innovative university and private sector research preferable to setting up another layer of duplication and leading to unhelpful dilution of existing funding. 6. National governance of the TICs should reside with the directorate of the enterprise, overseen by an advisory board composed of leading industrialists, scientists and representatives from the sponsoring government depts. Oversight of the national exercise should reside with RCUK , with the support Government Chief Scientist’s office.

Declaration of interests:

The Food and Environment Research Agency is an executive Agency of Defra.

Professor Robert Edwards Chief Scientist Food and Environment Research Agency

02 December 2010

Written evidence submitted by the Industrial Strategic Advisory Board of the University of Bristol and Bath University Systems Centre (TIC 51)

Technology Innovation Centres

1. Background and Declaration of Interest

1.1. This submission has been prepared on behalf of the Industrial Strategic Advisory Board of the Systems Centre which is operated jointly by the Universities of Bristol and Bath. The Systems Centre runs an Industrial Doctorate Centre sponsored by the Engineering and Physical Sciences Research Council (EPSRC) with funding support amounting to £8.1M and undertakes research and development in the field of systems engineering. The Centre has established collaborative relationships with around forty industrial partners across all key engineering sectors, and is supported by a further ~£4M in cash and around £10M ‘in‐kind’ contributions from private industrial sponsors. Partner organisations comprise well‐known blue chip companies including Rolls‐Royce, BAE Systems, Arup, Halcrow, Broadcom, Buro Happold, British Energy, Thales, Toshiba Research and Fujitsu Microelectronics, as well as a diverse range of Small‐Medium Enterprises.

1.2. The purpose of this submission is to express our support for the set up of the Technology Innovation Centres (TICs), and to identify the very important contribution that we believe systems engineering can make in successfully establishing and operating the UK’s TICs.

2. The Systems Centre Model for Delivering Impact

2.1. The Systems Centre has identified the delivery of impact as a key strategic goal, and seeks to achieve this through its taught Engineering Doctorate in systems engineering, through development of systems integration solutions for its partner companies, and through fundamental research to develop underpinning systems engineering methodologies with generic application. The Centre considers it one of its primary purposes to ensure take‐up of ‘systems thinking’ in the UK economy, this being now widely recognised in industry and academia as an urgent requirementi,ii. EPSRC is working to establish a coherent research base for systems in which the UK is regarded as one of the world leaders, and the Systems Centre at Bristol under the direction of Prof. Patrick Godfrey and Prof. Andrew Graves, one of UK’s centres of excellence.

2.2. The Systems Centre works highly effectively at the interface between science and industry and we fully endorse the establishment of TICs and the goal that they should also work in this space. Regardless of the precise model used in the operation of these Centres, we would wish strongly to encourage that ‘systems thinking’ plays a role in their setting up and operation whereby maximum benefits can be delivered.

3. The Status of Systems Engineering in the UK

3.1. Systems engineering approaches recognise that all ‘hard’ technical systems are embedded in soft, complex real‐world systems in which management of human and environmental factors are critical to achieving successful outcomes. As such systems‐based approaches seek to deliver solutions that will prove effective over the entire product life‐cycle, and actively seek beneficial emergent properties from the integration of systems in the real‐ world.

3.2. Whilst other countries are comparable in their hard systems engineering capabilities, the UK is widely regarded as a leader in a number of areas of systems engineering, particularly in the integration of hard and soft systems engineering and in modelling of complexity. The UK is therefore well‐placed to capitalise on this lead, and could gain significant competitive advantage if it is able to recognise and deploy effectively its soft systems methodology and understanding. We believe that in opening of the TICs, there is an opportunity to embed systems engineering approaches from the outset and that this will deliver significant operational and economic impacts as outlined below.

4. The Contribution of Systems Engineering to TIC Delivery

4.1. Systems engineering activities are ubiquitous within industry due to the complex and complicated systems our high‐value industries supply. Application areas include engineering design and development, design of advanced manufacturing processes, through‐life platform management, as well as risk, safety and quality management. It is challenges such as these ‐ complex technical and socio‐economic problems – which will need to be addressed as technologies are matured rapidly through the mid‐range Technology Readiness Levels.

4.2. Innovation and Control of Risk. The key success of the Fraunhofer model is the ability to exploit innovative technology and to deliver it to market rapidly. Industrial competitiveness is enhanced through innovation, and there is a clear advantage in quickening the pace with which novel and complex engineering products and processes can be brought to market, both for suppliers and end users. We believe that systems approaches provide the means to engineer ‘synergy’ successfully, i.e. to design and manage for desirable emergent properties as well as to predict and reduce undesirable impacts.

4.3. Rapid Transfer of Technology to Market. The explicit management of uncertainty, managing both to control risks and in searching for innovative outcomes, answers the need for both innovation and rapid product design, development and testing. Benefits include quicker introduction of new technologies, more rapid updates and modifications to ‘in‐ service’ systems, a greater capacity to engage successfully with high‐value riskier projects, and as a result, the potential to derive major additional competitive advantage.

4.4. Efficient Design and Production Processes. As engineered systems become increasingly complex and complicated, successful project delivery requires the application of Integrated Product and Process Development techniques to the entire supply chain, such as those currently being implemented under the UK aerospace industry’s SC21 change programme. A recent successful example of a systems engineering approach is the lean engineering programme with tools and techniques widely deployed by industry. Model‐Based Systems Engineering (Integration) techniques, including the use of synthetic environments for the evaluation, testing and training of human‐in‐the‐loop, ultra‐scalable systems, and ‘systems of systems’ can also deliver enhanced economic efficiency. These range from concept development, system design, advanced manufacturing, through to Independent Verification, Validation and Test (IVVT) of extremely complex systems. All are appropriate approaches to deploy in the interface between novel technology and delivering products and technologies to market.

4.5. Delivering Real‐World Solutions. Typical engineering problems require engineers to meet a wide range of stakeholder needs, frequently with conflicting objectives, and interaction with environmental systems in which there may be a high degree of uncertainty. Two examples are meeting the through‐life requirements of operators and successfully deploying complex engineered systems into unforeseen real‐world situations. For the TICs to work effectively and deliver viable technical solutions, they will need methods and tools capable of dealing with complexity and uncertainty. Again systems engineering could provide a significant enhancement to the proposed TICs if it is adopted as integral to their operating systems and culture.

5. Conclusion

5.1. In conclusion, we believe that the benefit for TICs, from engaging with systems engineering, will include: 1) more rapid technology transfer through the Technology Readiness Levels 4 to 6 to industrial partners and therefore to market; better design and more fit for purpose systems/products; 2) more robust, safe and sustainable end products delivered by using multi‐disciplinary approaches and accounting for uncertainty and complexity of real world applications; 3) fewer costly failures arising out of the product design and development phase because of a more holistic ‘end‐to‐end’ view of the engineering processes. In addition there is great value in the use of systems engineering to facilitate cross‐disciplinary communication and in capturing of the needs of diverse stakeholders. It is for these reasons that we would encourage the Science and Technology Committee to give serious consideration to our recommendation that systems engineering approaches are adopted in the set‐up and operation of the UK’s TIC programme.

This submission is presented on behalf of the Strategic Advisory Board of The Systems Centre.

Prof David Oxenham, Patrick Godfrey Chair of the Strategic Advisory Board, Director of the Systems Centre and Systems Centre EPSRC Industrial Doctorate Centre Advocate

02 December 2010 i Creating systems that work: Principles of engineering systems for the 21st century. Royal Academy of Engineering Report. ISBN: 1‐903496‐34‐9, June 2007. ii ‘Creating a High‐Value Economy’, Address to the Royal Society for the Encouragement of Arts, Manufactures and Commerce by Sir John Rose, Chief Executive, Rolls‐Royce plc, 10 November 2009. Written evidence submitted by Chemistry Innovation Knowledge Transfer Network (CIKTN) (TIC 52)

Technology Innovation Centres

Introduction:

1. Chemistry Innovation welcomes the opportunity to respond to the Science and Technology Committee’s consultation on Technology Innovation Centres. Chemistry Innovation is a national Knowledge Transfer Network (KTN) funded by the Technology Strategy Board. Chemistry Innovation was established in 2006 to stimulate and support product and process innovation in the UK chemistry-using industries, the network objectives are to build effective collaborations between academia and industry, helping companies to innovate and to realise economic gains from the commercial application of new science and knowledge.

2. To date we have supported and brokered the development of over 120 collaborative projects, delivering a total project investment nearing £100m, a large fraction of which is committed by industrial companies.

3. During the last 18 months we have consulted with a cross sector of the community within the chemistry-using industries and the knowledge base in order to develop and launch our Strategy Report. This Strategy Report presents in a single document the significant business opportunities for the sector, the science and technology needed to support these and the barriers to innovation, where they exist. It is largely against these findings that we present our responses to this Inquiry.

1. What is the Fraunhofer model and would it be applicable to the UK?

4. The Fraunhofer Institutes, with more than 80 research units, including 59 Fraunhofer Institutes, at different locations in Germany. They have a € 1.6 billion annual research budget. Of this sum, 1.3 billion Euros is generated through contract research. Two thirds of the research revenue is derived from contracts with industry and from publicly financed research projects. Only one third is contributed by the German federal and Länder governments in the form of institutional funding, this is largely regional funding. They also have research centres and representative offices in Europe, USA, and Asia and in the Middle East.

5. The main challenges to making the Fraunhofer model work in the UK are around critical mass. Private and public sector investments, and in turn the size of the research/delivery network, are unlikely to be in the same order to that seen in Germany and so it is questionable whether a scaled down version would be able to deliver comparable synergies and returns on investment.

6. Within the scope of our experience, the Fraunhofer model would be loosely applicable to the UK, but it is critical that such centres receive ongoing public funding support for them to be successful in delivering sustainable benefits to business.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

7. There are existing Fraunhofer-type research centres within the UK, which focus on specific sectors. The Centre for Process Innovation (CPI) was established in 2004 as a national technology innovation centre to provide the UK’s business and academic communities with the vision, tools and expertise to develop and test new technologies and innovations quickly and help position them for commercial exploitation.

8. Through CPI, the UK has established two internationally recognised technology innovation centres in Printable Electronics (PETEC) and Sustainable Processing (SUSPROC), incorporating the Industrial Biotechnology facilities. These centres are equipped with development laboratories, prototyping facilities and pilot plants that enable clients to prove and scale-up processes from the laboratory stage through to commercial reality. Commercially experienced scientists and engineers on site offer their expertise and guidance and a multi-disciplined team is available to work with clients on project management, investment and market opportunities to ensure each business fulfils its potential.

9. CPI also manage the National Industrial Biotechnology Facility (NIBF) a £12 million open access centre, currently being commissioned to enable industrial customers to develop proof of concept ideas. Providing a single centre to trial and develop manufacturing processes, NIBF helps firms, across a diverse range of sectors, replace traditional chemical processing techniques with new enzymes routes to form cleaner and less wasteful manufacturing processes using their 10,000 litre demonstrator facility.

3. What other models are there for research centres oriented toward applications and results?

10. The Knowledge Centre for Materials Chemistry (KCMC) - with initial investment of £15 million from the Northwest Development Agency and academic partner organisations, aim to drive industrial growth for the UK chemistry-using industries through the coordination, development and exploitation of leading edge materials chemistry research. It is a virtual centre of expertise providing multi-disciplinary research and innovative knowledge transfer based on world class capabilities in applied materials chemistry.

11. KCMC provides a single point of contact for companies of all sizes to access a substantial range of facilities and expertise in applied materials chemistry at four leading academic institutions at, Liverpool, Manchester, and Bolton Universities and the Science and Technology Facilities Council at Daresbury. 12. There are many centres, standalone (e.g. SUSPROC at CPI) or multicentred (e.g. KCMC), which despite variations in operating models and technological focus, have a strong track record of value-adding industry collaboration. These centres work because established industrial sectors are strongly engaged, and drive their core agenda, that being to tackle short to medium term, company specific challenges, potentially across multiple sectors. The other extreme, which can be harder for existing industry to buy into, would be a higher risk (but potentially greater reward), challenge–led or technology push centre. One example was the Micro and Nanotechnology centre network (DTI-funded), which conceptually made sense, but experienced major operational barriers to success. Generalised differences between these types of centres are given below:

Industry-led Knowledge Challenge-led or Centres Technology-push Knowledge Centres Who’s mostly driving the Existing industry sectors Government, Venture agenda Capitalists, Entrepreneurs What type of Short/medium term; Long term interrelated problems/opportunities company specific; across challenges with well defined are they addressing? multiple sectors. TRL 3-7. success criteria/milestones, i.e. roadmapped. TRL 3-9. What does success for Long term sustainable At a given point in time, the the centre look like? growth, through continuity of centre can claim to has brand and core offering contributed to UK leadership whilst adapting technological and wealth creation in a focus areas to match predicted opportunity area. evolving industry needs Risk Lower risk Higher risk ‐ Established route to ‐ New supply chains market/commercialisatio ‐ Unclear route to n commercialisation ‐ Unlikely to require ‐ Scope creep by RTOs capital investment ‐ Capital investment heavy Membership/engagement Inclusive Exclusive Reward Incremental, cross sector, Disruptive innovation – new product/process markets differentiation Reliance on public Needed but private match Heavily dependent, difficult to funding funding is already get private match funding. commonplace. Starting points? TSB strategy (technology TSB strategy (technology areas, application areas), areas, application areas, KTN memberships, existing innovation platforms). centres Example themes taken Advanced manufacturing, Nanotechnology, fuel cells, from the Hauser Report Composite materials climate change

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

13. Chemistry Innovation KTN believes that the Technology Strategy Board (TSB) is the most appropriate group to coordinate the TICs. They lead the national innovation agenda, setting the strategy and managing the main public funding and support schemes which should be aligned with TIC activity.

14. For example, the TSB is already well positioned to utilise the network of KTNs to maximise the TIC’s route to market. The KTNs are already well placed to access the views and strategic priorities of the industry leaders within their memberships. KTNs also provide support in creating collaborative projects by: dissemination and translation of information regarding funding; building project consortia; supporting stakeholders in development of compelling project proposals; monitoring and review of ongoing projects; and value estimation of the project impact.

15. Whilst TSB is the obvious candidate for a coordination role, it is crucial to the successful exploitation of TIC funding that industrial users play a role in the formation, definition and ultimately have ‘ownership’ of these centres.

16. In order to maximise the impact of the introduction of Fraunhofer type institutes, the UK must understand and compliment the current existing network of PSREs (Public Sector Research Establishments). The new innovation network can then be created between academia, industry, and the various knowledge centres of the UK.

17. The objective is to drive the more fundamental research and development toward Technology Readiness Level 8 (Technology proven to work in its final form and in the desired application). Currently TRLs 1-3, which cover the basic principles, application formulation, and proof of concept, are funded by the Research Councils and undertaken by researchers within Universities. It is critical that the Technology and Innovation Centres work to bridge the gap between universities and business and drive new science and knowledge toward commercial application. They will also act as a critical vehicle to develop the requisite multidisciplinary skills that will effectively drive technology development through to economic gain for the UK.

Chemistry Innovation Knowledge Transfer Network (CIKTN)

02 December 2010 Written evidence submitted by United Kingdom Science Park Association (UKSPA) (TIC 53)

Technology Innovation Centres

1 Introduction

1.1 Over the last two decades, the emergence and growth of science parks throughout the UK has helped create many thousands of scientific, technical knowledge-based businesses. These companies locate in a science park (or innovation centre/ innovation-based Incubator) to take advantage of a variety of services ranging from financial advice through to marketing support.

1.2 Science parks nurture, support and provide their tenant companies with access to the very best information, knowledge and expert advice that helps to deliver their tenants future growth and expansion. UKSPA is keen to stress that the Association, Science Park Managers and Developers are therefore ideally placed to contribute to Government ambitions to continue to exploit science and technology through commercialisation.

2 About UKSPA and Science Parks

2.1 The United Kingdom Science Park Association is the UK’s authoritative body on the planning, development and creation of Science, Technology and Innovation Parks that support and develop innovative, high-growth, knowledge-based companies.

2.2 Members of UKSPA have been in the business of creating the right environment to support both the creation and growth of technology-based businesses for over 25 years. The origins of UKSPA date back to the early 1980s when a number of universities in the UK recognised that the era of the knowledge-based business had arrived, and pooled their experience so that they could guide others pursuing similar interests.

2.3 Science parks nurture, support and provide their tenant companies with access to the very best information, knowledge and expert advice that helps to deliver their tenants future growth and expansion.

3 Existing UK Science and Innovation Parks

3.1 UKSPA member parks are actively engaged in innovation-led incubation, providing space for specialist groups of companies that want to work with the UK's research base and so helping technology companies develop using the UK's immense skills in science and technology. Our members are helping to build the UK's corporate tax base by supporting the formation and growth of new generations of technology based firms.

3.2 We would like to stress that existing Science and Technology Parks are uniquely placed to help the Coalition Government meet the need to continue to exploit science and technology through commercialisation.

3.3 Our member parks provide the environment for specialist groups of companies that want to work with the UK's research base and helping technology companies develop using the UK's immense skills in science and technology. Our members are helping to build the UK's corporate tax base by supporting the formation and growth of new generations of technology based firms.

3.4 Science and Technology Parks perform a key function acting as an interface between business and centres of knowledge such as universities, government funded laboratories, hospitals, and in some instances corporate laboratories, with the purpose of helping to commercialise ideas that arise from the UK's research base.

4 The Frauenhofer Model

4.1 As Herman Hauser stressed in his initial Report to the Department for Business Innovation and Skills “The remit of this review does not therefore include the important role played by University Technology Transfer Offices, Science Parks, centres and labs that support public policy …. or clusters, each of which have a key role in the innovation ecosystem.”

4.2 The Frauenhofer model may be applicable to the UK, but care has to be taken not to simply introduce another “initiative”, no matter how well it might be working in other countries. We strongly advise that Interested Parties work with the United Kingdom Science Park Association to audit the capacity of the existing science parks, technology parks and research parks to deliver the innovation agenda before investing in any future models of delivery.

4.3 We believe there are existing science and research parks delivering customer-led innovations, but they are not referred to as Frauenhofer centres. We do not believe it is necessary, nor valuable to try to identify other models focussed on applications and results. The current market- led science parks in the UK have a wealth of tenants undertaking research that by its nature is focussed on commercial imperative.

4.4 The United Kingdom Science Park Association met with all Science Park Associations from all over the world in Madrid two weeks ago, and it was interesting to note that all but Germany and the UK were supported either directly or indirectly by their respective governments, and that all recognised and readily welcomed the value of their national Association activities in supporting the delivery of the innovation agenda.

4.5 As the UK makes the transition from one innovation landscape to another, we are concerned that the government use the tools, knowledge and twenty five years’ experience that are resident within the current UKSPA Membership. We have developed “ASPECT” – a structured quality assurance mechanism that enables our Members to work toward a standard that should be applied to any future investment that is made by the private sector or the government. We strongly advise that this standard is applied to any future investment made by the government in supporting capital projects.

4.6 The current network of science, technology and research parks in the UK although professionally managed, urgently requires a professional and recognised management qualification to drive the sector to the next level of development. UKSPA strongly urges the government to support the development of a qualification in this sector, and we offer our technical support and experience in the development of these new industry-wide qualifications.

4.7 To fully understand whether the Frauenhofer model would be relevant in the context of the United Kingdom innovation landscape there is the requirement to fully understand the research currently being undertaken by all 3000+ tenants in our science parks and research centres. The United Kingdom Science Park Association holds a live database of tenants on our Member Parks that includes technology and application areas, and we strongly urge the government to maximise the use of pre-existing knowledge to inform their decision making process. The UKSPA Board would be delighted to work with the Government on extending the use of this data with a view to stimulating further joint venture and collaborative activities.

Paul Wright Chief Executive United Kingdom Science Park Association

02 December 2010

Written evidence submitted by The British Private Equity and Venture Capital Association (BVCA) (TIC 54)

Technology and Innovation Centres (TICs)

About the BVCA: The British Private Equity & Venture Capital Association (BVCA) is the industry body and public policy advocate for the private equity and venture capital industry in the UK.

The BVCA Membership comprises over 230 private equity, midmarket and venture capital firms with an accumulated total of approximately £32 billion funds under management; as well as over 220 professional advisory firms, including legal, accounting, regulatory and tax advisers, corporate financiers, due diligence professionals, environmental advisers, transaction services providers, and placement agents. Additional members include international investors and funds‐of‐funds, secondary purchasers, university teams and academics and fellow national private equity and venture capital associations globally.

As a result of the BVCA's activity and reputation‐building efforts, private equity and venture capital today have a public face. Venture capital is behind some of the most cutting‐edge innovations coming out of the UK that many of us take for granted: the medical diagnostic services we use in hospitals, the chips in our mobile phones, the manufactured components of our cars, and the bioethanol fuels that may run them in the future. Likewise, private equity is behind a range of recognisable High Street brands, such as Boots, Phones4U, Birds Eye, National Grid and Travelodge.

1. The UK has a strong track record when it comes to scientific research and investment in innovation. Indeed as the Hauser Review notes, we are currently 2nd in the G8 only to the US for excellence in research1 and we have three universities (Cambridge, Imperial and Oxford) that regularly appear in the world’s top ten2. The UK is regularly ranked near the top for innovation in the EU (though the latest report presents our current position as one of stagnation3). However the BVCA’s own analysis suggests that despite this strong base in research and innovation, the market for commercial investment in high growth companies is not as burgeoning as it could be.

2. In the UK, the state of the capital markets is usually found at fault when it comes to early stage venture. A BVCA/NESTA report (2009) found that this was both a demand and a supply problem. They dubbed this ‘thin markets’ where limited numbers of investors and entrepreneurial growth firms within the economy cannot get together at low cost. This analysis is less applicable to say the US which is characterised by deep markets4.

1 International Comparative Performance of the UK research base, September 2009 (http://www.dius.gov.uk/assets/biscore/ corporate/migratedd/publications/i/icpruk09v1_4.pdf 2 Times Higher Education Supplement rankings, see http://www.timeshighereducation.co.uk/world‐university‐ rankings/2010‐2011/top‐200.html 3 European Innovation Scoreboard 2009 4 From Funding Gaps to Thin Markets: UK Government Support for Early Stage Venture Capital, BVCA, 2009

In comparisons with other countries, investment in early stage companies in number of investments and quantum of investment does not reflect our relative strength in r&d.

3. As can be seen from the above, whilst neither the UK nor Israel could hope to compete with the US in absolute terms, neither do we compete in relative terms in early stage and have recently fallen behind the US5.

4. In terms of the size of investments made (and the quantum), the UK and France are very close together as is Germany. But the US invests much more per investment as does Israel. This suggests investment in UK and EU early stage is spread much too thinly6.

5. Regression analysis in the benchmarking report highlight three determinant factors in explaining levels of activity; higher levels of entrepreneurial activity, R&D expenditures as a percentage of GDP and visible success stories on the stock market affect early stage and total venture capital activity. The analysis suggests that the supply side is attracted by success stories, while opportunities for entrepreneurs arise from technological exploration (reflected in the R&D measure). In‐depth analysis shows that entrepreneurial activity in the UK is the most important of the three factors. We would expect that if entrepreneurial activity (in terms of creating high growth oriented ventures) was increased it would have a significantly higher impact on VC activity in the UK. Therefore one of the first areas of attention for policy makers is to increase entrepreneurial activity.

5 Benchmarking UK Venture Capital to the US and Israel: What lessons can be learned? BVCA, 2009 6 ibid

6. This is backed up by a 2010 survey conducted by Deloitte which says that in terms of what is important in fostering VC activity, 60% cite an improving entrepreneurial climate as key and 59% cite a strong R&D climate, supported by Govt. Only 35% cited tax and regulation as the most important element7.

7. The BVCA welcomed the commitment in the Comprehensive Spending Review to protect the science budget but as the analysis above suggests, we must do more at the next stage when it comes to fostering entrepreneurial activity and turning research into commercial opportunities. Thus the £200m to be invested in Technology and Innovation Centres has merit as this will cut to the heart of the problem.

Fraunhoffer and the UK

8. The Hauser Report8 described work done in other countries to add capacity through TIC‐like institutions in the so called ‘intermediate sector’. In France Carnot Institutes set up in 2006 foster links between a renowned research base and industry. In Germany Fraunhofer Institutes perform a variety of functions listed by Hauser as

• undertaking basic research; • carrying out applied research in the innovation chain between university generated initial discovery and industrial development to realise its commercial potential; • enabling SMEs to innovate though provision of knowledge, equipment and applied research; • providing technical and commercialisation services to large and small companies; and • developing a highly skilled workforce.

9. The Fraunhofer Model, is comprehensive in scope and geographical coverage with over 80 institutions (of which 58 are fully fledged Fraunhofer Institutes) with total funding of € 1.6 billion annually. It is clear that with initial investment of £200m we are not looking to create that scale here in the UK and nor should we. As Hauser notes the role and rationale of TICs is therefore context dependent, which also includes the presence and nature of other academic or business centres of excellence; the balance of business sectors; and the importance attached by the public and private sector to innovation within a particular nation. This is an important point to bear in mind when considering the transferability of a ‘model’ from one country to another9.

10. Fraunhofers also tend to focus upon “Technology Readiness Levels” (called TRLs ) 4 to 7 (industry/applied contracts and government projects ), whereas UK universities are traditionally strongest in TRLs 1 to 3 ( blue sky and early stage translational research ). However, in the best research intensive universities, there is a strong overlap, both in people, equipment and funding bodies between the TRL 1‐3 stage and the TRL 4‐5 stage.

11. This is a major strength in the UK and leads to better and more creative outcomes. We should not then see Fraunhofers as filling a completely empty gap, as there is already good work being done in that space by the best universities. These are precisely the universities which also tend to have critical mass/active technology transfer offices with dynamic and productive VC links, such as at The University of Manchester, Cambridge and UCL.

7 2010 Global Report on Trends in Venture Capital, Deloitte 2010 8 The Current and Future Role of Technology and Innovation Centres in the UK, BIS 2010 9 ibid

12. The Fraunhofers, as a specific initiative, have more recently championed and catalysed a number of Translational Innovation Clusters, which look to build upon existing areas of expertise and contacts, in regions and fields of critical importance to the relevant national economies in which they are based. So promoting clusters in which venture capital and universities can “sit” together as part of an enterprise landscape and add value together is worthwhile. This aspect of the Fraunhofer model would be welcome – especially if centred in those areas which could pick‐up and build upon existing activity – particular consideration should be given to existing sectoral expertise as can be seen from the examples below.

13. So we need to be particularly mindful of overlap when it comes to implementation because it is clear from the list of Fraunhofer functions above, that the UK already has existing capacity in many of those areas and any new provision through TICs must dovetail effectively with it. University of Manchester Intellectual Property is engaged in activity that would certainly fall into Hauser’s ‘intermediate sector’, for example managing IP created at the University and then following evaluation, helping to commercialise it via sale, licence or spin‐out. They have helped raise hundreds of millions for spinouts and are now licensing at a rate of 20 per annum

14. Case Study – UMIP and NanoCo: with VC partners, UMIP raise some £175M into spin‐out companies in the last 5‐6 years. This represents 85 transactions during a very difficult economic climate and of which about half were in the very early venture space ( seed capital ). From selling shares in some of those spin‐outs ( and from other sources ) they have been able to initiate about 100 proof‐of‐principle programmes in new tech transfer intellectual property projects, which will give rise to many new start companies/spin‐outs and licences over the next 5‐6 years. An example of a Manchester University spin‐out staring life as a proof‐of‐principle project is NanoCo. Although originally set‐up in 2001, it received its first seed capital injection in late 2004. It makes and commercialises fluorescent nano‐crystalline particles (quantum dots) of semi‐conductor materials that have unique chemical, electronic and optical properties, due to their small size. The dots are so small that 80,000 of them can fit across the width of a single human hair, and have applications in biological marking, flatscreen TVs, security and clean‐tech. Having received two rounds of institutional venture capital following the 2004 university and VC seed round, NanoCo now has partnerships with major industrial firms and is today valued on the stock‐market at £200M

15. Case Study ‐ UCL and pharmaceuticals:

GSK: UCLB have announced partnerships with GSK on a three year strategic collaboration to investigate new compounds to treat potentially sight‐threatening disorders.

Pfizer: They have also announce a collaborative project with Pfizer Regenerative Medicine to research a better understanding of stem cell‐based therapies for certain ophthalmic conditions.

AstraZeneca: UCL and Astra Zeneca have entered into a collaboration to develop regenerative medicines for diabetic retinopathy (DR)

Summary and Conclusion

16. BVCA research suggests that there is work to be done in turning a world class research base into a burgeoning market for high growth companies that can attract venture finance and become the global titans of tomorrow. Whilst closing this gap has many facets, one such facet is further provision in the intermediate sector through institutions like Fraunhofers and our own TICs. However, the wholesale application of such a network of institutions is not financially viable (with £200m) nor is it practically necessary because of extensive existing provision. Before deciding on how to deploy this capital, an audit of existing provision is essential so that a clear understanding of coverage and best practice is gleaned and where appropriate, this can be replicated where provision is currently lacking. This may involve investing in new standalone institutions or it may involve adding to existing capacity. Government should not be wedded to either approach but should simply deploy the money where it will be of most use. An extensive consultation with the university, venture and business angel sectors should be the starting point.

The British Private Equity and Venture Capital Association

02 December 2010

Written evidence submitted by The Media Institute (TIC 55)

Technology Innovation Centres

1. Declaration of Interests 1.1 The Media Institute is a new organisation founded in 2010, after nearly two years of development. It is currently incorporated as “Media Research Partners Limited”, a company limited by guarantee, pending permission from the Secretary of State to incorporate under its proper name. 1.2 At present University College London (UCL) is the sole Member of The Media Institute, but it is expected that up to five other universities and colleges of world-class standing will become Members within a short time. Its governance will be substantially independent, both of its Members and of Government. 1.3 The Media Institute has been established to be a London-based UK centre for applied research for the creative industries, including content creation, publishing and distribution. Its focus is on the disciplines of computer science, behavioural economics, law, management science and design. 1.4 The creative industry accounts for nearly 10% of UK GDP, a higher proportion than in any other developed country. The vision of The Media Institute is to enhance the productivity and international competitiveness of this industry, by harnessing the outstanding skills of leading universities to address challenges identified by new, emerging and established companies in the sector. 1.5 The Media Institute constitution addresses the challenges arising from the collaboration of multiple universities and multiple companies, and seeks to create a skills and knowledge asset focused solely on serving the national interest in terms of growth and employment. 1.6 The business plan of the Institute anticipates the contribution of public funding, to support its overhead on a scale and in a manner consistent with the recommendations of the Hauser report and the Chancellor’s statement on the Comprehensive Spending Review. Such funding would serve to create a stable and cost-effective environment within which research would be funded by company contracts and Research Council funding.

2. What is the Fraunhofer model and would it be applicable to the UK? 2.1 The Fraunhofer Gesellschaft was founded in 1949 to provide a state-funded bridge between the fundamental research carried out by the Max Planck Institutes and the needs of Germany’s reconstructing industrial sector. It is a group of 59 Institutes, each institute specialising in a particular area of applied research. 2.2 The Fraunhofer Institutes employ about 17,000 staff, mostly qualified scientists and engineers. Institutes working in related areas form Fraunhofer Groups. Current groups are (i) Information and Communication Technology (ICT), (ii) Life Sciences, (iii) Light and Surfaces, (iv) Microelectronics, (v) Production, (vi) Defence and Security, and (vii) Materials and Components. 2.3 In 2009 the Fraunhofer Institutes had an income of €1.65bn. Of this, €428m (26%) came from industrial research contracts. A further €406m (25%) came from Regional (Land) and Federal (Bund) contracts for research. €107m (6%) came from “other sources”. The Institutes received a total of €621m (38%) as Base funding from the Regions and the Federal Government. A further €89m (5%) came from other sources, including licensing income. This approximate 60:40 split between contract and base funding is the basis of the Fraunhofer model. Public funding accounts for about two thirds of its resources. 2.4 Patent license revenue was €78M, the majority of which is derived from the patents relating to the MP3 audio coder/decoder (e.g. MP3 players such as the iPod), the most common digital audio file format. Evidently the Fraunhofer budget is not materially dependent on licensing revenue. 2.5 Of the 25,107 patents applied for in Germany, the Fraunhofer Institutes applied for 675. The national benefits of the Fraunhofer model are therefore not expressed primarily through patents. 2.6 The Fraunhofer Institutes received slightly more than €1bn (£850m) from public sources in 2009. This compares with the TSB expenditure in 2008/9 of about £230m on support for innovation via funded projects, and a total UK Science budget in 2009/10 of £3bn. Clearly the scale of the Fraunhofer Institutes is remarkable by UK standards, and implementation on a comparable scale in the UK would either represent a significant and welcome increase in funding on research, or have a very serious impact upon the funding of research in higher education. This model of research, staffed and expensed independently of the higher education sector, is therefore unlikely to be applicable to the UK. 2.7 The Fraunhofer Institutes are clearly key centres of research in Germany. The UK has a strong tradition of research within Universities, with several amongst the top rank at a global level. Despite effective models of

university engagement with industry, however, such work is largely focused on academically important work rather than on applied research. Not only would an enhanced focus from universities on applied research be applicable in the UK, it would be positively desirable, as a means to focus some of the UK’s outstanding intellectual resources in directions that stimulate growth and employment. 2.8 A key weakness of the current UK model for funding innovation is the policy of supporting projects rather than infrastructure. As the Hauser report identified, this weakness critically limits the degree to which public funding can catalyse change and accelerate innovation over a sustained period. For this reason, the Fraunhofer model, as a template for the public funding of the infrastructure of innovation, is applicable and indeed urgently required in the UK. 2.9 The Fraunhofer model, in which public funding for its infrastructure amounts to 40%, public funding for research projects amounts to 25% and industrial funding for projects amounts to 25% is directly applicable to the UK. Government funding of infrastructure to this level would then be complemented by Research Council (RC) funding of projects on a scale roughly matching industrial sponsorship. 2.10 It is questionable whether, in the UK context, it is appropriate for Research Council funding to go directly to such a centre. RC funding today goes overwhelmingly to universities, and there is a strong argument for the perpetuation of this system. However, if RC funding pays for university staff to contribute to the work of technology innovation centres, the same end is achieved and is accomplished without pitting such centres in direct competition with universities for RC funding. 2.11 The Fraunhofer model provides a single brand and a common governance and reporting structure for research institutes across a wide range of sectors. It is questionable whether this degree of integration should be applied in the UK, where a more flexible approach may be appropriate. The reasons are (a) The nature and outputs of research differ very widely between sectors, and approaches that work, for example, in the creative sector may be entirely inappropriate to the medical and pharmaceutical sectors. Examples of such differences may include: the type of intellectual property generated and the optimum strategy for its exploitation in the national interest, the scale and lifetime of capital assets required, the necessary degree of collaboration between competing company sponsors and the breadth of multi-disciplinary engagement required. (b) Links between industry and centres of research (mainly universities) have not been as strong in the UK as might be desirable, and hence it is more

important to build affiliation between sectoral research institutes and their sponsoring industries than to emphasise commonality of approach between institutes engaged in research across very disparate sectors. (c) Accountability and transparency of impact will be very important in a UK environment that is unfamiliar with this new model, uncertain of its effectiveness and necessarily frugal in its investment. Consolidation of the inputs and outputs of many different centres into a single corporate entity risks obscuring the effectiveness of each centre and of limiting the ability of each centre to report and focus on its impact in the way most appropriate to its sector. 2.12 For these reasons, it is hard to see why the UK, starting ex novo, should establish a corporate structure as consolidated and integrated as the Fraunhofer Gesellschaft. There can be no doubt that central oversight, governance, coordination of approach and sharing of management expertise are essential and desirable, and these can be accomplished by a flexible, federal form of management. The paramount consideration should be that technology innovation centres serving different sectors have strong sectoral identities, the greatest degree of adaptation to the nature and needs of each sector, and metrics for accountability that are meaningful in the sectoral context. 2.13 A new approach to funding applied research, a new funding model and new governance structures may well be best presented under a new unifying brand. Public understanding and trust in this new approach to funding innovation may best be served by endowing such a brand with the key values of accountability, transparency and relevance. However it is important that the brand is not applied in such a way as to diminish the association between each centre and its client industry sector. Whilst Fraunhofer is a strong unifying brand, whose meaning is understood by industry and the public after more than sixty years, the UK should perhaps follow a more nuanced approach, in which the new brand takes second place to the sectoral identity of each centre.

3. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 3.1 The Media Institute has focused on the creative sector, and abstains from commenting on UK institutions in other sectors. 3.2 The nearest analogue to a Fraunhofer Institute in the UK creative sector is BBC Research and Development. With a secure base of medium term funding, paid for from the licence fee, it has concentrated on advanced development and applied research in the audio-visual and broadcasting sectors, with an outstanding record of achievement. Whilst MP3 is the

totemic achievement of the Fraunhofer Institutes in this sector, BBC R&D has numerous accomplishments, from PAL to digital terrestrial TV, in which its contribution to the development of a global industry has been fundamental.

4. What other models are there for research centres oriented toward applications and results? 4.1 In the United States there are several examples in the creative sector of university-based centres focusing on applications and results. 4.2 The University of Southern California hosts a number of advanced development institutes, such as the Institute for Creative Technology in Marina del Rey which is focused on delivering leading-edge results to sponsors such as the US Army and leading Hollywood studios. 4.3 Carnegie-Mellon University in Pittsburgh hosts a number of joint institutes with companies such as Disney, aimed at applying the skills and knowledge of its academics to advanced industrial challenges. 4.4 At Stanford in Palo Alto, the fluid relationship between acadamics and companies has given rise to many world-class enterprises.

5. Whose role should it be to coordinate research in a UK-wide network of innovation centres? 5.1 The Technology Strategy Board (TSB) ‘s role is to “stimulate technology-enabled innovation in the areas which offer the greatest scope for boosting UK growth and productivity. We promote, support and invest in technology research, development and commercialisation. We spread knowledge, bringing people together to solve problems or make new advances.” As such, it is the competent and trusted body to coordinate and manage a UK-wide network of innovation centres.

6. What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 6.1 As The Media Institute is not aware of any Public Sector Research Establishment or other Government-sponsored centres carrying out research in the creative sector – with the possible exception of BBC R&D as noted in clause 3.2, we abstain from comment on this question.

Evidence 7. The Media Institute would be pleased to provide further detail on any of the points noted above, either in writing or by way of oral evidence.

The Media Institute

02 December 2010

Written evidence submitted by The Work Foundation (TIC 56)

Technology Innovation Centres:

Applying the Fraunhofer model to create an effective Innovation Ecosystem in the UK

Introduction

1.1 This paper provides evidence to the House of Commons Science and Technology Committee on the implementation of an elite network of Technology Innovation Centres (TICs).

1.2 Since 2005, The Work Foundation has been researching how progress towards the knowledge economy is reshaping the economic life of all advanced economies, and the UK in particular. This change is creating a special need for a network of intermediary institutions which can better link research institutes with each other, and with businesses. Technology Innovation Centres must be a central part of this network.

1.3 In the knowledge economy, growth and job creation depend on our ability to generate and exploit intangible assets such as brands, human capital, and design. Here, innovation is the primary driver of value. This depends on our innovation eco‐system – the set of organisations, institutions and linkages through which the economy creates new value in the form of products and services.

1.4 All innovations draw on the basic building blocks of knowledge creation, entrepreneurship, selection (of potential innovations, typically through markets) and the mobilisation of resources. The system relies on a network of intermediary institutions which can link and support the transfer of knowledge between these blocks. Our analysis highlights a major UK deficiency: a weak and fragmented system of research institutions that lacks the scale, coordination and commercial focus required to fully exploit the value of the UK’s knowledge and creativity.

1.5 There is, therefore, clear scope to draw on the experience of the German Fraunhofer Network to build a new class of institutions which can respond to this need. Our evidence on how this must be realised is presented in two main sections below:

• Understanding the Fraunhofer model and how it should be applied in the UK – this section addresses questions one to three outlined in the call for evidence;

• The need to position TICs within an effective UK Innovation Eco‐system – this section addresses questions four and five of the Committee’s inquiry.

Beyond Fraunhofer - The model and its application in the UK

What is the Fraunhofer Gesellschaft?

2.1 Fraunhofer Gesellschaft is an integrated network of intermediate research institutions in Germany that support industry and technology transfer as part of a national innovation eco‐system1. This network is a major player within the German innovation eco‐system, the primary independent applied research body in the country, and the largest organisation for applied research in Europe.

2.2 Deploying a model which has developed over more than 60 years, Fraunhofer Gesellschaft comprises more than 60 semi‐autonomous institutes linked by a single over‐arching governance structure. Seven content ‘groups’ – for example ‘microelectronics’, and ‘ICT’ – link the research activity across institutions.

2.3 It undertakes applied research of direct utility to private and public enterprise and of wide benefit to society. Customers span industry, service sectors and public administration. These Fraunhofer Institutes develop and exploit new technologies by creating an infrastructure bridging the needs of applied research with those of technology commercialisation.

2.4 The Fraunhofer Gesellschaft network has over 17,000 employees, including more than 11,000 research staff, and generated an income of more than €1.6bn in 2009.

Why have Fraunhofers been effective in Germany, and how should this be translated for TICs in the UK?

3.1 From our investigations, we believe there are a number of clear principles behind the success of the Fraunhofer model in the German context: their focus on national economic strengths; their operation as a single co‐ordinated network; their high‐reputation and strong brand; their commercial focus; and their independent operation.

3.2 While the Fraunhofer system should not be viewed as a panacea for linking universities and industry, the principles of success in the German context offer important insight for translating the system into the UK context:

1. Focus on national economic strengths and areas with strong growth possibilities

3.3 All of the UK’s areas of competitive advantage lie within the “knowledge economy”. Universities and other research institutions are a key source of competitive advantage within these areas, making it crucial for them to establish effective links with businesses.

3.4 Jobs in knowledge‐intensive activities were less affected by the recession than the rest of the economy. The most recent economic and employment figures tell us that advanced manufacturing is starting to grow strongly, and that almost all the net growth in jobs is coming from knowledge‐intensive services2. Initiatives framed to drive innovation and growth in these areas offer the greatest scope for economic returns and value for money.

1 A National Innovation System is the ‘eco-system’ of institutions, agencies, bodies, funding flows, technology and knowledge transfers, and channels, which supply a national economy with innovations. 2 Brinkley, Ian (2010) Knowledge Economy Strategy 2020 http://www.theworkfoundation.com/research/publications/publicationdetail.aspx?oItemId=263&parentPageID=102&PubType= 3.5 It is important to stress that while each TIC should have a clear subject focus within its mandate, they should not be exclusive or restrictive in terms of the academic disciplines of individual researchers, since it is at the boundaries of where these disciplines meet that innovation occurs.

3.6 While the German Fraunhofer Institutes tend to focus on advanced engineering and physical sciences, the UK’s TICs should focus on sectors that reflect the UK’s strengths. The four broad areas of activity that we expect would benefit most from TICs are:

• Advanced manufacturing (including the growing “manu‐services” sector3);

• The low‐carbon economy4;

• The cultural and creative sectors; and

• High‐tech services.

3.7 It is important that the geographic placement of TICs reflects the existing distribution of these economic strengths and growth possibilities, maximising potential returns. There is a trade off between distributing the new TICs around the UK (helping to balance the geography of economic growth) and locating them in the most competitive locations possible (which will disproportionately favour London and the South East). While TICs should aim to support growth around the UK as far as possible, this should not be at the expense of building fully on the UK’s existing strengths and clusters.

3.8 We believe it is particularly important that UK TICs do not take a narrow ‘STEM’‐only perspective. Innovative technology development is equally important to, for example, the future prospects of the UK’s creative and cultural industries. It is worth remembering that the Fraunhofers’ most financially‐successful single innovation is the ‘mp3’ digital sound compression algorithm, a technology innovation that revolutionised creative content distribution.

2. An effective network of powerful and influential intermediaries

4.1 The UK’s scientific research output is high by international standards, as measured by the numbers of publications and citations generated per capita5, the number of inventions and sources of licensing income, and the number of staff working on licensing activities6. The problem is not the quality or the amount of research coming out of UK institutions – it is in the lower number of patents registered; and the lower total amount of income derived from licensing activity7.

In short, the UK is poor at exploiting the commercial value of its research.

4.2 This weakness can in part be explained by problems of coordination between intermediary institutions within the UK’s innovation eco‐system. While Fraunhofer Institutes are a major regional and national player in the German innovation eco‐system with a strong, unitary national ‘brand’ (see point 3 below), the UK system is currently more dispersed – or more fragmented.

3 Organisations which provide high-value services ‘around’ their manufacturing offering: In the US 60 per cent of manufacturing firms have taken this route compared with just 1 per cent in China. 4 Levy, Charles (2010) A 2020 Low Carbon Economy, London: the Work Foundation, http://snipurl.com/108gzu 5 Livesey, Minshall and Moultrie (2006): Investigating the technology-based innovation gap for the United Kingdom. Refer to Figure 13. http://www.ifm.eng.cam.ac.uk/cig/documents/Innovation_gap_FINAL.pdf 6 Wellings (2008): Intellectual Property and Research Benefits. This report was commissioned by the then Department for Innovation, Universities and Skills. Refer to Table 1. http://www.genecombio.com/sitepix/page_images/int_property_and_research_benefits_131008_reports.pdf 7 Ibid. 4.3 The UK must look to emulate the Fraunhofer Institutes’ example by consolidating the fragmented set of intermediary institutions by applying rigorous criteria8 for assessing institutions’ value to the overall system.9 Our suggested criteria (set out below) have two key advantages. First, they would ensure government would only invest when alternative private financing was lacking; and second, they offer a rigorous process for selecting and deselecting institutions:

a) A confirmed market potential (by industry consensus) of products from the research of over $2bn a year;

b) Demonstrable existing UK strength or pre‐eminence in the research field;

c) Clear ability for the UK to retain and defend parts, if not all, of the value chain for future products;

d) Lead time to commercial products from the research of over 10 years (e.g. beyond usual venture capital funding timeframes); and

e) Clear commitments of industry support for each Institute and its focus – concrete pledges of financial support.

4.4 Gaining critical mass for real breakthroughs for each Technology and Innovation Centre would require concentrations of researchers – a minimum of 50 researchers per centre. The Fraunhofer network of over 60 institutes was built over 60 years. The UK should aim for a concentrated group of not fewer than 6 centres, and maximum of 10, and look to build from there. In a period of constrained public spending it is vital that investment is focused on developing a small but strong network of intermediate institutions.

3. High reputation and strong brand

5.1 The credibility of Fraunhofer Institutes is reflected in their ‘employer of choice’ positioning within the German labour market: Fraunhofers are the 2nd most popular employer for German Natural Science grads, 4th for ICT graduates, and 7th for engineering graduates.10 This success in attracting talent can be partly attributed to the strong, unitary brand of the Fraunhofers.

5.2 The UK government must commit to creating an intermediate institution which can develop to be an equivalent draw for talented individuals with scarce skills. This should be achieved through mechanisms such as high‐profile commitments from across government, ministerial visits, attractive career paths for researchers, and a high‐level of buy‐in from industrial employers.

4. A mixed funding model which is as self-sustaining as possible

6.1 The Fraunhofer Institutes have a mixed funding model, with public funding through a central grant, individual institutions receiving support from local government, government commissioned work, and private commissioned work. The element of core funding is guaranteed over a period, which, has been

8 Current criteria for the Fraunhofer institutes include: Scientific competence, proved by the recognition of the scientific community; Well- balanced financial mix of different independent Sources; Market success and entrepreneurial competence proved by contracts with industry and government; and Professional networking with other Fraunhofer Institutes and externals. 9 Zabala-Iturriagagoitia, J., et al. (2007) ‘Regional Innovation Systems: How to Assess Performance, Regional Studies, Vol. 41, No. 5, 661-72 10 Egner, Harald (2010) presentation to BIS on Fraunhofer Institutes, February suggested to enhance the ability of institutes to take a more long‐term and innovative approach to their work programmes11.

6.2 The German Fraunhofers still receive a substantial proportion of their funding from public sources (albeit some gained through competitive tender in addition to long‐term public commitments) 60 years after their original formation. Continued public funding role is important for longer‐term innovation, as research models based predominantly on private research contracts and competitive tenders are more suited to react to technology trends rather than to anticipate them12.

6.3 In order to viably re‐create any of the kinds of successes of the Fraunhofers, each Technology and Innovation Centre would require a longer‐term public commitment of funding for up to 10 years in the first instance, with full and informed reviews of progress against clear criteria every three to five years13.

6.4 Each TIC would require £10m of funding per year to achieve critical mass, from both public and private sources. In addition, building a portfolio of commercial contracts year on year should also be an explicit target for all TICs.

5. Strong governance, but contractual flexibility within individual institutions

7.1 The Fraunhofer Institutes are managed on a ‘federal’ model, which provides stability and national profile as well as local flexibility. A single independent board agrees major elements of strategy, and shapes the seven key research themes which stretch across the 60 individual institutions. However, individual institutions have wide powers to negotiate individual research project contracts, and to establish inter‐ institutional links for themselves.

7.2 TICs should also be seen explicitly as a national level network, with single over‐arching governance structures (linked to the strong unitary brand), while allowing individual institutions the flexibility to manage their portfolios of research and development projects independently.

7.3 Because there is less of a tradition of senior science academics in the UK who have also held senior industry positions, it is important that the UK’s TICs have majority industry representation on the governing body, to ensure the centres remain close to the needs of industrial and commercial innovation. Success will also depend on matching these national institutions with local economic strengths as well as the aspirations and plans of the developing Local Enterprise Partnerships and their constituent local authorities.

How does the Fraunhofer model compare to alternative technology transfer systems?

8.1 The primary alternative to the Fraunhofer model is to operate a system of fragmented and specialised intermediary institutions, each associated with particular universities or research institutions. The best example of a fragmented model is the USA, which has a large number of overlapping institutes aimed at specialist areas.

11 OECD Working Party on Research Institutions and Human Resources (May 2009) ‘Analysing the transformation of public research institutions’ 12 Mina et al (2010) Models of Technology Development in Intermediate Research Organisations Imperial College London Business School Summer Conference June 16-18 2010 13 Connell, David, and Probert, Jocelyn (2010) Exploding the Myths of UK Innovation Policy:How ‘Soft Companies’ and R&D Contracts for Customers Drive the Growth of the Hi-Tech Economy, UKIRC / EEDA, http://www.ukirc.ac.uk/object/report/3341/doc/full_report.pdf; see also the Research Councils UK response to the Hauser Report, www.foundation.org.uk/events/pdf/20100518_Delpy.pdf 8.2 However, the USA’s larger economy and commercial culture may still allow a fragmented model to have sufficient critical mass, but the UK does not have a wide enough funding base to allow over‐lapping focus on many areas at once. From the international comparative data on commercialisation of research cited in the section above, it seems the UK’s weakness can in part be explained by problems of coordination between intermediary institutions within the UK’s innovation eco‐system. In his 2003 assessment of the UK’s innovation institutions, US‐based academic Michael Porter concurred that the UK’s innovation institutions were both too few and too ineffective14.

8.3 Within the UK’s innovation eco‐system the Technology Strategy Board has identified more than 60 institutions, agencies or ‘intermediary institutions’ which comprise the UK innovation ‘landscape’15. These institutions come in many different forms, including:

• Individual university Technology Transfer Offices (TTOs)16;

• Research and Technology Organisations (RTOs) which are independent from Universities; and

• the Research Councils and public sector research establishments17.

8.4 Compared to alternative approaches to technology transfer, TICs can strengthen the UK’s innovation eco‐system by:

1. Improving coordination between the various research institutions within the UK’s innovation system;

2. Strengthening links between research institutions and businesses; and

3. Developing and following their own research agendas with enough critical mass to achieve viable commercialisation of new technologies.

8.5 We believe that, by following the principles in the previous section, the TICs will demonstrate the value of a more integrated, co‐ordinated approach to technology transfer, and result in a more effective innovation eco‐system.

14 See http://www.idea.gov.uk/idk/core/page.do?pageId=8507296#contents-6 15 Technology Strategy Board (2010) ‘Overview of innovation landscape in the UK including role of centres’ 16 Mina et al (2010) Models of Technology Development in Intermediate Research Organisations Imperial College London Business School Summer Conference June 16-18 2010, see also Tang (2008) Exploiting University Intellectual Property in the UK: Intellectual Property Institute http://www.ip-institute.org.uk/pdfs/Exploiting%20University%20IP%20in%20the%20UK.pdf 17 Oxford Economics (2008) Study of the impact of the Intermediate Research and Technology Sector on the UK Economy, May 2008, Oxford n Eco-System in the UK

9.1 If TICs are to succeed in their mission of creating new applied research activities which can significantly contribute to the UK’s future economic performance, then it is essential that they are rooted at the heart of the UK’s future innovation system. This will demand clear strategic planning for: a) the establishment and management of the activities of TICs; and b) their relations to other public and private research and development institutions.

Managing TICs

10.1 The ‘principles’ section above stressed the importance of an independent governance structure for the network of TICs. The ‘federal’ board – which should combine representatives from each TIC with independent business figures – should be established as quickly as possible, so that they can be involved in setting up the new TICs. This should ensure the research priorities are determined by what each board expects to be most commercially successful.

10.2 TICs will require a balance between independence offering medium‐term (10+years) freedom to innovate, and (as they will require government capital) proper democratic accountability. So, while the research agenda would ultimately be set by the independent board, the natural path would be for the Technology Strategy Board to assume a medium‐term co‐ordination and support role as the TIC network develops, with oversight from the Department of Business Innovation and Skills. The Technology Strategy Board would also oversee and support consultation on the appointment of the overall TIC network board, and of any tendering process for the establishing of specific TICs.

Anchoring TICs at the heart of a 21st century innovation eco-system

11.1 If TICs are to improve coordination and commercial performance within the UK’s innovation eco‐ system, then they can not be a replacement for the existing network of institutions, nor can they risk adding another isolated layer to an already complex system. Instead TICs must complement the existing network by bridging gaps within the innovation eco‐system, and providing new links to commercial markets – in essence they must be anchored at the heart of the UK’s innovation‐ecosystem.

11.2 The initial £200 million funding for TICs is ring‐fenced, meaning that the TICs would not divert cash directly away from other central government‐funded institutions. However, the funding for TICs is likely to place pressure on funding for existing research institutions, while they will also act as a competitor for existing research institutions in bidding for public commissions. The introduction of TICs needn’t be a “zero‐ sum game”– the TICs should be expected to leverage new finance from the private sector and from commercial revenues from their activities. If they work effectively with existing research institutions, the TICs also should be able to support the activities of other institutions, without removing all of the public funding from them.

11.3 Rather than leaving the potentially chaotic impacts of this to chance, a systematic review of the role of intermediary institutions – such as TICs – in the innovation eco‐system will be needed. Given the current fragmented picture, this would almost certainly imply a process of rationalisation and consolidation. Action on TICs and all other publicly funded research institutions must be driven by a clear vision of what will drive economic growth in the future. Under such an approach, the strongest performing parts of the existing innovation eco‐system should be maintained and strengthened by the new TICs. Only the least effective institutions should be adversely affected. This action will offer the clear leadership that the private sector requires to establish long term frameworks for investment in innovation with the potential to transform our economy.

11.4 Failure to take such radical action to establish TICs at the heart of the innovation system would represent a major missed opportunity, and would dramatically limit the potential positive impacts from public investment in TICs. The place of TICs within the UK’s innovation eco‐system should be considered by the forthcoming cross‐government growth review.

The Work Foundation is the leading independent authority on work and its future. It aims to improve the quality of working life and the effectiveness of organisations by equipping leaders, policymakers and opinion‐formers with evidence, advice, new thinking and networks.

The Work Foundation wish to declare the following:

1. “The Work Foundation” the trading name for Landec Ltd, a wholly‐owned subsidiary of Lancaster University

2. The Work Foundation submitted a briefing note to BIS in August 2010 entitled ‘Fraunhofer Institutes and Beyond’. Some of the information presented in this document was presented to BIS.

3. The Work Foundation receives funding from BIS, TSB and NESTA to support its Knowledge Economy 2 programme.

The Work Foundation

December 2010

Written evidence submitted by TWI Ltd (TIC 57)

Technology Innovation Centres

0. Summary

0.1. The Fraunhofer model applies to a network of research institutes in Germany. The model involves core funding in addition to bid for public and industrial funding. This core funding allows Fraunhofer Institutes to support the national industrial strategy. Although operating as individual entities, Fraunhofer Institutes have central coordination and a strong “brand”. The core funding and network brand component of the model could be applicable to the UK, where there is already an infrastructure of effective, industry focused applied research institutes.

0.2. Although there are no existing, directly equivalent Fraunhofer-type research centres in the UK, there is an infrastructure of research centres with similar aims operating effectively and successfully. These are technology focused institutes, working with academia and industry to implement new technologies. They are often working with organisations worldwide as well as in the UK. Currently, the missing components of the Fraunhofer model from these UK research centres are the core funding that allows support of national industrial strategy, and the strong, common branding.

0.3. There a number of models for research centres oriented toward applications and results, both in the UK and overseas. However, the key common factor is not the specific operation model, but rather their role in providing an applied research and development service to industry.

0.4. The Technology Strategy Board is the appropriate organisation to coordinate research in a UK- network of innovation centres.

0.5. The introduction of Fraunhofer-type institutes, based on the current infrastructure of organisations with a proven track record of excellence, will have a beneficial effect on Public Sector Research Establishments and other existing research centres, and be an effective, efficient way of supporting the national industrial strategy. Ignoring the existing infrastructure, and setting up duplicate research organisations will be highly detrimental to the viability of both the new and existing research organisations.

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1. The Fraunhofer funding model is one in which ~40% of funding for individual research institutes comes from local and central government. The remaining 60% is from industry and from competitively bid projects from public sources. The government funding enables the institutes to make strategic investments in equipment, technologies, facilities and projects that support the clearly identified development needs of regional and national industries. Additionally, the funding directly from government provides the freedom for institutes to lead and participate in strategically important projects funded by sources that require a degree of funding match.

1.2. Fraunhofer Institutes cover a range of technical areas including construction, energy, ICT, electronics, surface technologies, photonics, production engineering and materials. Each institute is linked with an academic institute with appropriate technical expertise and has a leadership team comprising of staff with strong academic credentials. Research is mainly carried out by post graduate and post doctorate staff who typically use the institutes as a stepping stone to working in industry.

1.3. The work undertaken at Fraunhofer Institutes covers the full range from fundamental research to full industrial implementation, but is often focused in taking technologies from the point at which they have been demonstrated in an academic environment to a level of development at which industrial application is feasible. Individual projects have strong industrial “pull” and clearly defined routes for implementation and exploitation.

1.4. Each Fraunhofer Institute has a degree of independence in terms of technical specialism, and has the ability to build their own expertise and capabilities to best suit their understanding of regional and national strategic requirements.

1.5. The “Fraunhofer” brand is well established and recognised worldwide, which is in contrast to other, more academically focused organisations in Germany that claim to operate in similar fields to the Fraunhofer Institutes. The global recognition of the Fraunhofer name is beneficial in achieving involvement of individual institutes in, for example, EU Framework projects as they are often the partners of choice for less well established and promoted organisations.

1.6. Individual Fraunhofer Institutes have developed strong, strategic relationships with relevant industrial companies, and it is not unusual for such companies to have their own ring-fenced facilities within a Fraunhofer Institute.

1.7. The Fraunhofer model involves a significant, continuing investment of public funds at the state and federal level. These funds have been restricted in some German states recently, limiting the activities of individual Fraunhofer Institutes.

1.8. Fraunhofer Centres have been set up outside of Germany (eg US and France). These Centres have not experienced the same level of success as the institutes in Germany.

1.9. Applying the Fraunhofer model in the UK, by setting up a new series of research centres, is unnecessary and potentially catastrophic, as it will replicate the existing, successful infrastructure of research centres. However, strategic investment in core funding of existing research centres will be a cost effective way to ensure these organisations will have a significant impact on UK industry and the UK economy.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1. There are no directly equivalent Fraunhofer-type research centres in the UK, in terms of ownership and governance. However, there are UK research centres with the same objectives of working with both industry and academia, to ensure new technologies are refined and implemented in a low risk manner.

2.2. Many of these UK research centres are highly successful and effective, developing technology over the long-term, providing industry worldwide with support, and operating without core public support.

2.3. Where these UK research centres differ from the Fraunhofer Institutes is this lack of core funding, which limits their ability to: o Support the national industrial strategy. o Invest in new facilities and equipment. o Renew core knowledge.

3. What other models are there for research centres orientated toward applications and results?

3.1. The models for research centres can be defined in terms of ownership, governance and funding. The existing research centres in the UK operate on a range of models based on different combinations of these three factors.

3.2. Ownership may be public, industrial sector, or private.

3.3. Governance may be public sector, university owned, company limited by guarantee, charity, corporate, public company limited by shares or private company.

3.4. Funding model may be based on proportions of public grant (for Public Sector Research Establishments with a national role), bid for public funding, and industrial funding in the form of research contracts and for some organisations, membership fees.

3.5. The key common factor for the infrastructure of research centres in the UK is not their specific operation model, but their role in providing an applied research and development service to industry.

3.6. France has recently carried out a similar exercise to develop “Fraunhofer-like” research centres. They too have a complex existing infrastructure, and introduced core funding for key organisations to allow them to perform a more strategic national role. The selected organisations, with a range of operational principles, have been designated “Institute Carnot”, and this brand is being actively promoted.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1. The coordination of a UK-wide network of innovation centres is consistent with the aims and objectives of the Technology Strategy Board (TSB). Therefore, it is the obvious body to undertake this role.

4.2. Setting up a new independent body to undertake the role will cause overlap with the TSB and confusion, and be an inefficient use of resources.

4.3. Providing coordination from a government department, such as the Department for Business, Innovation and Skills, will again cause overlap and potential conflict with the TSB. It will also represent a reversal of policy regarding the administration of UK public funds for applied research and development.

5.1. The introduction of Fraunhofer-type institutes will enhance the activities of the existing infrastructure of research centres in the UK, provided these institutes build on and enhance the capabilities and reputation of existing, high performing UK research centres.

5.2. The introduction of a totally new infrastructure of Fraunhofer-type institutes, duplicating the technological scope of existing, effective research centres, will have a detrimental effect on the viability of both the existing and the new centres.

6. Declaration of interests

6.1. This submission is made by TWI Ltd., a Research and Technology Organisation.

6.2. TWI considers itself to be an appropriate organisation to become a Technology and Innovation Centre in High Value Manufacturing, under the proposed new network.

6.3. TWI is an independent research and technology organisations. With headquarters at Granta Park near Cambridge since 1946, TWI provides industry with engineering solutions in structures incorporating joining and associated technologies (surfacing, coating, packaging, cutting, etc.) through information and technology transfer, consultancy and project support, contract R&D, and training, qualification and personal membership.

6.3. It has regional UK offices and research facilities in Middlesbrough, Rotherham, Aberdeen and Port Talbot. There are also offices and training facilities in USA, China, Malaysia and the Middle East.

6.4. TWI is a non-profit distributing company, limited by guarantee and owned by its Members. It can therefore offer independent advice and is internationally renowned for employing multidisciplinary teams to implement established or advanced manufacturing technology or to solve problems arising at any stage - from initial design, materials selection, production and quality assurance, through to service performance and repair.

6.5. Over 600 skilled staff are dedicated to helping industry. Some 2000 companies and organisations – representing virtually all sectors of manufacturing industry from over 60 countries around the globe – benefit from TWI services. TWI also collaborates with more than 20 universities in the UK and worldwide.

6.6. TWI undertakes contract R&D in confidence for both industry and governments. It can offer individual experts or teams to help solve problems in manufacturing. It will send its specialists anywhere in the world at short notice on troubleshooting missions.

6.6. Know-how within TWI covers materials properties and applications (ferrous and non-ferrous metals, polymers, ceramics, advanced composites, structural integrity, fracture, design and NDT), joining, fabricating and assembling technologies (welding and cutting processes, surface engineering, brazing, soldering, adhesive bonding, electronic packaging), and manufacturing (project management, decision support, manufacturing systems, health and safety, quality assurance).

TWI Ltd

November 2010

Written evidence submitted by Harper Adams University College, Newport (TIC 58)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK? 2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 3. What other models are there for research centres oriented toward applications and results? 4. Whose role should it be to coordinate research in a UK-wide network of innovation centres? 5. What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research?

This submission accepts that the Fraunhofer model would be highly applicable to the UK but does not currently exist within the agri-food sector. Within this sector, the translational pipeline of fundamental research (often undertaken in Universities and Research Institutes) through to delivery of innovations to end users has been fractured in recent years. This has been contributed to through the loss of support for the agricultural extension service (ADAS) and closures and downsizing of Public Sector Research Establishments supporting agriculture and horticulture. This submission is focussed mainly on the need and benefits of a TIC within the agri-food sector in the UK addressing question 5.

1. Key challenges of the 21st Century. The key drivers for change within agriculture this century are generally acknowledged to be climate change and population increases. These have both been well documented elsewhere and the challenges well articulated [1]. 2. Innovation. It is also widely acknowledged that meeting the challenges of food production will require sustained improvements in all aspects of agriculture through innovation and investment in technologies. The UK model for addressing these challenges is primarily through Government support of research in Universities and a network of publically funded research institutes, augmented by private sector research activity. Industry support for research is provided in part through a levy on agriculture collected via the Agriculture and Horticulture Development Board. 3. Changes in UK agriculture. Changes in technology have played a central role in productivity within the agricultural sector over the last 50 years within the UK. Various factors have been used to assess agricultural production over this period but changes in technology influence these measures over time [2]. Use of total factor productivity (TFP) overcomes these limitations [3]. Barton and Cooper [4] were the first to use the method to assess US agriculture whilst in the UK the method was first applied by the Central Statistical Office in 1961 [5]. 4. Growth in UK agriculture. Using TFP, [6] showed that growth in UK agriculture between 1953-2000 was 1.68% per annum until 1984 after which it declined to 0.26%. Comparisons with other leading EU countries showed that the UK growth figures had fallen behind. The authors concluded that this decline was in part due to reduction in expenditure on research and development, fewer patents, less growth in farm size and to the loss of the public agricultural extension service. Despite this, closer scrutiny of the data suggested that output from UK farms has doubled in nearly half a century (all of this increase occurring between 1953 and 1984) whilst output per unit of labour has increased nearly 7 fold [6] 5. Population growth. Over approximately the same time period, the global population has increased from 2.6 to 5.9 billion and grain production per capita increased by approximately 12% [7].Innovation underpins these increases in productivity. Growth in productivity has been achieved through various means including development of improved outputs and reduced inputs. Historically, the drivers of change in agriculture have been changes in population (increasing from approximately 56m to 61m between 1971 and 2004 [8] ; technological advances for example the development of technologies for harvesting crops; and more recently the predicted change in climate. 6. Agricultural footprint and greenhouse gas emissions. On a global basis, agriculture occupies 5023MHa of land [9] and has increased by more than 20 % since 1961 in the developing world, whilst declining in the developed world [10]. Global agriculture is thought to be responsible for between 10-12% of the total anthropogenic emissions of green house gases (GHG) and methane and nitrous oxide emissions have increased by 17% from 1990-2005 [11]. The main sources of these gases are biomass burning, enteric fermentation of ruminants, manure management, rice production, and emissions of nitrous oxide from soils [11]. 7. Managing resources. The conflicting requirements of increased productivity and reductions in GHG emissions have created challenges for global agriculture. Significant changes will be required in major production systems such as rice and livestock to reduce methane production. Similarly, changes in the way the nitrogen fertilisers are used in crop production will be needed to reduce nitrous oxide release from soil. Management of fertiliser to ensure that nutrients are not wasted as described by Dalal [12] and Follett [13] will contribute to reductions in nitrous oxide emissions. 8. Water management is an area of concern for global agriculture. Approximately 18% of crops now require irrigation [14]. Climate change will both increase this demand in many parts of the world and create new challenges in areas where rainfall is predicted to increase in terms of capture and storage. A recent report in the UK [15] ‘indicates that agriculture faces considerable future challenges in meeting a range of demands of which water resource availability for crop and animal production, flood control and climate change are prominent’. 9. Climate change is driving a move away from the use of fossil fuels and exploring the use of alternative sources of energy. A vast array of plant species can be used for energy production including grain, cellulosic crops and tree species [16],[17],[18],[19],[20],[21]. Their growth and processing will require major adaptations by the agricultural community. 10. Innovation in agriculture. Distinction is often made between innovation of products (for example harvesters, tractors, seed, chemicals etc) which might be considered as the ‘hardware’ of agriculture and the ‘software’ which could be innovations in application of, for example, decision support systems for control of pest or diseases. Other taxonomies of innovation include mechanical innovations (machinery), chemical innovations (herbicides, fungicides, fertilisers), biological innovations (new varieties, biocontrol agents), agronomic innovations (new production systems), biotechnological innovations (genetic modification, treatment of wastes) and finally informational innovations (conduits for knowledge exchange). 11. Barriers to adoption. Each of these categories can have barriers to adoption and include many factors such as economic, political, legal, social and occasionally cultural aspects. Production of a new pesticide is influenced by the economics of development and marketing, the legal requirements of registration, acceptability by both consumers and increasingly the supermarkets [22] and acceptance by the European Commission [23]. Similarly, innovations for new varieties need to demonstrate an improvement compared with existing varieties [24] whereas new machinery, whilst needing to meet health and safety regulations would normally be adopted based on economic returns. Whilst many barriers appear to influence the uptake of innovation, perhaps of equal significance are the characteristics and attitudes of those who adopt the innovations [25]. 12. The innovation process. Innovation has been thought of as a linear process of discovery, development and marketing [26] although increasingly this is being shown not to be the case and that interactivity and networking across the innovation chain of researcher to end user can lead to innovative solutions [27]. 13. UK Government strongly supported R&D efforts in applied agricultural/horticultural research in the twentieth century which aimed in broad terms to improve the efficiency of production. Research funding from MAFF, then Defra was used by PSREs to undertake strategic work upon which more applied research could be based, funded by levies on farmers and growers. Justification for this expenditure was that the ‘public-good’ nature of this work was justified due to the market failure of the industry. Although data are not easily available for the innovations directly relating to this Government research, many of the current practices and products in UK agriculture can be traced back to this work. Varieties of major crop plants grown today such as wheat and potatoes were produced by public sector breeders as were many vegetables and fruits grown in the UK. Production systems for mushrooms and fruit were developed in UK institutions as were widely used decision support systems for pest and disease forecasting. Biological alternatives to chemical pesticides have been developed for a range of pests and diseases. 14. USA. In comparison, data are available in the USA for public sector research in agriculture which has been shown to give high returns [28]. Public funding of research introduces a political dimension to innovation. Various studies have analysed the political economic considerations linked with assessing levels of public funding for developing agricultural innovations (e.g. [29]). They argued that the political economic system would affect the level of R&D investment and the proportion that the producers and taxpayer should pay and could vary from 100% taxpayer to 100% producer support. These funding extremes may well influence the innovations that result from this work. The relative involvement of the public and private sector may also be influenced by the level of return one or both parties might expect. One aspect that influences investment in research is the potential generation of intellectual property. 15. Adoption of innovation is the ultimate measure of value of an invention and considerable effort has been expended on modelling the adoption and diffusion of innovation. Analysis of innovation diffusion received much attention by social scientists in the latter quarter of the 20th century, mainly due to its significance for economic growth. Innovations in agriculture have been of particular interest, possibly due to the unusual situation where decision makers are typically individual households, as opposed to firms. Household behavioural issues are therefore thought to be central to understanding the observed processes and outcomes. [30]. 16. An example of adoption was a study on the diffusion of hybrid-seed corn [31], [32] which appears to have influenced both the methodologies and theoretical framework for later studies [33]. Key questions relating to the variables relating to innovativeness, the rate of adoption and the role of different communication conduits were all addressed within this study. 17. UK bioscience research The BBSRC Strategic Plan states that “UK bioscience ranks with the best in the world [34]. [BBSRC] will keep it that way by funding high quality research and training across [their] remit. [BBSRC] will foster world-class institutions which are engaged internationally and have access to state-of-the-art facilities. A robust, modern and outward facing research base, which meets user needs, is essential to derive the greatest impact from the public investment in science.” 18. BBSRC supports research to increase the efficiency and sustainability of crop and animal production and reduce waste in the food chain and will boost national capability in research underpinning food security through major infrastructure and facilities, and by ensuring that the UK skills base has appropriate critical mass and specialist research expertise. BBSRC acknowledge that ‘There is a need to accelerate the translation of research into practice. [BBSRC] will tackle this through establishing public sector programmes, such as precompetitive crop germplasm improvement to underpin commercial plant breeding, aligning academic research more effectively with industry needs, and increasing translational skills’. BBSRC ‘will also seek opportunities to translate knowledge generated through UK bioscience to increase sustainable food production in developing countries’. 19. The translational pipeline where basic research funded by research councils is translated into strategic and applied solutions to production issues has been weakened over the last 2-3 decades through loss of PSREs and also public sector funding of the UK extension service ADAS. Translational activity within the UK is currently fragmented and lacks coordination. 20. Business engagement with research within the food and agriculture sector has been strengthened recently through the introduction of the Technology Strategy Board Sustainable Agriculture and Food Innovation platform which originally aimed to provide £75m for a programme of strategic/applied research themes [35]. Business and academia have generally welcomed this initiative which will make a significant contribution to funding industry led research involving public sector research providers. This programme may not however create a strategically driven link between universities/research institutes and industry. 21. Requirement for TIC in agriculture. Despite the investment in bioscience research in the UK of £800m in plant and animal sciences since 2003 [36] there is still a specific need to stimulate innovation in food production and the extended supply chain and to identify a mechanism for translation of basic research to practitioners and end users. 22. A TIC in agriculture would build on the UK strengths in plant, crop and animal sciences. It would facilitate much needed inter- and multi-disciplinary research (in particular between engineers and agriculture researchers e.g. for precision agriculture). It would create a focus within the UK by being positioned between end users in agriculture, the extended agricultural supply chain and basic research providers currently located within Universities and Research Institutes. The TIC would engage with practitioners, academia and policy makers. 23. Workforce. Successful innovation is likely to be driven by a well trained workforce building on existing initiatives such as KTPs and the Advanced Training Partnerships currently under consideration by BBSRC. Further training at Masters and Doctoral levels (in particular through the use of professional doctorates) is likely to be required to maximise the impact of a, sustainable TIC. 24. Funding should be committed for sufficient time to allow for strategic planning and delivery of a TIC. Funds could be sought from Government (for core funding and also via grants and contracts), but also from industry (although the agricultural supply chain comprises a higher proportion of smaller companies compared to other sectors and may therefore be more challenging to secure), through IP and possibly through the newly created Local Enterprise Partnerships. The Fraunhofer model provides a sound model on which to base an agricultural TIC. No such institution exists in the UK at present. 25. Impacts of a TIC would be measured against IP generation and use, by determining changing practices and behaviour and by the likely return to productivity improvements witnessed in the last century.

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Ethanol as fuel: energy, carbon dioxide balances, and ecological footprint. BioScience, 55, 593-602. [21] Eidman, VR, 2005. Agriculture as a producer of energy. In Agriculture as a Producer and Consumer of Energy, J.L. Outlaw, K.J. Collins, and J.A. Duffield (eds.), CABI Publishing, Cambridge, MA, pp.30-67 [22] Assured Produce (2009). http://www.assuredproduce.co.uk/ap/. [23] European Commission [Online] (2008). Factsheet: New rules on pesticide residues in food.http://ec.europa.eu/food/plant/protection/pesticides/explanation_pesticide_residues.pdf [24] Plant Varieties and Seeds (2009). http://www.defra.gov.uk/planth/pvs/policy/index.htm [25] Rogers EM, 1995. Diffusion of innovations 4th ed (New York: The Free Press) [26] Rogers EM, 1962. Diffusion of innovations (New York: Free Press of Glencoe) [27] Robertson M, Swan J and Newell S, 1996. The role of networks in the diffusion of technological innovation. Journal of Management Studies, 33, 333-360. [28] Huffman WE, 1998. Finance, organization and impacts of U.S. agricultural research: Future prospects, Paper prepared for conference Knowledge Generation and Transfer: Implications for Agriculture in the 21st Century,University of California, Berkeley, June 18–19, 1998. [29] de Gorter H and Zilberman D, 1990. On the political economy of public good inputs in agriculture, American Journal of Agricultural Economics 72, 131–137. [30] Feder G and Umali DL. 1993. The adoption of agricultural innovations: a review, Technological Forecasting and Social Change 43 , 215–239 [31] Ryan B and Gross NC, 1943. The diffusion of hybrid seed corn in two Iowa communities. Rural Sociology, 8, 14-24 [32] Ryan B and Gross N. 1950. Acceptance and diffusion of hybrid corn seed in two Iowa communities. Ames: Iowa Agricultural Experiment Station Research Bulletin 372. [33] Ruttan VW, 1996. What happened to technology adoption-diffusion research. Sociologia Ruralis, 36, 51-73 [34] http://www.bbsrc.ac.uk/publications/planning/strategy/priority-food-security.aspx [35](http://www.innovateuk.org/ourstrategy/innovationplatforms/sustainableagricultureandfood.ashx) [36] (http://www.bbsrc.ac.uk/publications/planning/strategy/priority-food-security.aspx),

Declaration: Harper Adams University College is a provider of higher education and research to the land use sectors.

Professor Peter R Mills Vice Principal Harper Adams University College Newport

02 December 2010

Written evidence submitted by University of Leicester (TIC 59)

Technology Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1. The Fraunhofer model is to have centres, largely independent of the academic technology base, at the cornerstone of national technology support services for industry. Led and at least partly funded by industry they provide facilities and expertise for applications driven contract research, either for individual private clients or as part of an industry agreed non‐competitive program. In truth the institutes are as valued as a central, highly visible, first port of call for consulting and problem‐solving expertise as for their abilities to perform significant research programs. This is especially important in mature, post∙competitive, technology areas such as manufacturing engineering where the innovation base struggles to maintain and support expertise.

1.2. One underpinning feature of the German industry base, not present in the UK, is the unusual dominance of stable medium sized businesses that form the bulk of Fraunhofer clients. The frequent mergers, acquisitions and evaporations that effect both SME's and multinationals undermine the core networks that support the long term viability of Fraunhofer Institutes and has made "technology clubs" hard to sustain in the long term in the UK. Equally, in general German industry has a much stronger track record that the UK in investing in collaborative R&D.

1.3. Fraunhofers are totally focused around industry needs and tend to be built around transfer of proven technologies and solving pragmatic and often pan‐sector problems leading to solid rather than innovative technologies that gain recognition for their international excellence, the main focus of UK science policy for many years. They also aim to support existing businesses rather that germinate new ones, again a key focus of UK policy. As such Fraunhofer centres are poor role models for the commercialisation of research and are better seen as the technological end of a business support system.

1.4. Nevertheless, there is a role for Fraunhofer type institutes in the UK where there is a clear long term industry pull and appetite for pre or post competitive investment. In order to work efficiently they should be:

• Inclusive, collaborative and open to all potential industry partners and technology providers and not inwardly focused around a small number of HEIs/industrial concerns • Built around generic technology need rather than proprietary solutions • Aligned but non competitive with the innovation strategy and academic Knowledge Exchange base • Financially viable in the medium term

2. Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

2.1. The UK had a series of government run industry facing research institutes until the 1980’s after which most were privatised, closed or amalgamated into academic institutions. There are a number remaining such as Campden BRI (food), BTTG (textiles) and PERA (Production Engineering) that work in a similar way to Fraunhofer centres with a combination of Government funds, contract research and membership subscriptions. Although they appear to work well to support their industries they now, as CROs, interact very little with the innovation base and do little to promote emerging technologies arising from UK based institutions. It is fair to say that these institutions have suffered from low prestige over the last 20 years yet remain a valuable anchor for near‐market support.

3. What other models are there for research centres oriented toward applications and results?

3.1. The codification of the University research base as an economic asset has been transformed by the Higher Education Innovation Fund (HEIF) in particular over recent years and now there is a very significant, but currently threatened, body of research commercialisation activity across the academic innovation landscape. The link between HEIF and productivity, measured by HEBCIS, encourages technology exploitation especially in areas where technology is best exploited through exclusive licensing or generation of high growth potential spin‐out companies. The introduction of Impact as a measure of research quality due to be introduced in the coming years will further ensure that Universities operate as broad innovation centres, providing that support for Knowledge Transfer & Exchange activity is preserved.

4. Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

4.1. The only single body with a breadth sufficient to co‐ordinate a national network of technology centres in the UK today is the Technology Strategy Board (TSB). However, many industries also have representative organisations and they too should have a role in defining research directions of innovation centres. Industry has a key responsibility here to specify its requirements and participate fully in pan‐sector collaborative research rather than solely seeking programs that support proprietary research interests.

5.1. It is crucial that Fraunhofer type Technology Innovation Centres (TIC’s) add value and focus to existing technology exploitation programs rather than replacing or undermining the current flow of innovation through the excellence led national research programs. The Public Sector Research Establishments (PSRE) are especially vulnerable as they tend to lie between the academic and the industry led sectors. However, it could be argued that many of the resources expended on PSREs could be split between the academic centre for emerging and underpinning technologies and the TICs for post competitive industry facing programs.

6. Declaration of Interests

6.1. The University of Leicester has no specific interests to declare but would be willing to help support and collaborate in a future TIC if and as appropriate to its skills and expertise.

Professor K Schürer Pro Vice Chancellor – Research and Enterprise University of Leicester

02 December 2010 Written evidence submitted by the Surrey Research Park, University of Surrey (TIC 60)

Technology Innovation Centres

1. The Government has asked for views about Fraunhofer Institutes. I am pleased to respond in relation to the question: whose role should it be to coordinate research in a UK‐wide network of innovation centres?

2. The view of the Surrey Research Park about Fraunhofer Institutes is that they are widely regarded as a success and achieve in Germany some positive contributions to economic development. However, in the UK what has developed over the last 30 years are a number of science and technology parks. These sites champion an enterprise led innovation programme which engage SMEs in the innovation system and have helped with the gradual reorientation of some R&D institutes towards serving the emerging sector of technology‐intensive SME.

3. This evolution represents a shift in the way innovation policy has been altered through the influence of real operations on the ground from focusing on technology transfer to an enterprise‐based innovation system which utilize the business skills to innovate.

4. Science parks such as the Surrey Research Park see many innovative companies working at the forefront of innovation using the array of interface programmes already in place. They operate pre and full incubation, are involved in creating networks such as Innovation and Growth teams that operate across large sectors of business and with companies of different sizes, are actively engaged with University Research and Enterprises Units as well as supporting larger in a number of ways that are a direct response to requests from business. These are effective and do not need to be changed nor is there a need for another initiative. The sensible approach is to build on current activities rather than keep changing and trying “new” ideas.

5. The Surrey Research Park has also attracted a number of R&D facilities from a number of international organisations such as the Mitsubishi Research Centre which selected this Park because of the excellence of work being conducted in the University in its research base. Originally the centre located on the Park because of the University’s Virtual Centre of Excellence in Mobile communications. These research activities far outweigh the value of Fraunhofer Institutes. There should be more incentives for industry to invest in their own open innovation R&D based activities. This strategy is more likely to be productive.

6. The view of Surrey Research Park is that the existing network of science and technology parks in the UK are highly valuable and need equally as much support as new initiatives such as the proposed Fraunhofer Institutes.

7. Most science parks in the UK are local initiatives which have been established in response to local needs and strengths but they work closely with national programmes such as KTPs, KTNs, KTAs and the SBRI programme. It is suggested that the existing framework for organising R&D through the Technology Strategy Board is retained and that the links and support for existing projects such as science and technology parks is enhanced rather than pursue a raft of new initiatives. There is a view that KTPs operate over too long a period for most companies of fewer than 100 people which is about the size where the companies of the future are now beginning to be found. They are also too bureaucratic. Shorter less bureaucratic versions of KTP’s are needed. Also academics are now so overworked they do not have time for dealing with the business community – there have been about 10 requests from the Surrey Research Park to work with university over the last 3 years where academics cannot find the time to help because of the funding system under which they labour.

8. It is suggested rather than create another initiative it would be more sensible to stimulate industrial research by dealing with the definition of R&D used by HMRI which appears as being very narrow which is even difficult for UK tax professionals to understand which means that they are complex for inward investors and they are prone to interpretation by the HMR Inspectorate. This uncertainty and lack of clarity in the definition needs to be resolved. Also R&D is just one part of that process of innovation and is not enough to build economic activity – tax credits need to be available for innovation as well.

9. It is suggested in particular that the funding gap is addressed on an immediate basis because there is a distinct lack of funding to support SMEs that have innovative ideas and products and they are finding it difficult to support shifting from prototype to production without access to finance.

10. At the bottom end of the spectrum this relies on angels but this strata of funding is relatively amateurish. VC is insufficiently international in the UK which means the connection into the wider international economy is weak which does not help our companies. UK banks are very cautious and funds via loan guarantee have excessive interest charges. There should be a greater focus on private investors by providing greater tax incentives for individuals to invest in business creation UK investors are all focussed on the short term – the UK needs long term investment and this can only come out of certainty on policy which currently does not exist because predicting the next move in finance legislation is very difficult. It is suggested that rather than come up with new initiatives the government should provide greater incentive for longer term investment through tax system exempting all capital gains over say 5 – 7 year period – potential benefits from business creation outweigh any loss.

Dr Malcolm Parry OBE Director of the Surrey Research Park University of Surrey and current Chairman of the UK Science Park Association

02 December 2010

Written evidence submitted by LGC Ltd (TIC 61)

Technology Innovation Centres (TICs)

LGC response to the inquiry examining the Fraunhofer as a model for Technology Innovation Centres in this country and its validity in improving commercialisation of research in the UK.

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 Fraunhofer-Gesellschaft is the largest European organisation for promoting and undertaking (mid-range) application-oriented, fundamental and innovative research of international relevance. 1.2 This research is directed to be of practical use to both the public and private sectors and wide benefit to all aspects of society. 1.3 Established over 60 years ago, now more than 80 research units, including 59 Fraunhofer institutes representing 7 ‘technical macro application’ groups, at different locations throughout Germany. 1.4 It employs around 17,000 individuals, most of whom are scientists and engineers. 1.5 Its (approx 60bn Euro) income is derived from the public sector (approx. 40%) and through contract research opportunities (approx. 60%). 1.6 It provides a repository of ‘know-how’ for companies that do not maintain their own R&D departments. 1.7 It provides a platform for personal and professional skills development of relevance to itself as an organisation, industry and others. 1.8 It operates through a Senate which dictates strategy and a decision-making Executive Board assisted by a Scientific and Technical Advisory Board. 1.9 It is unlikely that a straight adoption of the Fraunhofer model, or indeed any other Fraunhofer-type models, would be suitable for the UK innovation system as each model has developed different approaches and adapted over time. The principle of development and exploitation of scientific ‘know-how’ for delivering economic growth however cannot be in doubt. 1.10 The Fraunhofer model has been largely only responsive to current traditional (not emerging) trends (typically policy-driven) and has traditionally been slow-moving to change due to its size and ‘top-down’ management approach. 1.11 The UK failure to innovate rests predominantly with the ‘translation’ of its science base ideas into commercial reality and with their ‘intellectual protection’. Whilst some organisations are positioned to address these innovation issues, in many there remain difficulties in establishing successful collaborations between the public and private sectors, largely as a result of the differing objectives, timescales and management systems. This is where the focus for any adopted/established model for the UK needs to be directed.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 The UK has a diffuse/distributed innovation system. The nearest centres to Fraunhofer centres probably lie with the intermediate research and technology organisations (RTOs) (as acknowledged by other global economies such as the United States). However, the public sector research establishments (PSREs) and centres such as the advanced manufacturing centre and integrated knowledge centres (IKCs) bear some elements of similarity. 2.2 Turnover for the RTOs is approx. £3bn, employing approx. 22,000 individuals, some 60% of which are research scientists. 2.3 RTOs provide a highly skilled workforce and bridge the ‘translation gap’ between academia and public and private sector end-users of technology, i.e. they span technology readiness levels 3-7/8, particularly where there is market failure. 2.4 The majority of RTOs have a sectoral focus. 2.5 There exist both public and private sector-based RTOs, the latter especially being independent, more market responsive and less constrained strategically, and more competitive. 2.6 However, RTO sector coverage is patchy and this may limit the ability to maintain delivery of their existing portfolio and be able to fully address emerging industry needs where the UK could potentially leverage a sustainable, competitive advantage, globally.

3. What other models are there for research centres oriented toward applications and results?

3.1 The Carnot Institutes, France; the Inter-University Micro-Electronics Centre (IMEC), Belgium; the (joint Dutch-Flemish) Holst Centre, Netherlands; the GTS Institutes, Denmark; the Industrial Technology Research Institute (ITRI), Taiwan; the Electronics and Telecommunications Research Institute (ETRI), South Korea; and the National Institute for Advanced Industrial Science and Technology (AIST), Japan, all share the need to bridge technology development and its commercialisation. 3.2 However, each national entity varies in its age, size, policy drivers (and hence focus) and management approach. 3.3 The Carnot institutes were established recently to address the country’s weaknesses in collaboration within, and between, sectors. 3.4 The IMEC strategy was established specifically to address a relatively poor research establishment environment and technology needs 3-10 years in the future. Efforts are directed early in the lifecycle to maximise co-operative working and maximise commercial benefit opportunities. 3.5 The recently established Holst Centre (part of TNO but an IMEC/TNO collaboration) focuses on advanced micro-electronics. Efforts are directed particularly at demonstrator level. 3.6 The GTS Institutes are a loose network of nine organisations which are predominantly industry-funded. Whilst they appear to benefit from shared experiences and easier collaboration, they suffer from no unified governance system. 3.7 ITRI was established through the combination of three existing research- oriented organisations. Growth has been linked to the semi-conductor and display industries, but its current (still relatively conservative) technology development and industry service activities are far broader. 3.8 ETRI was established as a result of the consolidation of two existing research institutes. Its focus is world leading (human) information technology. It prides itself on creative management through continuous change and innovation, but this has placed itself in competition with the country’s universities and too far from market. 3.9 AIST was established through the amalgamation of fifteen existing public research establishments. It remains predominantly public-funded. It focuses on six research fields, including (unlike most of the other Fraunhofer-type centres) life sciences and biotechnology, and metrology and measurement science. The research initiatives are ‘bottom-up’ driven, time-limited and flexible; they seek mid- to long-term continuity.

4. Whose role should it be to co-ordinate research in the UK-wide network of innovation centres?

4.1 Government needs to set the over-arching innovation framework and maintain sustained support. 4.2 The private sector needs to respond to the set framework challenges and provide market pull. 4.3 The lead Government department should be BIS, enabling delivery through its innovation-driven arms-length body, the Technology Strategy Board. 4.4 An independent governance structure should be required for each TIC but there needs to be strong oversight of the TIC network co-ordination/alignment and prioritisation of investment.

5.1 The effect will be dependent upon the type/mode of innovation framework established. 5.2 There would be concern if there was duplication or potential for competition with any existing establishments or centres by the establishment of the ‘new’ innovation centres. In this context a ‘hub and spoke’ model has been muted, but the logistics of governance, strategy and financing such a model would need careful consideration on a case-by-case basis. 5.3 The establishment of any framework(s) of collaboration of existing RTOs would appear to bear greatest similarity to the model adopted by many other country innovation centres. Such a model would leverage the economic and wider direct and indirect benefits of the RTO sector that have been well defined in a number of recent impact documents derived for the sector. Clearly, any innovation centre model not utilising the appropriate sector benefits would have a significant associated cost in economic and social terms for existing RTOs. 5.4 In newer emerging technology areas, prioritised as of potential national importance but where currently RTOs do not exist, consideration would need to be given to either diversification of an existing supplier network (using the benefits of their existing infrastructure and working model) or establishment of a new innovation centre.

Declaration of interest: LGC can be considered as a private sector RTO. With the benefits this brings and its designated national measurement institute (NMI) role underpinning the translation of chemical and bioanalytical measurement for industry take-up and provision of training in related measurement science, it would consider itself suited to have a potential role in technology innovation centres.

LGC Limited

02 December 2010

Written evidence submitted by LGC Ltd (TIC 62)

Select Committee Enquiry into Fraunhofer Institutes

What is the Fraunhofer model and would it be applicable to the UK?

1. The Fraunhofer Society (Fraunhofer‐Gesellschaft zur Förderung der angewandten Forschung) is a German research organization with 59 institutes spread throughout Germany, each focusing on different fields of applied science (as opposed to the Max‐ Planck‐Gesellschaft, which works primarily on basic science). It employs over 17,000 mainly scientists and engineers, with an annual research budget of about €1.6 billion. The organisation has six centres in the United States, under the name 'Fraunhofer USA', and three in Asia.

2. In Germany, some basic funding for the Fraunhofer Society is provided by the state (the German public, through federal government together with the German Länder, "owns" the Fraunhofer Society), but about 60% of funding is earned through contract work, either for government sponsored projects or from industry. The remaining 40% of the budget is sourced in the proportion 9:1 from federal and state (Land) government grants and is used to support preparatory research.

3. The size of each institute’s budget is dependent on its success in maximizing revenue from commissions. This serves both to drive the realisation of the Fraunhofer Society's strategic direction of becoming a leader in applied research as well as encouraging a flexible, autonomous and entrepreneurial approach to the society's research priorities.

(Source: http://www.fraunhofer.de )

Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective? What other models are there for research centres oriented toward applications and results?

1. The University of Plymouth is not currently aware of any Fraunhofer‐type institutions in the South‐West region, and indeed none are listed within the UK by the Fraunhofer society. 2. The University of Plymouth is a key partner in the Tamar Science Park, and the Pool Innovation Centre, established in 1996 and 2010 respectively. Both centres comprise business incubation services, as well as facilitating access to University expertise in new product development. Centres such as these provide a sound basis on which to develop Fraunhofer‐type models in the near future. 3. The Fraunhofer focus on applied research is complimentary to the current agenda associated with publicly‐funded research, placing a great deal of importance on real‐world impact and return on investment. 4. The Fraunhofer model would be beneficial for smaller businesses (with no R&D arm), in allowing them to work in partnership with other businesses in the area to develop new technologies which would be mutually beneficial. 5. Universities, through the institutes, would be able to leverage income through contracted work, Intellectual Property rights, or a stake in the resulting business or product. 6. With Intellectual Property a potential key economic driver in the commercialisation of research, it is vital that the results and recommendations of this enquiry link with Ian Hargreaves’ ongoing review of Intellectual Property regulations for growth

Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

7. As mentioned above, the German model is that of a co‐ordinating society overseeing a network of institutions focussing on different fields of applied science. In our view however, individual universities would be best placed to coordinate institutions in their regions, based not only on individual subject areas, but instead on the broad range of expertise available to them, and tailored to the regional economy. 8. The University of Plymouth, for example, would be best placed to lead on a Technology Innovation Centre based around our expertise in Marine Renewable technology research and Sustainability. This would leverage interdisciplinary research expertise through our new Institute for Sustainability Solutions Research, with access to expertise from across all subject areas. It would also combine with our work in the region with PRIMaRE (The Peninsula Research Institute for Marine Renewable Energy) and the Wave Hub ‐ an offshore testing platform in Cornwall for wave technology and energy.

9. If government is to encourage the development of Fraunhofer‐type institutions, it is important that existing work is not duplicated. However, we see an opportunity whereby existing institutions focussed on basic science could be encouraged to share outcomes with these new institutes in order to develop practical applications. 10. It is not difficult to imagine a model whereby Fraunhofer‐type institutes work as part of, or in partnership with, existing research institutes. Again, the role of IP regulation in this model would need to be clarified by government, or within the institutions themselves.

University of Plymouth

02 December 2010

Written evidence submitted by One North East (TIC 63)

TECHNOLOGY INNOVATION CENTRES

Introduction

1. One North East is the Regional Development Agency for the North East of England. Since our inception we have been implementing a strategy based on the region’s unique strengths and economic make up by enabling the generation of growth in new markets to build on the strengths in our traditional industries. To do this we have been working with public and private sector partners to enable the transformation of industry through investment in innovation and technology infrastructure.

2. Innovation is key to economic growth, retaining competitive advantage and accessing new markets. We believe that exploiting the indigenous strengths of the North East in innovation, enterprise and skills has driven local and UK economic growth. Continued investment in this agenda where the UK has competitive advantage will enable the UK to continue to compete with the best in the world, become the location for new sustainable industries and deliver substantial private sector job creation.

3. One North East therefore welcomes the proposal for a network of Technology Innovation Centres (TICs) in the UK but cautions that economic growth cannot be achieved through investment in technology alone. Technology is only one component of an innovation system be it at a local, UK or global level.

4. Declaration of interests: One North East set up CPI and Narec as Section 5 companies; has invested Single Programme in their development since their inception; and takes a place as an Observer on each of their Boards.

What is the Fraunhofer model and would it be applicable to the UK?

5. The key gap in UK innovation infrastructure is facilities, finance and expertise to support the translation of research and development into commercial products and processes; through programmes to prototype, demonstrate and scale up. This requires investment in facilities and people that can work with businesses particularly SMEs, and the knowledge base. This is particularly important for certain types of industry and for the North East economy.

6. One North East has been implementing a £200m innovation and technology programme since 2002 under the umbrella of the Strategy for Success. One North East’s role has been to provide leadership and work with others to deliver sustainable economic growth in North East England and as such has invested heavily in the region’s capability to achieve industrial transformational change.

7. We have been pursuing a sustainable green economy in the North East and have growth programmes based on industrial and technological strength in the following areas: energy and the environment; greening the process industry; healthcare and health science. In addition design, digital and software have been key enabling industries. These priorities have been subject to refinement into niche areas of unique expertise e.g. electric and low carbon vehicles, industrial biotechnology, offshore wind and printable electronics.

8. One North East welcomes the plan to develop a national model and sees this capacity building across the UK as an opportunity to enable the UK to compete in high value and growth global markets.

9. In order to deliver this the UK needs a strategy and funding programme over a sustained period that spans individual CSRs. This is essential to enable true economic impact and institutional change.

10. As the innovation gap indicates these centres need to sit in the close to market, pre-commercialisation translation stage. They need to operate at scale and their location needs to be close to industry.

11. The investment required to take a product to market is significant and generally led by the private sector. In our experience of refining our priorities and interventions it is clear that technology and innovation centres are more important for some technologies and industries than others.

12. There are market failures in many new and emerging markets and technology platforms. Where these capabilities are important, often the principal requirement is for large scale open access facilities e.g. process plant, blade testing. This requires significant and sustained capital investment that SMEs and the private sector alone will not provide. A point recognised in the funding model of the Fraunhofers.

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

13. One North East has been implementing a programme of investment in Centres of Excellence since 2002. The Strategy for Success set the framework for these interventions. It was industry led and informed by a review of industrial and academic strengths conducted by Arthur D Little Ltd and a review of UK and international technology and research institutes.

14. It set out North East strategic priorities for new institutional arrangements to overcome barriers to growth. To deliver this agenda we have needed to work in partnership with a number of public and private sector organisations across the whole of the North East; by aligning strategic priorities and investment programmes and working nationally and internationally.

15. The core components of the Strategy were as follows: a. Priorities in areas of North East strength in academic research excellence, the technology base and industry b. A Science and Industry Council to lead this agenda in and for the NE c. Centres of Excellence to be created to be the bridge between research and technology expertise and industry d. A venture capital fund to seed new business – NStar (now North East Finance)

16. Over the period the region has continued to prioritise and refine the programme to reflect changes in the economy, industry, technology and national priorities. The North East now has two core centres, CPI and Narec, which align both the North East and UK strengths. They are Companies Limited by Guarantee set up by One North East under Section 5 of the RDA Act.

17. CPI and Narec were set up to provide capacity in the North East to support businesses to develop new products and processes; to bridge the gap between research and industry; to address multi-disciplinary issues; and to work with businesses in the region and attracting others. They were set up because the North East had a market failure in this space that Centres of Excellence could address and become national assets located in the region but with international standing.

18. CPI is an industrial research centre for the process industries, located with international companies in one of the largest private sector research sites in the UK - the Wilton Centre on Teesside. This centre is central to a network of leading academic research, sustainable processing (including industrial biotechnology) and high value manufacturing in Teesside and other chemical industry centres across the UK and beyond. Printable electronics is a global market forecast to be worth $120billion by 2020. The Printable Electronics Technology Centre (Petec) at CPI is the UK national printable electronics prototyping centre, aimed at bringing new printable electronics products to market quickly by working with industry e.g. DTF and Thorn Lighting.

19. Narec, based in Blyth, is dedicated to advancing the development, demonstration, deployment and grid integration of renewable energy and low carbon generation technologies. Narec’s primary focus is on supporting the development of technologies for the new industries in offshore wind and marine renewables but they also provide national capability on microgeneration, high voltage and smart grids. The Centre is located in the North East in order to be alongside major existing offshore engineering and subsea industries and leading academic centres including the UK’s largest marine engineering school at Newcastle University.

20. Identifying the location for these Centres was crucial. The considerations for each were different as they depended on the individual characteristics of the technology and industry. Both needed to be located close to industry clusters and existing research facilities.

21. The initial capacity building phase has taken us to 2010 and has involved setting up the Centres including governance structures and the provision of core costs to set up and run their organisation. It was very important that the Centres understood their technology, industry and market to invest in the appropriate capital asset base and attracting specialist and respected individuals to work at the centre.

22. The role of the Centres was to bridge the gap between university R&D and innovation in business in the region; to address the intermediate technology gap. They are also now doing this for the UK and international markets and are working in partnership with international centres where there are opportunities for collaboration e.g. Narec with NREL and CPI with Fraunhofer.

23. The Centres now have a diverse funding base and source their income from a range of UK, European and international bodies. Their financial and business models differ but generally involve a balance of public funded research, commercial or contract research and consultancy, and government support (primarily national and regional). This approach provides a level of sustainability and flexibility as the centre is not overly dependant on one funder. This diversity of income streams has taken time to develop from the start up of the centres, for example commercial income only can be generated with marketable expertise and services.

24. We have been working in partnership with national policy makers and delivery bodies such as the Technology Strategy Board to ensure our programme was set in a national context and could deliver benefits to the UK; and with other RDAs to ensure best value from each others investments where activities align.

25. Recognition of the Centres as national assets was further validated in 2009 when they were named by policy makers, national industrial boards and strategies as key to the delivery of technology support to UK industry e.g. Industrial Biotechnology (IB) Demo facility at CPI for IB IGT; PETEC at CPI for the National Printable Electronics Strategy; and the Marine Test Facility at Narec for the Low Carbon Industrial Strategy.

26. National Government allocated over £60m SIF funding since 2009 to increase the capability of the Centres to support the expansion of the asset base and technology offer by these Centres aligned to national priorities.

27. Centres are a key part of the economic future of the UK and will underpin the future competitiveness of some key sectors. This will be achieved through partnership between business and academia securing R&D programmes at centres; scaling up of high value activity in small business; and then securing the UK as the preferred location of the scaling up of advanced manufacturing business.

28. As a result of this work the North East has under gone a remarkable transformation as a result of the long term plan, focus on outcomes and emphasis on the role of innovation and technology in achieving economic growth. A new economic structure has emerged, new partnerships formed and new institutions leading in their respective fields. For example the North East has secured the manufacture of the Leaf vehicle by Nissan and is rapidly developing an offshore wind industry with inward investment by the likes of Clipper Wind and indigenous company growth e.g. JDR Cables and CTC Marine.

29. In 2010 the British Library used its data on patents, trademarks and design rights to research new product development across the UK. The North East between 2000 and 2009 was ranked at the top of the innovation index, generating more per person per pound invested in R&D, than any other region. Businesses in the North East invest an average of £127,982 in R&D per patent, trademark or design right. The research highlighted as an example the Proctor and Gamble Technical Centre, based in the North East since in 1957, which employ’s 300 scientists and engineers and produces 50 patents per year for products on sale all over the world.

30. Challenges remain in sustaining this success as the North East was moving out of the capacity building phase of centres into intensive innovation and business development in particular through supporting the development of new clusters and supply chains. Government must ensure the UK capitalises on the significant capital investments made to date, embeds the benefits in local economies and UK supply chains, and supports flexibilities in education and skills provision to address the new requirements emerging from industry.

What other models are there for research centres oriented toward applications and results?

31. There are a number of international models to consider in a UK context such as those mentioned in the Hauser Review, which include Carnots in France, ITRI and ETRI in Taiwan and Korea respectively and the GTS network in Demark.

32. There are others, such as the VTT in Finland, which focuses on contract research for businesses, providing specialist capacity for businesses and using its international network to supplement its own knowledge base. The TNO organisation located in the Netherlands, also provides another model, as an independent organisation that is focused upon providing results focused research to businesses and government, focused on particular areas of research expertise.

33. As we have developed and refined the North East strategy we have reviewed many models to identify characteristics that can be applied to a new model in the North East. The models we reviewed included the Fraunhofer, Sophia Antipolis in France, Cambridge UK, MIT in the US and VTT in Finland. We have also reviewed international centres in specific markets relative to the North East e.g. renewable energy.

34. No one model was applied and no single model can be transposed to the UK innovation system. Instead the key characteristics and good practice should be identified and applied in the context of UK needs and conditions.

35. It is also important for Centres to be international. They need to be able to compete with their international counterparts, work with them where opportunities arise and be international leaders in their fields.

36. There are also research centres in the UK. In the North East we have supported Centres of Excellence, universities and their research centres to work together to create a stream of support for innovation and technology development, from basic research through to commercial application. For example One North East has funded some industrial liaison activity at the Biopharmaceutical Bioprocessing Technology Centre (BBTC) at Newcastle University and the Durham Energy Institute (DEI) at the University of Durham.

37. It is our view that university led research centres are an important part of the UK research and technology offer but are not best placed to lead. TICs should operate closer to market, operate at scale, be located amongst industry and have a deep understanding of the industry it serves.

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

38. The Government has clearly stated that the Technology Strategy Board (TSB) will lead the delivery of innovation and technology development activity in the UK, and specifically the TIC network. One North East believes it is right that a body independent of Government sets the technology priorities for the UK and that the TSB is well placed to do this.

39. The UK needs a national framework. This must recognise the specific nature of each technology, related industry and its location, the market opportunities and the transformational impact on the way companies and their supply chains do business. Not all technologies will need a Centre and from our experience there is greatest need in capital intensive industries.

40. It is crucial that the co-ordinating body recognises the location of core technology companies and their supply chains and the spatial concentrations of the technology offer. The North East has been doing this in the field of printable electronics, new and renewable energy and industrial biotechnology; and has been working with the rest of the North and Technology Strategy Board to invest in programmes that support the development of supply chains across regional boundaries.

41. The co-ordinating body will need to structure itself and its programmes to build capacity and capability in the UK. It needs to build a critical mass of activity by integrating their investment programmes and interventions to create transformational impact. This is essential if the UK is to compete as a nation in the global market place and to make the most of limited public funding relative to their international competitors.

42. A UK framework needs to recognise that the economic benefit of technology will not be derived from investment in technology alone. Our experience has shown that support is often bespoke and certainly industry and technology specific.

43. A successful intervention by a centre will lead to businesses scaling up their activities and creating jobs within their business. The co-ordinating body must ensure that their organisation has the capacity to work in partnership with specific local institutions and organisations to secure these companies and future private sector investment in the UK. This partnership is important because to embed the benefits of technologies and centres the local business environment needs to understand the growth potential and changing needs of the industry to be able to provide the support to companies e.g. high technology premises, incubation facilities, planning regulations, access to finance, bespoke training.

44. The co-ordinating body will need to build on the significant experience in the UK in doing this, in managing the performance management of Centres and ensuring best value from the significant public investments in capital to date.

45. A strategic view of the UK research landscape and how it relates to industry is needed and should recognise differences in technology, industry and geography.

46. It is suggested that for TICs to maximise their potential; they must work with appropriate research centres in universities and other bodies (including Research and Technology Organisations) and business networks, to integrate the UK offer with industry need. Business networks will be a very important part of the new landscape and will include cluster and sector bodies, examples include NEPIC and NOF Energy in the North East.

47. TICs will need to be closer to market and more industry driven than Public Sector Research Establishments. They will need to develop a route to market through all Technology Readiness Levels that integrates facilities and centres.

Ian Williams Director of Business and Industry

Lynne Davies Innovation and Business Development Manager

One North East

02 December 2010

Written evidence submitted by Society of Motor Manufacturers and Traders (SMMT) (TIC 64)

TECHNOLOGY INNOVATION CENTRES

About SMMT 1. The Society of Motor Manufacturers and Traders (SMMT) is the leading trade association for the UK motor industry, providing expert advice and information to its members as well as to external organisations. It represents companies throughout the automotive sector ranging from vehicle manufacturers, component and material suppliers to power train providers and design engineers. The motor industry is a crucial sector of the UK economy, generating a manufacturing turnover of £51 billion, contributing over 10% of the UK’s total exports and supporting around 800,000 jobs.

2. SMMT welcomes the opportunity to respond to this inquiry into Technology Innovation Centres (TICs) and would be pleased to provide further information on issues raised in this submission.

Summary of comments 3. In summary the automotive industry supports the formation of TICs and calls for:

• The automotive industry to be a priority area for the formation of a new Technology Innovation Centre – building upon existing work of the Automotive Council, together with the TSB, to identify low-carbon technology opportunities and strengths within the UK. • Adequate funding for both the establishment and continued investment in TICs to ensure a real contribution to rebalancing the economy and future sustainable growth. • Limited funds to be targeted to areas of best value for money – such as the areas of world leading expertise in the UK identified by the automotive industry. • Clarity over future continued funding for TSB innovation competitions – TIC funding should be additional to the previous work of the TSB not instead of if UK competitiveness for R&D and innovation is to be improved.

Introduction 4. In September, the Centre for Economics and Business Research (CEBR) published an SMMT commissioned report on R&D, investment and credit in the automotive sector. The paper reflected on the significant investment automotive companies make in the UK. The report also found that the UK is behind other countries in supporting investment which is intrinsically liked to long-term growth. The role TICs can play as an additional tool to help leverage investment in innovation in the UK is important and the committee should consider their competitiveness in comparison to not just the Fraunhofer Institutes, but similar initiatives in other European member states and globally.

5. As a global industry we have relationships between automotive businesses and academia in many countries around the world. There is significant global competition when business decisions are made on which country they should invest in to undertake innovative research and development. The automotive sector is well-placed for a TIC and it would be an additional factor influencing the attractiveness of the UK as a place to invest and as a place to do business. The world-class research undertaken by the automotive sector in the UK, and its readiness at the forefront of low-carbon technology development (see paragraph 11), give us a strong basis for further development and investment opportunities.

A focus on growth 6. The coalition government has recognised the need to rebalance the economy and the need for private sector investment and job creation. As a dynamic and globally competitive industry, the automotive sector sees itself as key to achieving this ambition. The automotive industry is a significant part of the economy and a contributor to prosperity and growth, exporting more than 75% of domestic production and generating revenues of £55 billion.

7. Government initiatives, such as Regional Growth Funds and TICs are welcomed by industry. However, it is essential that government and industry work together to identify the priority needs and maximise the impact of the fund. It must be ensured that limited funds are not spread too thinly but targeted and focused where they can have the biggest impact.

The Automotive Council – identifying priority technologies and targeting support 8. The UK Automotive Council represents a strong collaborative partnership between industry and government; and has established a clear, long-term strategy for the UK automotive sector. It seeks to make the UK a leading player in the transition to ultra-low carbon vehicles with particular emphasis on encouraging R&D and rebuilding the UK supply-base for current and emerging technologies.

9. The Automotive Council’s Technology Group has developed a long-term technology roadmap that represents a shared vision of manufacturers and suppliers in the UK of how new innovations in reducing CO2 will come to market1.

10. The Technology Group, together with the Technology Strategy Board (TSB) has utilised this roadmap as a basis to evaluate which areas of future low carbon technology the UK has the greatest expertise in, when compared to other global automotive producers2. This evaluation incorporated the views of global automotive manufacturers, suppliers and SMEs – the future purchasers and suppliers of this technology.

11. The headline technology the Council identified the UK as well placed for globally, include:

• Internal combustion engine (ICE) • Energy storage and energy management • Lightweight vehicles and powertrain structures • Power electronic and electrical machines • Intelligent transport systems (ITS)

12. The report also went further, highlighting where in the sub-technologies for each area, the UK has expertise to bring leading technologies to market in the short, medium or long-term if competitive levels of industry and public sector investment are secured. The shorter term strengths relate to where expertise is already within manufacturers or the supply chain. The medium to longer term expertise sits across industry and/or UK academia.

13. SMMT believes this collaborative effort of the automotive industry, government and its agencies provides an excellent basis for the development of a TIC to support opportunities in the UK auto industry. It is a sectoral approach and a basis for directing funding to areas of highest potential for the UK. The UK automotive has significant potential for greater collaborative working, research and development.

Funding and resources of the Technology Strategy Board 14. In 2011, the Automotive Council Technology Group will complete work on funding and academic partnerships; focusing on the development of collaborative projects and partnerships. Industry already has extensive experience of working with a range of partners, for example through TSB competitions, which bring together companies of all sizes and academia, with significant value-added outcomes for industry.

15. SMMT is concerned that the level of funding the TSB will have for collaborative research and future technology competitions is still very unclear. Over the last 4 years, through its Innovation Platform Programmes these have made a very significant contribution to UK industry with relatively modest sums. For instance the most recent major TSB competition secured the development in the UK of three new plug-in hybrid vehicles by Lotus, Nissan and JLR.

16. The delivery of TICs should be additional to and not instead-of continued TSB funding of innovation competitions.

17. Another concern is the adequate resourcing of the TSB in terms of people and funds to take on the responsibility and initial funding for TICs as well as their core programmes. In addition the TSB is also being asked to take on the previous role of the Regional Development Agencies (RDAs) in supporting innovation investment at the sub-national level. Resourcing must reflect this expanded remit.

SMMT 02 December 2010

1 UK OEM Consensus Technology Roadmap, www.automotivecouncil.co.uk/technology-group/strategies 2 Automotive Technologies: The UK’s current capability, June 2010 www.innovateuk.org/_assets/pdf/automotive%20technologies%20-%20the%20uks%20current%20capabilities.pdf

Written evidence submitted by Cancer Research UK (TIC 65)

Technology Innovation Centres

About Cancer Research UK

1. Cancer Research UK1 is leading the world in finding new ways to prevent, diagnose and treat cancer. We are the largest independent funder dedicated to cancer research in the world. Over half of all cancer research in the UK is carried out by our doctors and scientists. Cancer Research UK’s work is entirely funded by the public. We spend 80p in every pound we receive, from over 9 million supporters across the UK, on our work to beat cancer. In 2009/10 we spent £334 million on research, supporting the work of more than 4,000 scientists, doctors and nurses.

2. Cancer Research UK funds research into all aspects of cancer from exploratory biology to clinical trials of novel and existing drugs as well as epidemiological studies and prevention research. As such we support research in a variety of different environments, including university research groups, core funded Institutes, and the Cancer Research UK Centres.

3. In responding to the Committee inquiry, we have answered the questions that we feel are most relevant to our experience.

4. In particular we have provided information on our Centres initiative as an example of a model of investment in research. In this paper we outline the setup, aims and achievements of our Centres to date, drawing comparisons, where relevant, with the Fraunhofer model as a proposal for the Technology Innovation Centres. If the Committee requires further information about Cancer Research UK Centres, we would be very happy to arrange a visit to one of our Centres to provide a better appreciation for how they function, and the benefits and opportunities that they provide. If this would be a useful opportunity, or if you would like further information, please contact Dr Harriet Teare in the policy team at Cancer Research UK on [email protected] or 020 3469 8052.

3. What other models are there for research centres oriented toward applications and results?

Cancer Research UK Centres

5. Cancer Research UK has taken a strategic decision to invest in research infrastructure in up to twenty Cancer Research UK Centres throughout the UK.

6. The Cancer Research UK Centres are 'virtual' arrangements between existing local facilities. They are designed to enhance cancer research in the UK, with strong governing partnerships ensuring that research within the Centres leads to improved patient benefit and public health.

7. The Centres initiative does not follow a single model; each Cancer Research UK Centre is different, recognising the location’s unique strengths and opportunities for conducting high quality cancer research that will feed through to patient benefit.

1 Registered charity no. 1089464

8. Centres work on a local level with universities, NHS Trusts, cancer networks, Cancer Research UK, and other charities and on a national level with government and industry. They are Centres of Excellence, designed to deliver world-class research, to improve patient care and to provide greater local engagement. To date, sixteen Centres have been approved, with more in the process of review. Cancer Research UK has committed £21.3m pa to the Centres approved so far, though this figure may fluctuate in future years.

9. The Centres Initiative is one of our highest priority initiatives and plays a major part in our 5-year research strategy. The Centres form a national framework through which we can achieve our 2020 goals and deliver the greatest impact in the global fight against cancer.

Set-up

10. Cancer Research UK Centres provide a strategic framework, in which researchers can work in clear view of the clinic. They provide local leadership and governance, and an environment where different research disciplines and areas of expertise are easily brought together.

11. An established and well developed Centre is a dynamic research environment. This is facilitated by clear ways of working to share resources, ensure focus on strategy, encourage collaboration, and develop a platform to deliver results.

12. In all of the environments that Cancer Research UK supports research, partnership with other funders is critical to maximising what we do. The success of our Centres will be founded in forming true partnerships with Universities and NHS Trusts. Public funding for research infrastructure, provided by the Funding Councils and through the National Institute of Health Research and other UK health departments, will be critical to the initiative.

13. Fraunhofers and existing Technology Innovation Centres in the UK similarly utilise public money to support infrastructure and basic research. This provides the robust foundation for research translation and application.

Aims

14. The central aim of the initiative is to establish long-term centres of excellence in cancer research that provide a sustainable environment which encompasses basic, translational and clinical research, maximising the health impact for local communities. This aim is reminiscent of the ideals of the proposed Technology Innovation Centres, which aim to encourage private investment in local infrastructure, to improve the translation of research from laboratory to application.

15. The Centres initiative will provide significant benefits; on the most general level it should improve cancer research. Specifically, it should accelerate the translation of cancer research into benefits for patients, enable the best possible training of the clinical and non-clinical research workforce, and provide a focus for public engagement and awareness. The Centres form a network across the UK and ensure that our research covers a broad spectrum of cancer types, treatment modalities and research areas.

16. The inclusion of senior representatives of the University and Trust, such as pro vice- chancellors, NHS Trust CEOs and senior cancer experts on the governing body of

the individual Centres, provides a forum for communication and engagement that has proven invaluable in the long term planning of research within the local area.

17. The Fraunhofer model makes similar use of sector experts to direct research strategy.

Strategy

18. Across each Centre there is a clear and agreed joint strategy for cancer research. Researchers within each Centre share the infrastructure provided to support the delivery of this plan.

19. In developing the individual Centre Strategies, the partners need to demonstrate a shared commitment to common goals in cancer research with measurable milestones for the next three years and beyond. Centres are seen as more effective than the ‘sum of their parts’, providing synergy, collaboration and value for money.

20. The scale of the Centres initiative recognises the need to strike a balance between the potential achievements arising from concentrating research effort, and the healthcare benefit that can be delivered by giving as many patients as possible, throughout the UK, the opportunity to receive treatment in a research active clinical environment.

21. The central aim of Technology Innovation Centres is to attract diverse sources of funding. The benefits of the close proximity of contributing partners are keenly recognised in existing TICs in the UK.

22. To qualify for centre status, the research location will usually already have a critical mass of funding for cancer research. Most centre locations also have access to an Experimental Cancer Medicine Centre (ECMC) as a resource for early phase clinical trials.

Achievements

23. Immediate benefits of the initiative have already emerged, with the formation of strong partnerships, and improved funding efficiency and communication.

24. A successful Centre will deliver the strategy, train the researchers of the future and promote local engagement between Centre researchers and the local community. 53 new senior academic appointments in cancer research have been committed by Cancer Research UK and our partners so far.

Partnership 25. As intended, the Centres initiative has led to excellent engagement and commitment from partners. To date NHS trusts have committed to significant investment (approximately £30m) in cancer research in the next few years. Universities and NHS trusts have so far agreed to provide support for nearly £4m of basic infrastructure posts and senior salaries.

26. The Centres encourage partnerships between different stakeholders, which allow resources and expertise to be shared more easily. For example the Newcastle Cancer Centre is a partnership between Cancer Research UK, Leukaemia and Lymphoma Research, and the North of England Children’s Cancer Research Fund. Centres act as catalysts for collaboration and funding across a wide range of stakeholders/investors, which facilitates cross-disciplinary working.

27. It is anticipated that the UK will benefit from investment from major pharmaceutical companies that will increasingly see Centres as an identified location for partnerships, drug pipelines and clinical trials. Already there is strong evidence that the launch of several of the Cancer Research UK Centres has led to even greater external investment in cancer research in the local area.

28. Industry, charities and the government have different but complementary roles as research funders. The synergistic nature of these relationships, and how they link with the unique resource provided by the NHS, is a vital asset to the Centres, and to UK biomedical research.

Funding efficiency 29. The cost of research includes both direct costs incurred, but also the indirect costs associated with infrastructure funding, for example support for laboratory technicians, or clinical trials nurses. Provision of infrastructure funding has been simplified within the centres, with support provided through a central fund called the ‘Centre Award’, rather than being directly associated to individual research project and programme grants. This uncoupling of the infrastructure funding from individual grants provides longer term stability, funding transparency, and gives individual Centres greater flexibility and autonomy over provision and use of shared resources.

Communication and visibility 30. Centre status provides a sense of identity and prestige. It is seen to be a contributing factor to attracting high quality candidates interviewing for cancer research positions at the university.

31. The Fraunhofers are similarly seen as leading experts in their respective fields and this reputation helps to attract the best talent.

32. Cancer Research UK Centres are independently building on their sense of identity and common purpose. Several Centres have organised internal conferences, meeting days and symposia focusing on their core areas of research. These activities have occurred naturally as a result of winning Centre status and serve to reinforce the Centre strategies and multidisciplinary collaborations.

33. Centre status has also helped to raise the profile, not only of Cancer Research UK, but also the specific cancer research being carried out at several of the Centres, with their local community.

Research Quality 34. The decision to grant Centre status is an acknowledgement of outstanding research quality.

35. Within its research strategy, each Centre identifies several specialist focus areas in which to drive research. The Centres are required to regularly report on their progress, to ensure that the full range of priorities in cancer research throughout the UK is being met, to allow central oversight by Cancer Research UK.

36. A similar overview could be achieved through a network of TICs, to provide a UK perspective, and to allow for regular communication and review.

37. An asset of the Fraunhofer model is that while each institute focuses on different areas of research, a specific project may involve two or more institutes, as well as collaboration from outside the organisation.

38. As the Centres develop over time, we expect to see an increase in proposals for strategically aligned, collaborative projects and programmes which blend, for example, basic and clinical research. With more high quality cross-disciplinary proposals translating into higher success rates for funding, the Centres will grow in terms of activity, expertise and reputation. Importantly, we also expect to see a rise in support for cancer research in Centres from other funding bodies in response to higher quality research proposals, stable infrastructure, and reputation.

Research Strategy and networking 39. The Centres provide an opportunity to implement Cancer Research UK’s strategic programmes. For example, to deliver on current areas of unmet need, such as surgery or pancreatic cancer research.

40. Efficiency and value for money will be further enhanced by networking between the Centres. This is likely to involve greater co-ordination of Centres’ expertise and resources, the sharing of equipment and capacity, and the exploitation of new and emerging technologies. Information relating to the networked Centres including capability mapping and showcasing of talent and outputs, via the internet or brochures, will be useful to students, international researchers and investors.

41. It is our understanding that the proposed Technology Innovation Centres will fulfil a similar aim for unmet need in science and technology throughout the UK.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

42. Experts in the field of the chosen focus for each of the Technology Innovation Centres should be enlisted to help coordinate research, to ensure good collaboration with existing researchers/groups/institutes, and provide strong links between the basic research and the opportunities for translation.

43. The strength of the Centres initiative is that it is driven by the contributing partners, relying on input from the university, NHS trust, Cancer Research UK, and other funding bodies.

44. Technology Innovation Centres need to work alongside existing research establishments to capitalise on existing expertise and networks, to learn from previous experience, and to provide channels for the exploitation of research beyond the laboratory. This will encourage industry investment and growth not only within TICs, but throughout the UK.

Case Studies LIVERPOOL CENTRE – Case Study

The Liverpool Centre was launched in 2009, with a focus on a better understanding of how cancers start and behave, how to develop better treatments with fewer side effects and how to tackle cancer in low-income communities where survival is lowest. The Centre award has been a major catalyst in the reconfiguration of specialist cancer services in the city.

A major clinical research interest in Liverpool is the treatment of pancreatic cancer, which is associated with low survival rates. The Liverpool Centre’s original strategy identified a requirement for cancer research groups in the city to engage more closely with one another, and for the Centre to forge joint leadership and integration of services and research. Despite the Centre only being formed in 2009, it has already been the main driver in the engagement of NHS clinicians based at Clatterbridge Centre for Oncology, University Hospital Aintree, Alder Hey Children’s Hospital and the Royal Liverpool University Hospital. The Centre status awarded to Liverpool has helped engage clinicians from these locations with the work of the Cancer Research UK Liverpool Cancer Trials Unit (LCTU) and the Liverpool Experimental Cancer Medicine Centre (LECMC). This has helped to boost early and late clinical trials work, which it is hoped will lead to new and improved treatments for pancreatic cancer. Furthermore the Royal Liverpool University Hospital, a partner in the Centre, has appointed a Consultant in Clinical Pharmacology and Therapeutics to help develop this work. Without Centre support these developments would not have been possible.

MANCHESTER CANCER RESEARCH CENTRE - Case Study

The Manchester Cancer Research Centre (MCRC) partnership is made up of the University of Manchester (including the Paterson Institute for Cancer Research), the Christie Hospital (a specialist cancer hospital) and Cancer Research UK. It is a world-class centre of excellence for research, with ambitions to more than double the level of cancer-related research activity in Manchester by 2015. Collaboration between these partners, and the pooling of resources, enables the sum to be significantly greater than the individual parts.

Before centre status was awarded, Cancer Research UK already funded significant research activity in the city. This, coupled with the international reputation of the Christie Hospital as one of Europe’s leading cancer centres, treating over 40,000 patients a year, laid the foundation to greatly expand the range of activities which contribute to Manchester’s fight against cancer.

The state-of-the-art Centre that has been created is able to attract and train some of the finest cancer research talent in the world. It brings together the expertise, ambition and resources of the contributing organisations to enable a dynamic, joined-up, fruitful collaboration that will be central to the centre achieving its 2015 ambition. There has been significant inward investment, and CR-UK and the Christie Hospital NHS Trust have funded what will become one of the largest dedicated early clinical trials centres worldwide.

A wide-ranging and comprehensive arrangement has been developed with AstraZeneca (AZ). The alliance has been enormously productive and mutually beneficial since it was set up three years ago. It supports a number of different themes including blood-borne, cancer imaging, radiation-related research, human cancer tissue collection, early phase clinical trials and medical and clinical oncology training schemes.

Cancer Research UK

December 2010

Written evidence submitted by the Regional Development Agencies (TIC 66)

Technology and Innovation Centres

Summary 1. This submission has been prepared by the South East England Development Agency (SEEDA) on behalf of the eight Regional Development Agencies (RDAs) outside London. The RDAs promote and enable economic growth in England’s regions by creating the conditions to grow businesses and by helping to create additional, better quality, higher-paid jobs. Because of London's unique governance arrangements, this response only represents the views of the RDAs outside London.

2. The RDAs support the Government’s ambition to build a network of elite Technology and Innovation Centres (TICs) in the UK. We would like to make a number of points to the Committee.

3. First, it has been widely noted that the Fraunhofer model cannot be copied directly to the UK, as there are significant differences between the UK and German economies and the way that companies engage with universities on innovation. The focus, therefore, should be on how the UK network of TICs can achieve the same overall objectives as the Fraunhofer network. TICs in different technologies, relevant to different sectors, may need to be markedly different to be most effective. A thorough and convincing assessment of the business demand for the services of each TIC will be an important criterion to be met before public funding is committed to the centres.

4. Second, TICs will engage with innovative companies, many of which are the high-growth, job-creating companies that are of most benefit to the UK economy. As public support becomes increasingly focused on high-growth businesses, there is a clear rationale to connect TICs and Growth Hubs where this can increase the effectiveness and efficiency of both bodies.

5. Third, the location of TICs will be critical as TICs will build relationships with organisations at different spatial levels. While all the TICs will need to develop an international reputation, they will also need to work with local organisations, including small and medium enterprises (SMEs) and local authorities, and across the UK with relevant businesses, universities and public bodies. A hub and spoke model is likely to be of most benefit to achieve this.

Q1. What is the Fraunhofer model and would it be applicable to the UK? 6. The German Fraunhofer Society describes itself as undertaking “applied research of direct utility to private and public enterprise and of wide benefit to society”. The research develops technological innovations and novel solutions in collaboration with customers to further the economic development of the regions and the country. It also brings social and environmental benefits through spillovers from the resulting innovation.

7. The Fraunhofer Society is the largest organisation for applied research in Europe and has more than 80 research units, including 60 Fraunhofer Institutes, across Germany. Two thirds of the research revenue is from public and private contracts. The remaining third of revenue is core funding from the national and regional governments.

8. It would benefit the UK to adopt the funding model of the Fraunhofer Centres. The core funding provides sustainability for the centre, while the contract basis of the remaining two thirds of funding drives a customer and results focused approach to research, accelerating innovation for the benefit of funders and the country.

9. In addition to applied research, the Fraunhofer Society has assumed the task of conceiving and implementing innovation clusters and developing a highly-skilled workforce. This is a key element of the German government’s high-technology strategy.

10. This element of the Fraunhofer network is also relevant to the UK as the TICs must be integrated into the UK’s innovation ecosystem, alongside effective existing bodies, to support innovation and economic development.

11. While the incentives for applied research offered by the Fraunhofer network are very relevant to the UK, the implementation in the UK must be different to take account of the significant and critical differences between the two countries.

12. First, business research in Germany is built around the physical sciences and engineering, whereas the UK business strength is underpinned by life sciences. This is illustrated by Figure 1, taken from the 2010 R&D Scoreboard, which shows that nearly half of UK research is in the pharmaceutical and biotechnology sectors, compared to around half of research in Germany in the automobiles and parts sector.

Figure 1. R&D expenditure by sector in the leading R&D counties over five years (2010 R&D Scoreboard, Department for Business, Innovation and Skills, 2010)

13. This is also confirmed by research from manufacturers’ organisation EEF published in November 2010 that found just 1.2% of UK manufacturers employ more than 250 people, compared with 2.1% in Germany and 2.9% in the US.

14. The difference in the business research base is critical as, for example, the route to market for pharmaceuticals is very different in risk, timescale, barriers and rewards from that for advanced manufacturing.

15. Therefore, the focus should be on how the UK network of TICs can achieve the same overall objective of incentivising applied research as the Fraunhofer network. However, the specific barriers to innovation in technologies and sectors should be understood before a TIC is established.

16. It is also notable that of the countries presented in Figure 1, the UK has the largest proportion of R&D outside the major global sectors, i.e. over half the expenditure is in the “other” category. As well as the major sectors, companies in the top 25 UK R&D funders include aerospace and defence; banks; food producers; oil and gas producers; fixed line telecommunications; media; mobile telecommunications and tobacco.

17. This unusual diversity of research-funding sectors in the UK economy presents a challenge in supporting research through a network of focused TICs, as there will be sectors or technologies that could benefit from a TIC that are not covered by the limited number of centres in the network.

18. Rather than diluting the focus of the TICs, it would be possible to offer multi- sectoral support alongside the TICs, and to help companies to make links with relevant technologies for their sectors.

19. Second, the network of Fraunhofers is well established in Germany; and has a defined role alongside the fundamental research carried out by the Max-Planck institutes. It is a very different proposition to establish a new network in the UK, since the UK already has a variety of public, hybrid and private research centres that contribute to the rich innovation ecosystem in the UK.

20. This means that successful TICs will drive significant changes in the way that businesses collaborate with the knowledge base. In some cases this will be at the expense of existing centres in both the public and private sectors, which have local relationships and networks. These local links can be maintained through a “hub and spoke” approach to the TICs.

21. Third, to create a network of genuinely Fraunhofer-type centres in the UK would require large and sustained Government funding, substantially longer than that currently proposed. Whilst funding has been allocated for four years, the Hauser Review recommended that funding should be sustained over a ten-year period to deliver meaningful benefit, so the real and sustainable benefits of TICs can only be realised by continued funding across Spending Review periods.

22. Fourth, given that two thirds of the funding for a TIC will be from contracts, it is necessary to consider the particular needs of UK sectors and public bodies for applied research and near to market support, and to tailor the formation and operation of a TIC to meet that need. This should include a thorough assessment of the scale of business demand for research from the centres.

Q2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective? 23. The overall objective of the Fraunhofer Centres is to incentivise applied research of direct relevance to private and public bodies. While there are no centres in the UK that are identical to the Fraunhofer Centres, there are a variety of internationally respected centres that use different approaches to achieve the same objective and, arguably, may be more relevant to the UK economy.

24. The RDAs have been instrumental in developing these centres to stimulate and incentivise applied research with business. (The drivers for these centres are discussed in the answer to Q3.) The 2009 Annual Innovation Report reported that in 2008/2009, the RDAs spent over £300 million on supporting innovation, over half of which was invested in innovation infrastructure, including Centres. We strongly recommend that wherever possible the network of TICs should build on RDA investments in centres.

25. The effectiveness of RDA investments in science, R&D and innovation infrastructure was assessed in The Impact of RDA Spending report prepared by PricewaterhouseCoopers in 2009. The scope of this category includes physical centres, as well as collaborative research, innovation support for SMEs, and skills projects on innovation; all of which are within the scope of the Fraunhofer Centres.

26. The study investigated the value for money of the RDA investments by focusing on the ratio of Gross Value Added (GVA) to cost, i.e. the GVA return on investment. The increase in GVA reflects the increased contribution to the economy of a business as a result of the RDA intervention.

27. The study found that while the annual return for investments in science, R&D and innovation infrastructure was 1:1, this increased to 3:4 when the potential persistence of the impacts is considered. As would be expected for interventions to increase business innovation, future potential returns are particularly significant for science, R&D and innovation infrastructure investments. This takes the GVA return on investment to 8:3.

28. This means that each £1 million of RDA spending on science, R&D and innovation infrastructure adds over £8 million to regional economies.

Q3. What other models are there for research centres oriented toward applications and results? 29. The RDAs funded four types of centres, developed in support of their primary objective to create sustainable economic growth in their regions, which are:

30. Technology Push centres that support technologies that could have significant disruptive effect or substantial economic benefit for businesses taking it up, but industry is not yet recognising the opportunity.

31. Examples of this type of centre are the Printable Electronics Technology Centre (PETEC) in Sedgefield, the Institute for Sustainability in the Thames Gateway, and iCON in Daventry.

32. Industry Demand centres which address feedback from businesses that there are technologies or markets that are too risky for them to enter alone. The barriers to entry are identified and may be addressed through facilities at a centre.

33. Examples of this type of centre are the Advanced Manufacturing Research Centre in Rotherham, the Manufacturing Technology Centre in Coventry, and the International Space Innovation Centre in Oxfordshire.

34. Centres to Link Research and Business bring together single or multiple universities to offer expertise to a clearly identified group of companies operating in an important sector for a region.

35. Examples of this type of centre are the Knowledge Centre for Materials Chemistry in the North West and the Centre for Low Carbon Futures in Yorkshire.

36. Geographical Centres offer physical premises to enable open innovation around a knowledge base resource (or anchor business) as a focus for a cluster of businesses.

37. Examples of this type of centre are the Harwell Science and Innovation Campus in Oxfordshire and Stevenage Bio-Park.

38. In addition, there are a variety of centres that bridge academic research and business, including centres funded by Research Councils and the Higher Education Funding Council for England, as well as the independent intermediate sector, including Research and Technology Organisations.

39. Given that there are existing and sustainable centres across the UK, and that these Centres have excellent links to both university and business research, and across supply chains, there is a sound basis for developing a hub and spoke model across the UK.

40. These spokes would help to address the difficulties that SMEs may encounter in engaging with an elite network of TICs, as the TICs may find it easier to work with large corporates that will be attracted to the world-class research and have the investment required.

41. The RDAs have often used a “hub and spoke” approach to centres. This combines the benefits of a strong hub as the focus for new activity, with the recognition that there will be relevant research spokes across the UK, which in turn enhance the hub.

42. These links operate in both directions, with spokes offering an access point to the hub for local businesses, particularly SMEs, across the UK. This helps to include all areas of the country in Government investment in new technologies.

43. For example, if the International Space Innovation Centre at Harwell in South Oxfordshire were a TIC for the space sector, spokes could include the National Centre of Earth Observation in Reading, the GNSS Research and Applications Centre of Excellence in Nottingham, the Mullard Space Science Laboratory in Surrey, the Advanced Space Concepts Laboratory in Glasgow, and the UK Astronomy Technology Centre in Edinburgh.

44. The RDAs have also recommended to Government that the Department for Business, Innovation and Skills (BIS) should create a national innovation system offering an integrated approach and focused on high growth/high impact businesses and key sectors of the future.

45. This includes recommending that the network of Growth Hubs is connected to existing and new Centres of Excellence (including TICs), Innovation Centres and Science Parks, to provide comprehensive geographical coverage across England. This would join up private and public innovation and growth support for SMEs, which are recognised to be hard to access, but critical for employment growth.

46. This will also enhance collaboration with universities by creating opportunities for collaboration with all relevant universities, rather than just the local university. This allows enhanced multidisciplinary research, as well as bringing in intermediate sector research bodies.

47. Each Centre could have a “front office”, offering the Growth Hub service (comprising, at a minimum, support for open innovation, coaching, understanding finance, high-growth start-up) to companies with high-growth potential from whatever sector. It would also act as a portal to a bigger network, thus connecting the Growth Hub and the Technology & Innovation Centre ideas.

48. The TIC does not become the Growth Hub and the Growth Hub does not become a TIC. Each would have a clear identity, but they may be able to work together to deliver strong support for high-growth businesses.

Q4. Whose role should it be to coordinate research in a UK-wide network of innovation centres? 49. We recommend that BIS should develop a national strategy for TICs, aligned with a national growth strategy, to be implemented by the Technology Strategy Board (TSB). In developing a national strategy for TICs, BIS should work with Research Councils and other research funders, as well as with business representatives of large, medium and small businesses.

50. In terms of implementing the strategy, the TSB will need to engage with sub- national and local partners to develop an implementation plan that recognises national strengths. The success of a national strategy will critically depend on drawing on intelligence from around the UK, and implementation through partners with local knowledge and relationships. TICs will be most successful where they build on genuine innovation strengths in a location.

51. All nine of the RDAs (and all three Devolved Administrations) have selected innovation priorities, developed with the advice of their Science and Industry Councils within each region, which include senior representatives from industry, universities and the public sector. These priorities differentiated the activity of each of the RDAs based on an evidence case of business and university strengths in the regions.

52. These innovation priorities provided an excellent starting point to assess the needs of key sectors and to identify and critically evaluate the role that each region’s asset base can play in maximising the benefit for the UK. These innovation priorities are summarised in the Annex.

53. This is in contrast to the approach adopted in the 2003 Micro and Nanotechnology Manufacturing Initiative where all the RDAs were asked to invest in facilities in their region, resulting in a lack of focus and critical mass.

54. While the economic development structure in England will look radically different in the future, there will still be a need for an objective assessment of the local strengths in a national context, and intelligence sharing to allow non-contiguous economic areas to collaborate on common opportunities.

Q5. What effect would the introduction of Fraunhofer-type institutes have on the work of Public Sector Research Establishments and other existing research centres that undertake Government sponsored research? 55. It is essential that the approach taken is cross-Governmental to create synergies, and not competition, with other publicly funded research centres. Currently, research centre funding originates from many departments, with differing objectives e.g. climate change or animal health. However, whatever their primary objective, all of these research centres have the potential to improve the UK’s business competitiveness.

56. Previously the RDAs have engaged with all such centres in a region and they are included in the Regional Economic Strategy implementation plans. Hence, there is a real risk of fragmentation and missed business opportunities with the abolition of RDAs, unless this role is continued by the new economic development structures.

57. If the TICs are to be successful, they will need to draw in public funding from other bodies and centres, and Government should acknowledge the potential for displacement of businesses from around the country to be located near a TIC. While this may well be desirable from a national perspective, there may be adverse effects for individual locations and bodies.

58. These potential issues can be addressed by the Government Office for Science maintaining a cross-Government perspective on public investment in applied research to ensure coordinated action across Government, while the adoption of a hub and spoke approach will ensure that the benefits of the TICs are accessible across the UK.

SEEDA, on behalf of the eight RDAs outside London 02 December 2010

Annex: RDA and DA Science and Innovation Priorities supporting National Priorities as at February 2010

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

Technology Innovation Centres

1. The Technology Strategy Board is a business‐led organisation with a leadership role to stimulate technology development and innovation in the areas which offer the greatest potential for boosting UK growth and productivity. We promote, support and invest in technology development and innovation for the benefit of UK business. We spread knowledge, bringing people together to solve problems or make new advances. The Technology Strategy Board is the prime channel through which the Government incentivises business‐led technology innovation.

2. Declaration of Interest: The Technology Strategy Board, sponsored by the Department for Business, Innovation and Skills, has responsibility for establishing and managing a network of Technology and Innovation Centres to help commercialise new and emerging technologies. This follows the announcement by the Prime Minister on 4 November 2010 that over £200m will be invested in Technology and Innovation Centres over the next four years. The Technology Strategy Board also has responsibility for publishing a Strategy and Implementation Plan for Technology and Innovation Centres in the UK by April 2011.

3. We welcome the opportunity to respond to this inquiry and have set out our response below against the questions set by the Committee.

What is the Fraunhofer model and would it be applicable to the UK?

4. With fifty nine institutes and an annual turnover of 1.6bn Euros, the Fraunhofer Group (FhG) is one of the largest applied research organisations in Europe. Positioned between Universities and industry, they have a strong reputation for making scientific and technical excellence available to German industry. The funding model is often expressed as ⅓, ⅓, ⅓. Approximately one third of the funding is granted by the German federal government and Lander; one third is collaborative research and development type funding, including funding won competitively from EU programmes, and the remainder is directly contracted commercial revenue. There is a very strong Fraunhofer “corporate brand” but within that each of the institutes has considerable operational autonomy.

5. The way in which a particular model is deployed is often dependent on the context and the environment in which it will operate. The German and UK innovation systems are different in both structure and the way they operate. The German innovation system has evolved with an expanding Fraunhofer network firmly embedded at its heart. Taking the Fraunhofer model and deploying it in the UK without modifying the approach to take account of the context of the UK innovation system is likely to result in sub‐optimal performance. Centres alone cannot stimulate innovation and wealth creation in any economy. They must form an integral part of a structured programme with a strategic vision.

6. There are however specific elements of the Fraunhofer model, as well as similar elements from other international examples, which are less context dependent. They therefore translate more easily into the context of the UK innovation system. Such elements include the ⅓, ⅓, ⅓ funding model; having critical mass in an area; a large measure of autonomy for individual centres, subject to performance; and, the need for a strong brand presence.

7. The sustained, predictable long‐term public investment in Fraunhofer Institutes has made it easier to deliver critical mass. This is a long‐term view that recognises that the payback to the economy accrues over many years and should not be viewed as something which will deliver economic growth in the short‐term.

8. Finding the right balance of national control and operational autonomy of the Technology and Innovation Centres is very important. The German funding model is fairly sophisticated, giving more core‐funding to Institutes as they increase commercial revenue.

9. Robust working links to a strong and well supported scientific research base are a pre‐ requisite, as is the ability to draw from across the pool of talent in the whole of the UK. Getting the incentives and interfaces right will be critical to successful cooperation between Technology and Innovation Centres, Universities and industry. In Germany, many Fraunhofer Institutes play an important role in linking German Universities with industry. The situation in the UK has developed in different ways with different performance incentives for Universities and business. It will be important that future UK Technology and Innovation Centres establish the right linkages with the full range of talent and expertise and that existing strong relationships between business and UK Universities are also supported.

10. There is a requirement for business‐focused Technology and Innovation Centres in the UK to make it easier for UK industry, particularly SMEs, to access world‐leading research and technical capability. The centres can play an important role in helping businesses solve their technical and commercialisation challenges. The centres should have: • reach into world‐class science • capability to undertake collaborative applied R&D with business • capability to undertake contract research for business • strong business focus with a professional delivery ethos • critical mass of activity between business and knowledge base • expertise in skills development • access to world‐leading knowledge.

Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

11. There are a large number of centres and other organisations that operate in the UK to bridge the gap between Universities and industry: there are the RDA and DA funded centres (E.g. AMRC, AFRC, CPI, and MNT centres); the Research and Technology Organisations; Contract Research Organisations and technical consultancies; and, coming from the other direction, there are University centres (including centres such as the Innovation and Knowledge Centres funded by the Research Councils and Technology Strategy Board) and other public sector research organisations. However, we don’t believe there are any centres currently in the UK fully meeting the requirements we believe necessary to be seen as a Technology and Innovation Centre.

12. Effectiveness must be when a centre enables economic activity that far outweighs the public investment. Effectiveness must be helping to stimulate a vibrant industry around the centres. This is long‐term and difficult to measure. The only near‐term measure can be the eagerness of industrial partners and customers to invest time and money in the centres.

13. The effectiveness of UK centres could be much better and has to date been hampered by a number of things, including:

• a lack of long‐term strategic integration and co‐ordination with other public investment measures and no overarching brand; • a piecemeal approach to investment in centres has not helped long term investment in capability – the RDAs for instance could only ever commit to three years of funding aligned to Spending Review periods; • the scale of many centres has been too small to have an impact on the national economy, let alone achieve international recognition.

14. Public funds for centres can only be justified if they are providing something special that the private sector will not fund or is beyond the resources of an individual company. Many centres have been established with injections of public capital and then asked to become sustainable. This appears to result in two main outcomes: either the centre approaches public funding bodies for further ad hoc injections of capital investment for major equipment refresh programmes, or the centre evolves to compete against commercial players in more lucrative markets and ceases to be “special”. Centres require long‐term investment which is strategically managed and which enables the centre to invest in higher risk areas in anticipation of business needs.

What other models are there for research centres oriented toward applications and results?

15. There are many variations of research centres. As well as the Fraunhofer Institutes, there are a number of European and international centres which provide a range of slightly different approaches. These include the Inter‐University Micro Electronics Centre in Belgium; the Industrial Technology Research Institute in Taiwan; the Electronics and Communications Research Institute in South Korea; the Torch Centres in China and the Carnot Institutes in France. More detailed explanation of these centres is set out in the review conducted by Hermann Hauser and so we have not sought to provide detail here.

16. Every technology area and market operates in a slightly different way and therefore the best approach for a centre to help address the barriers to adoption of new technologies by business will be different in each area. Most centres however seek to reduce financial and technical risk making it easier for companies to adopt new and innovative technologies. This would include making available expertise and equipment that requires an investment that no individual company could justify either because of the size of the investment or the length of the pay‐back period.

17. Early stage, less mature technology areas (for example those still looking for robust commercial applications and models) may be more suitable for university based centres, such as the Innovation and Knowledge Centres (IKCs) which are jointly funded by the Research Councils and the Technology Strategy Board. The IKCs focus more on emerging technologies in areas of research excellence where scientific breakthroughs have been achieved and where there is the potential to accelerate early commercialisation.

18. Some technology areas may need smaller, more local centres that drive the adoption, rather than the development of a technology. Other markets may need a greater emphasis on start‐up incubation facilities, or increasing knowledge transfer and sharing through virtual centres. In establishing Technology and Innovation Centres in the UK, an important point worth stating is that they will not be the right answer for every one of the UK’s priority areas and other approaches may be more suitable.

Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

19. No matter how excellent, a UK‐wide network of innovation centres working alone would not be effective in stimulating economic activity and anchoring the activity of global companies in the UK. Investment in Technology and Innovation Centres is one piece of a jigsaw. A strong research base on which to draw is a pre‐requisite. A business community willing to invest time and money is essential. Public funding bodies with investment programmes in relevant technologies and application areas are vital to stimulate long‐term activity.

20. The UK’s investment in Technology and Innovation Centres must be an integral part of a structured and coordinated innovation system. The Technology Strategy Board, as the lead innovation organisation in the UK, will be looking to take a much more proactive leadership role in bringing coherence to the UK innovation system. We will do this through working with a range of partners and stakeholders. We believe we have the broad view and the experience to ensure that Technology and Innovation Centres are integrated and seen as part of the bigger picture and have the ability to leverage other investments.

21. The activity delivered by each Technology and Innovation Centre must be informed by its industrial customers and public sector partners. The advantage of a model where the majority of the funding must be won through competitive routes is that it keeps the centres focussed on providing services that remain relevant to business. It is important to set technology and application areas in which the centres operate but within those bounds each centre must have a reasonable degree of autonomy in how it operates.

22. We believe the Technology Strategy Board is best placed to provide the coordination and drive a UK network of Technology and Innovation Centres.

23. The Technology and Innovation Centres will not be direct competitors for PSREs or other UK research centres. Their coverage and focus must be different but complementary. The past 20 years has seen the disappearance of a large number of public sector and corporate laboratories in the UK. The establishment of a network of Technology and Innovation Centres in the UK will help to fill the gap which now exists.

24. The primary objective of the Technology and Innovation Centres is to make leading edge technology available to businesses that would otherwise be beyond the reach of individual companies and to solve the development, scale‐up and other technical challenges that face many innovative companies as they seek to bring new products and services to market. The research that is carried out by the Technology and Innovation Centres should be aimed primarily at improving their offering to industry, and informed by their interaction with industry.

25. In future, what is important is to get the shape and position of the Technology and Innovation Centres right in the UK innovation landscape so that they complement the PSREs. They need to be appropriately incentivised to work with existing research establishments and the wider research base and innovative companies.

Technology Strategy Board

02 December 2010

Written evidence submitted by Loughborough University (TIC 68)

Technology Innovation Centres

Declaration of Interests:

Loughborough University is a strong academic institution with particular track record of research that is collaborative with industry and other research users. Such research forms>70% of our research portfolio. Loughborough has arguably the largest engineering academic activity in the UK. It has held significant funding from the Engineering and Physical Sciences Research Council in the form of Innovative Manufacturing Research Centres. It has a keen focus on research that makes a difference, and has pioneered a range of mechanisms for undertaking industrially focused research and knowledge transfer. These include a number of individual company technology or innovation centres, for example with Rolls Royce and Caterpillar. The University houses one of the largest centres of co-located academic and industrial staff in our Systems Engineering Innovation Centre, where around 30 industrial researchers work alongside our own academic staff. We have also had significant discussions with Fraunhofer (IPA) regarding a UK Fraunhofer centre in a manufacturing arena, potentially to be based within our Science and Enterprise Park on campus. A number of our current activities may form the focus of potential TICs.

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 The Fraunhofer centres are not-for-profit organisations with permanent staff, offering applied research and development services. The model integrates academic and industry research with a funding model based on income through three, notionally equally sized, categories (contract research for industry, competitively won research contracts (e.g. from EU), and “institutional” core funding). The latter is provided by central government and the amount is proportional to funds secured in the first two categories. The central funding has occurred for over 50 years and was initially a much larger percentage of the total. Thus government funding complements success in gaining contracts from industry. There is a large network of Fraunhofer centres, mostly in Germany, each with its own area(s) of expertise. The Fraunhofers are usually directly linked with a university department and an academic is often the Director. This enables useful collaboration and exploitation to take place.

1.2 Despite the unification of branding, there is a strong diversity of Fraunhofer institutes. They serve different technology communities, and different geographies. Within the German innovation system, Fraunhofer Institutes sit alongside a broad range of other highly differentiated institutes, each with very specific remits (eg Max Planck), as well as the German University system. This landscape is very different to that of the UK, where Universities occupy a much broader role spanning teaching, fundamental and applied research, and knowledge transfer. Implementation of the Fraunhofer model directly is unlikely to be successful without recognition of the existing strong applied research and innovation support landscape already in existence in the UK.

1.3 There are other differences between the UK and German systems that make a direct transplant of the Fraunhofer concept challenging. One is a different of IP regimes in the Universities, where the German academics would typically own their IP. A further difference is in the doctoral training system. Fraunhofer Institutes use significant numbers of doctoral students to provide a significant fraction of the labour force. The difference in the PhD model (length, and portfolio vs single project) between Germany and UK may require some adjustments to a Fraunhofer model.

1.4 The UK system, with significant applied research within Universities, also allows for a rapid feedback to ensure that undergraduate programmes remain relevant.

1.5 The Fraunhofer Institute system has benefited from consistent support over a number of decades, with significant benefit for its international profile.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 There are many research centres in the UK aiming at exchanging knowledge between industry and academia. Historically we had the membership based Research associations, now typically referred to as RTOs which moved towards a more consultancy-based model as public funding was withdrawn.

2.2 Effectiveness is not easy to ascertain, having no formal methodology to establish. Effectiveness could be based on the value which major industrial partners gain from the centres, or value for money for the public purse, where emphasis might be on benefits for a broader range of companies.

2.3 The UK has a history of comparatively short-lived initiatives in this area, compared with the Fraunhofer model.

3. What other models are there for research centres oriented toward applications and results?

3.1 The UK has a wealth of models for research centres oriented toward applications and results. The University system itself has built up extensive capability in knowledge exchange with external users. HEFCE has funded capacity building in this area via the Higher Education Innovation Fund. The success of this capability building has recently been evaluated very positively. 1 A hugely diverse range of centres serve a diverse range of industrial innovation needs.

3.2 Loughborough is a University strongly oriented towards applied research, and is involved with a number of models for research and knowledge transfer activities appropriate to individual sectors.

3.2.1 Loughborough University is a partner in the Manufacturing Technology Centre, based at Ansty. This has a small number of research partner members, with industrial subscribers, and is formally constituted as a not for profit company. This will be a physical facility for the scale up and test of innovative ideas on an industrial scale.

3.2.2 Loughborough University hosts the Systems Engineering Innovation Centre on our campus. This is not formally constituted as a legal entity, but has governance based on collaboration agreements between parties dealing with IP, facilities and allocation of resources. A key element of this is the collocation of industrial researchers with academic researchers. The centre has core funding from industry and the University, but also successfully bids for research council, TSB, European and other sources of funding. Many of these bids will involve further external academic and industrial partners, adding to the richness of the collaborative relationships of the centre.

1 http://www.hefce.ac.uk/pubs/hefce/2009/09_15/ 3.2.3 Energy Innovation Cluster within the Science and Enterprise Park. This is not a formally constituted centre, but is instead a naturally emerging cluster of activities including industrial and academic research groups, spin-out companies and public/private partnerships (including the Energy Technologies Institute, and Cenex (Centre of excellence in low carbon and fuel cell technology), plus regional innovation networks reaching out to smaller companies. Participants group together in a variety of combinations to bid for further external funding for research, knowledge exchange and postgraduate training. This innovation community has strong interactions between industrialists, academics. There is space available for likeminded organisations to cluster together. There is a rich pattern of collaborative interconnections both between those physically located on the Science and Enterprise Park and those beyond. This model has strengths that a monolithic “centre” would struggle to replicate. Academic linkages are to a broader range of academic expertise than available in our own University, via our collaboration with Birmingham and Nottingham Universities as the Midlands Energy Consortium.

3.3 These examples all have common characteristics. Multiple academic and industrial partners are involved. Diverse organisations are able to participate and benefit from the public funding investment. Central challenges are multidisciplinary and often involve platform technology areas that cross industrial sectors, yielding economies of scale. They have rich connectivity and interaction with other key players in the UK and internationally. Often this is formally driven by funded networks eg TSB Knowledge Transfer Networks nationally, or the regional iNETS or innovation networks. The governance arrangements are completely different in each case.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1 The Technology Strategy Board and the Research Councils are existing bodies with key roles in this domain and should both be involved. The governance of the individual TICs should involve a balance of industrial and public sector interests, and ensure accountability for the use of public funds. The Knowledge Transfer Networks could have a useful role in ensuring the coordination of TICs with other centres of excellence across the UK and ensuring that TICs tap into the full range of national expertise.

4.2 Successful innovation often occurs in the context of complex supply chains. In some mature technology markets, these may be well established, with obvious structures. In emerging technology markets, the nature of the supply chain may be as yet unclear. It is critical that all key innovation stakeholder viewpoints are incorporated into the activities of a TIC.

4.3 Supply chain opportunities and the associated need for capability development may have sub national spatial geography, and interfaces with other mechanisms such as regional growth hubs and other potential support for high growth businesses should be carefully planned. Care must be taken to ensure that smaller companies have a voice in shaping the activities of TICs.

5.1 Universities have developed a wide range of applied research activities and knowledge exchange mechanisms, often in close partnership with research users. Development of TICS to support industry/academic linkages needs to acknowledge the ownership that many Universities now have of this agenda. Whilst recognising that investment in TICs may create or enhance necessary infrastructure that is not currently available within the University system, structures devised for a TIC should find ways to be inclusive of existing activities and industrial partnerships within Universities via exploration of hub and spokes models.

5.2 Care must be taken with metrics that capture Universities’ industrial interactions, especially HEFCE HEBCI metrics, to reward Universities who interact with industry via TICs rather than directly.

Loughborough University

December 2010 Written evidence submitted by The Russell Group (TIC 69)

TECHNOLOGY INNOVATION CENTRES

A. The Russell Group is an association of 20 major UK research-intensive universities. Russell Group universities undertake high levels of business interaction, and host a number of research centres which embody characteristics of Fraunhofer research centres. These research centres undertake applied and collaborative research with business partners, support technology development, as well as providing incubators for spin-out companies and small high-tech start-ups.1

B. In 2008/92, 77% of HEIs whose contract research with commercial businesses was worth over £5M were Russell Group universities. In the same year, Russell Group universities received £283M of income from UK, EU and other overseas industry, and accounted for: • 68% of the total income from contract research to UK universities. • 53% of the total income from collaborative research involving both public funding and funding from businesses to UK universities.

C. The Russell Group wishes to highlight the following key points in response to the questions of the committee on Technology Innovation Centres (TICs):

i. Given the differences between the research landscapes in the UK and Germany, too close an adherence to the Fraunhofer model as it operates in Germany is unlikely to be the best fit to meet the needs of the UK. Successful innovation requires taking into account the context and environment within which research is undertaken, generated, and exploited. Nevertheless, a discussion of ways in which Fraunhofer-style activities might be carried out by universities themselves would be welcome.

ii. To address the UK’s needs for accelerating technology and innovation, there is real value in building on the strengths, competitive advantage and capacity of the existing research base. In a time of very limited public funding, resources should be focused on supporting existing centres of excellence, ensuring they are best meeting the needs of business, and making a maximum contribution to the UK’s innovation, productivity and growth performance. Consideration needs to be given to the long-term sustainability of any existing or new centres that are funded, taking into account issues such as long-term ownership, ongoing technology refresh programmes and if needed, decommissioning costs.

iii. Investments should be complementary to, rather than competing with, the current capabilities of the UK’s research base, and considered on a national (rather than regional) scale. Resources should be focused where there is most competitive advantage to be gained from integrating research, teaching and translation.

1 Collectively Russell Group universities receive around two thirds of Research Council grant income and QR funding, and the 2008 RAE showed that nearly 60% of the world-leading 4* research was undertaken in Russell Group universities. 2 2008/9 HESA Finance record (HEBCI survey).

iv. The Government will need to consider what the focus of a TIC should be – applied research, development activities, knowledge transfer, support for venture capital, or all of the above? Different TICs may also need to adopt different approaches or mixes of activities, depending on the area of technology it covers – a one size fits all approach will not be appropriate.

v. The Government will need to consider how the TICs fit within the existing research environment in terms of generation of research, alongside research- intensive universities and other research institutes, and also how the TICs will work alongside the technology transfer offices, companies and other knowledge transfer functions embedded in universities. Existing successful centres are often closely associated with, or even embedded within, universities which have a critical mass of excellent research and teaching, and a proven track record of translation.

vi. There is scope for exploring whether there are alternative models to Fraunhofer-type research centres, and what methods exist to improve coordination and cooperation between existing centres, research-intensive universities and business. For example, a TIC may benefit greatly from a leading ‘university as host’ mechanism. The university could offer co-location of academic and industry researchers in the hosting of nationally important physical assets, and be tasked with integrating resources through its network of associated centres of excellence, and managing communication with industry partners. This model would extend the reach into higher technology readiness levels beyond which some existing centres typically operate.

1. What is the Fraunhofer model and would it be applicable to the UK?

1.1 The UK research and innovation landscape is very different from that in Germany. In the UK, world-class research-intensive universities undertake a much broader range of research activities than in Germany, including basic research, applied R&D, long-term strategic research, interdisciplinary research and technology development services. Complementary R&D activities are undertaken in independent research institutes. These include the Wellcome Funded Sanger Institute, Research Council Institutes, Government laboratories, technology intermediaries, R&D consultancies and in company R&D laboratories.

1.2 In Germany, the roles of organisations within the research base are highly differentiated and largely discrete. For example, universities focus on higher education and basic research, and Fraunhofer Institutes undertake applied R&D and provide technology development services. In addition, Helmholtz Research Centres focus on long-term strategic research on issues of national importance in areas such as energy, health, space, transport and the environment, and Max Planck institutes focus on specific areas of cutting-edge interdisciplinary research and large-scale research facilities.

1.3 Recently, Germany has been aiming to boost research and quality standards at individual universities, and focussing on clusters of research excellence. This is motivated by a desire to improve Germany’s international competitiveness; the World Bank has noted that Germany’s universities are ‘hardly recognized as elite institutions3’ and trail behind the UK’s world-class universities.

1.4 The research and innovation funding landscapes, composition of research-intensive businesses, and nature of university-business relationships also differ significantly

3 World Bank, 2009, “The Challenge of establishing world-class universities.”

between the UK and Germany. In the UK, world-class universities have strong and established relationships with business, whereas in Germany it is the Fraunhofer institutes which have strong links to business. Universities in Germany are subject to rules governing their engagement with entrepreneurial activities, which restricts their ability to engage with business and secure industry funding. We have an opportunity to examine whether activities that are carried out by discrete institutes in Germany might be carried out within UK universities, exploiting the culture changes that have already resulted from decades of government investment.

1.5 Given the differences between the research landscapes in the UK and Germany, too close an adherence to the Fraunhofer model as it operates in Germany is unlikely to be the best fit to meet the needs of the UK. As the OECD has noted, attempts to transplant elements of productive innovation systems from other economies are usually unsuccessful.4 The response to falling behind in a race should not be to return to the start line and try a new strategy while our competitors forge even farther ahead. Rather it is to build on the training we have already done and adapt to new conditions. Successful innovation requires taking into account the context and environment within which research is undertaken, generated, and exploited. The UK’s world-class universities are embedded, and at the heart of, the national innovation system, whereas Germany’s innovation system relies on a much more dispersed number of players who generate research.

1.6 The Government has announced that a network of Technology and Innovation Centres (TICs) will support businesses in developing and commercialising new technology. It will be crucial to ensure the TICs do not duplicate effort and are joined up with the existing infrastructure and initiatives. It will be necessary to clarify the goals of the TICs and the mix of research and innovation related activities it will undertake. For example, what would the focus of a TIC be – applied research, development activities, knowledge transfer, support for venture capital, or all of the above?

1.7 Different TICs may need to adopt different approaches or mixes of activities, depending on the area of technology it covers – a one size fits all approach will not be appropriate. There is a need to ensure continuity of research development from the fundamental research undertaken within universities, through to full-scale commercial product/process. TICs should aim to maximise their position in the product/process development cycle, by supporting a balanced combination of industrially-driven challenges and university-catalysed innovation.

1.8 In setting up the TICs, and considering their goals and focus, the Government will need to consider the following:

1.8.1 How the TICs will fit within the existing research environment in terms of generation of research, alongside research-intensive universities and other research institutes. Russell Group universities host many research centres focused on more applied and collaborative research undertaken with business partners, as well as incubators for spin-out companies and small high-tech start-ups;

1.8.2 How the TICs will work alongside the technology transfer offices, companies and other knowledge transfer functions embedded in universities. Russell Group universities can point to a strong track record in technology exploitation, often via dedicated technology transfer companies, such as UCL Business, Cambridge Enterprise, Isis Innovations (Oxford), Alta Innovations Ltd (Birmingham), King’s College Business Ltd and Imperial Innovations Ltd;

4 OECD, 1997, “National innovation systems.”

1.8.3 How the TICs will fit alongside Technology Strategy Board initiatives involving business, such as innovation platforms, Knowledge Transfer Partnerships and collaborative R&D, and also other initiatives that aim to support business (for example, the London Technology Network).

1.9 Industrial R&D spend in the UK is much less than our competitors in Europe, and what there is, is concentrated in two sectors (aerospace and pharmaceuticals) dominated by a small number of large companies. The Government should consider carefully whether it wishes to focus on maintaining the status quo, or ensuring that TICs encourage new entrants to the marketplace, and companies operating in new sectors. Universities are well placed to provide open innovation collaborative environments that support new and growing high-tech companies, in addition to the established players. Growth in competition and innovation in all sectors is likely to be of benefit to the UK in the long run.

1.10 The Government should also consider how the TICs will address wider issues in the commercialisation of research and development of technologies through their early stages. Proof of concept funding, established by funding from Scottish Enterprise and the Higher Education Innovation Fund (HEIF), has been highly beneficial in developing Russell Group research into commercially successful technologies.5 This funding, and its Scottish equivalent Knowledge Transfer Grant, has also enabled our universities to expand and strengthen their technology transfer activities, employing highly skilled business professionals, through which administrative, technical and financial support can be provided to support the progression of new spin-out companies and development of technologies through their early stages.

1.11 In spite of existing sources of proof of concept funding, there remains a shortage of funds to help very early stage technologies to be developed to the point where they are able to attract funding from venture capital trusts or other investors, or can be established as a viable licensing proposition for external businesses.

1.12 The Russell Group would support further investment in existing proof of concept funds and exploring ideas around the potential for a national proof of concept fund, which would be managed by successful institutions. In particular it could be valuable to align part of this funding with the TICs.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1 Russell Group universities host a number of research centres which embody characteristics of Fraunhofer research centres, in that they undertake applied and collaborative research with business partners, support technology development, as well as providing incubators for spin-out companies and small high-tech start-ups. Below are examples of centres that have been particularly effective in working with industry (additional information on each centre is provided in the Annex):

• Centre for Plastic Electronics, Imperial College London and the Cambridge Integrated Knowledge Centre, University of Cambridge • Centre for Regenerative Medicine, University of Edinburgh • Advanced Manufacturing Research Centre, University of Sheffield

5 In a study of over 120 case studies of commercialisation of Russell Group university research, over 50% of the projects had drawn on proof of concept funding, and in those cases, the majority had accessed an internal university fund.

• The Nuclear Advanced Manufacturing Research Centre, University of Manchester and University of Sheffield • National Composites Centre, Bristol • WMG, University of Warwick • GSK Clinical Imaging Centre, Imperial College London • Centre for Materials Discovery, University of Liverpool • Biopharmaceutical processing, Newcastle University • Institute of Sound and Vibration Research, University of Southampton • High Performance Computing Wales, Cardiff University in collaboration with other Welsh HEIs • Institute of Electronics, Communications and Information Technology (ECIT) at Queen’s University Belfast • KNT, University of Glasgow

2.2 Russell Group universities support businesses in developing and commercialising new technologies in a variety of other ways, including:

• Technology exploitation via technology transfer offices, or often via dedicated technology transfer companies. These companies invest in businesses based on IP from research undertaken in the university, and in some cases in other IP rich companies with excellent commercial potential. An example includes Imperial Innovations, which in 2008/9 invested over £14M in 20 companies, and external investment in its portfolio of companies was £41M in 2008/9, rising to £75M in 2009/10.

• Provision of various kinds of incubation facilities for new companies, along with investment and knowledge transfer support. Examples include the University of Warwick, which has a virtual tenancies programme that allows emerging companies to access the support and facilities at Warwick’s science park without having to physically relocate.

• Incentives to access research expertise. Most Russell Group universities have knowledge transfer secondment programmes in place. In addition, the universities of Nottingham, Glasgow and Newcastle have awarded local businesses thousands of pounds worth of “innovation vouchers”, enabling small companies to access research expertise through consultancy or collaborative projects.

3. What other models are there for research centres oriented toward applications and results?

3.1 To address the UK’s needs for accelerating technology and innovation we believe there is real value in building on the strengths, competitive advantage and capacity of the existing research base. The Russell Group believes that in a time of very limited public funding, resources should be focussed on supporting existing centres of excellence, ensuring they are best meeting the needs of business, and making a maximum contribution to the UK’s innovation, productivity and growth performance.

3.2 If the Government wishes to establish new TICs, outside of existing centres of excellence, the Russell Group believes that existing national research capability and national need should be examined closely. A smaller number of focused, high quality centres would provide greater value for money and make a greater difference to the UK’s innovation performance, than a system of more widely dispersed centres.

3.3 We also believe there is scope for exploring whether there are alternative models to Fraunhofer-type research centres, and what methods exist to improve coordination and cooperation between existing centres, research-intensive universities and business.

3.4 For example, a TIC could make use of a ‘university as host’ mechanism. The university could offer co-location of academic and industry researchers in the hosting of nationally important physical assets, and be tasked with integrating resources through its network of associated centres of excellence, and managing feedback loops and communication channels with industry partners. This model would extend the reach into higher technology readiness levels beyond which some existing centres typically operate.

3.5 A further alternative is to bring together business, research-intensive universities, and existing centres of excellence to focus on specific challenges. This type of approach has the following advantages over a more ‘fixed’ technology and innovation centre:

• A greater breadth of activity than can be provided within more fixed or limited technology and innovation centres. • Stronger links to the critical mass of world-leading research expertise that is provided by the UK’s research-intensive universities. • A greater degree of flexibility, with the ability to rapidly deploy expertise within universities and centres of excellence to address new challenges as they arise. Teams can be dissolved and reformed as needed in the light of changing priorities. • Greater access to highly skilled graduates and postgraduates, who are looking to join high-tech companies or to start their own.

Successful examples of this type of approach include:

The Global Medical Excellence Cluster (GMEC)

3.5.1 GMEC was formed in 2007, and brings together leading universities, companies and NHS Trusts to build the capabilities to keep the UK globally competitive in biomedical research. Five of the UK’s top life science and medical research-based universities formed GMEC in partnership with GlaxoSmithKline, GE Healthcare, Pfizer UK, the Maudsley Hospital and the Royal Marsden Hospital. All five universities are Russell Group universities: University of Cambridge, Imperial College London, King’s College London, University of Oxford and University College London.

3.5.2 The GMEC cluster model is based on a proven approach. Medical excellence clusters exist in the USA, Europe and Asia. Additional clusters are being built in Asia and the Middle East. GMEC’s vision is to improve patient outcomes and achieve a globally competitive position in biomedical science and innovation. GMEC aims to increase cutting edge medical research, improve collaboration between industrial, academic and clinical partners, and attract increased inward investment.

The Institute for Sustainability

3.5.3 The Institute for Sustainability was set up to accelerate the delivery of sustainable cities and communities, led by a board representing UK industry, academia and public sector. The Institute brings together expertise from nine higher education institutions, including four Russell Group institutions: Imperial College London, King’s College London, University College London, and the University of Southampton. The Institute works closely with private sector and public sector partners to provide the knowledge, experience and practical solutions needed to deliver economically, environmentally and socially sustainable cities and communities.

3.5.4 Private sector partners include: Arup, Biffa, BT, EDF, HSBC, Jones Lang LaSalle, Land Securities, Marks and Spencer, National Physical Laboratory, Pera, Pilkington, ProLogis, QinetiQ, Thames Water, TWI, VTT Group.

3.5.5 Public sector partners include: Communities and Local Government, Dartford Borough Council, East of England Development Agency, Environment Agency, London Borough of Barking and Dagenham, London Development Agency, London Thames Gateway Development Corporation, South East England Development Agency.

The Science City Research Alliance

3.5.6 The Science City Research Alliance is a collaboration between the Universities of Birmingham and Warwick, established to increase collaborative industry R&D through demonstrator projects. The Alliance focuses on three areas of complementary research strengths of regional and national relevance, which are: advanced materials, energy futures, and translational medicine.

3.5.7 The Alliance works with both the private sector (including Arup, Aston Martin, Bruker, EON, GKN, JLR, Johnson Matthey, NPL, Sandvik) and the public sector (including local authorities, NHS Trusts, and housing associations).

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

4.1 There are a number of roles relating to coordination that need to be considered:

• Coordination of the entire network of innovation centres • Coordination of research within a specific innovation centre

4.2 In coordinating the entire network of TICs, it is imperative that national research strengths, international developments and engagement, and business needs are all taken into account. An overview of strategic priorities, both immediate and over a longer time horizon, is also needed. The branding of TICs will be crucial, in order to raise their international profile and provide global competitive advantage.

4.3 The Government has announced that the Technology Strategy Board (TSB) will establish and oversee the network of innovation centres. The Russell Group would welcome further opportunities to build and strengthen the links between our institutions and the TSB. Russell Group institutions, with their extensive experience in working with business can offer valuable insights on the latest developments in cutting-edge research, the types of research and information most requested by business, and how research has directly enhanced the growth performance of business.

4.4 The Government has also announced that individual innovation centres will have a high degree of autonomy so they can respond to business needs. The ability to respond flexibly, and rapidly, will be significant to a TIC’s success. However, TICs will also need to respond to emerging developments in research. Therefore, we recommend that the coordination of research within a specific centre needs to be strongly linked to research within existing centres and research-intensive universities, as well as business needs. This will avoid duplication of effort.

4.5 In practice, this may mean that the coordination of research in a TIC needs timely inputs from business and academia. One way of implementing this may be a board

coordinating research within a centre, including members from leading businesses and academics. Input from RCUK may also be very helpful.

5.1 As noted under question 2, there are a number of existing centres that are working on aspects relating to regenerative medicine, plastic electronics and high value manufacturing. These centres are partially funded or sponsored by Government. It will be imperative for the TICs to work together with public sector research establishments and relevant existing centres, forming partnerships where appropriate, to ensure synergies are generated and duplication of effort is minimised in the generation of research.

5.2 In addition, Public Sector Research Establishments and other existing research centres (for example, Diamond and MRC Harwell) have established relationships with business and the community, and considerable commercialisation activities. All TICs will need to ensure that their activities add to, and do not displace, existing valuable activities.

The Russell Group

02 December 2010

Annex (to question 2): Examples of existing centres

Centre for Plastic Electronics, Imperial College London and the Cambridge Integrated Knowledge Centre, University of Cambridge

2.2.1 As two of the leading academic centres in plastic electronics, Imperial and Cambridge are strongly engaged in the process of refining and delivering the national strategy in this area and to this end participate strongly in the printable electronics centres of excellence (PECOE) network and plastic electronics leadership (PELG) group. Both universities have a large number of researchers active in plastic electronics, in Physics, Chemistry, Materials and Engineering - totalling more than 150 in Cambridge and 175 at Imperial. In both universities important links also exist to other university activities in potential end- user areas: Biotechnology, Computer Science, Medicine, Architecture, Environment and Civil Engineering. Both universities work with a broad range of industrial partners including Dow Corning, Plastic Logic, Merck, DuPont Teijin Films, Hitachi, Unilever, Nissan, BT, BASF, BP Solar, General Electric, Konarka, Philips, Solvay, Sumitomo and others.

Centre for Regenerative Medicine, University of Edinburgh

2.2.2 The MRC Centre for Regenerative Medicine (MRC-CRM) at the University of Edinburgh brings together world leading basic stem cell research with established clinical excellence to deliver a "bench-to-bedside" approach aimed at developing new treatments for major diseases including cancer, heart disease, diabetes, degenerative diseases such as multiple sclerosis and Parkinson's disease, and liver failure.

2.2.3 The MRC-CRM is committed to building both strong industrial collaborative links, specifically companies who are seeking to develop technologies in any area of stem cell biology and therapy, interested in derivation and GMP production of new stem cell lines or interested in the development and use of stem cells for drug screening.

Advanced Manufacturing Research Centre, University of Sheffield

2.2.4 The University of Sheffield Advanced Manufacturing Research Centre (AMRC) with Boeing is a world-leading research centre dedicated to developing innovative technology solutions for advanced materials forming.

2.2.5 The AMRC works in collaboration with a wide range of manufacturing businesses, to develop cutting-edge technologies and provide practical solutions to manufacturing problems.

The Nuclear Advanced Manufacturing Research Centre, University of Manchester and University of Sheffield

2.2.6 The Nuclear AMRC is a joint initiative with industry, the University of Sheffield and the University of Manchester’s Dalton Nuclear Institute.

2.2.7 Working in partnership with Government and business, the Nuclear AMRC is designed to be the focal point for the civil nuclear manufacturing industry in the UK. Assistance will be provided to companies to introduce ‘step change’ manufacturing technologies and to become competitive in global markets, and assist with training and developing staff expertise.

National Composites Centre, Bristol

2.2.8 The National Composites Centre (NCC), was announced in November 2009 as an element of the implementation of the UK Composites Strategy, prepared by BIS with industry and academic stakeholders.

2.2.9 The NCC (http://www.nationalcompositescentre.co.uk/) is an independent, open-access national centre designed to deliver innovation in the design and rapid manufacture of composites and facilitate their widespread industrial exploitation. It is based in Bristol close to research centres of excellence and significant absorptive industrial capacity. The NCC is subject to a strong governance structure, steered by an industry-led Board, and managed by an industry-experienced management group, whilst maintaining close links with academia and government agencies. It brings together industry and academia to develop new technologies for the design and rapid manufacture of high-quality composite products for deployment in multiple industry sectors. The combination of academic and business strengths will speed progress from laboratory to design to factory and into products. Public sector capital investment totalling £25M coupled with major recurrent commitments from industrial partners (Airbus, AgustaWestland, GKN, Rolls Royce, Vestas) has been secured to allow operation of the NCC by summer 2011.

2.2.10 As envisaged in the UK Composites Strategy NCC will link regional centres of excellence around the UK, in HEIs and industry, including the University of Bristol’s Advanced Composites Centre for Innovation and Science, to provide national capability in composites research and development.

WMG, University of Warwick

2.2.11 WMG works with companies to develop better working methods, to match the technologies they employ into what their business wants to achieve. WMG works across a broad range of industrial sectors, including aerospace, pharmaceuticals, automotive manufacture, food processing, banking and healthcare.

2.2.12 Some of the companies WMG have collaborated with include Jaguar Land Rover, TATA, Siemens, AirBus, RBS, GlaxoSmithKline, Northern Foods, Network Rail, BAE Systems and the West Midlands Strategic Health Authority.

GSK Clinical Imaging Centre, Imperial College London

2.2.13 The GSK-sponsored clinical imaging centre at Imperial College London is a multi-million pound collaboration which has created a world-leading facility drawing on the research expertise of Imperial College London.

2.2.14 GlaxoSmithKline committed to a £50m investment in the centre, which officially opened in 2007. Alongside parallel investment from Imperial College London and the Medical Research Council, GSK’s commitment has equipped the centre with state of the art scanning and imaging facilities, which will enable scientists to improve their understanding of some of the world’s most serious diseases, including cancer, cardiovascular disease and neurological disorders. Through improving fundamental understanding of diseases, it will create a platform for the development of new, more effective, treatment and prevention.

Centre for Materials Discovery, University of Liverpool

2.2.15 The Centre for Materials Discovery (CMD), based at the University of Liverpool, provides a research centre and a research and knowledge transfer service to academia and industry in the area of high throughput materials discovery.

2.2.16 Building on the strong base of academic expertise within Liverpool, and working closely with other universities in the North-West, the centre aims to support businesses by providing access to leading research, training for industry personnel, and world-class facilities such as robotics and advanced ICT.

2.2.17 The Centre is explicitly targeted at the use of research excellence to support business endeavor, particularly businesses based within the Northwest. Figures provided by the university indicate that, after three years, the centre has had a major impact within the Merseyside region, including £5.85m Net Value Added to the Merseyside region.

Biopharmaceutical processing, Newcastle University

2.2.18 The Newcastle University Research Centre in Biopharmaceutical Processing is a UK leader in developing techniques for drug development and production processes.

2.2.19 The centre facilitates interdisciplinary research collaborations between biological, physical and engineering scientists, and developing research expertise which is relevant to the problems and needs of industry.

2.2.20 The work of the research centre in collaboration with industry spans a broad range of knowledge transfer activities. Experts at the centre offer consultancy services and continuing professional development (CPD) courses to the pharmaceutical and biotech

industries, such as the application of Process Analytical Technologies (PAT) for the pharmaceutical sector.

Institute of Sound and Vibration Research, University of Southampton

2.2.21 The Institute of Sound and Vibration Research (ISVR) at the University of Southampton carries out world-leading academic research and commercial consultancy and contract research across a range of subjects including acoustics, noise, vibration, human hearing and vehicle dynamics.

2.2.22 Similar to a typical Fraunhofer institute, the ISVR receives around a third of its funding from contract research and consultancy, with another third from academic research grant funding. The final third is primarily research and teaching block grant funding. As well as delivering the contracted research, much emphasis is placed on cooperation and collaboration with the bodies who provide funding, including industry, Government Departments and health authorities, in order that academic research and teaching may be directly related to their needs and the everyday needs of society.

High Performance Computing Wales, Cardiff University

2.2.23 High Performance Computing Wales is a £40M pan-Wales university project designed to give businesses working independently or in collaboration with academics access to advanced research computing capability.

2.2.24 Operating via an independent not-for-profit company structure, Cardiff University's Advanced Research Computing at Cardiff (ARCCA) will provide the gateway for researchers at the University to access HPC Wales, facilitating links to Swansea, Aberystwyth, Bangor and Glamorgan Universities, University of Wales Alliance Universities and Technium business innovation centres around Wales. The cutting-edge computing facilities will be available for use by businesses working independently or in collaboration with academics and will establish Wales as a key international centre for specialist computational research.

Institute of Electronics, Communications and Information Technology (ECIT) at Queen’s University Belfast

2.2.25 The Institute of Electronics, Communications and Information Technology (ECIT) at Queen’s University Belfast is a unique £60m facility which opened in 2004. ECIT brings together over 150 staff and focuses upon digital wireless communications technology and secure information technology. Researchers and industrial partners within the institute contribute to ‘mission-led’ research programmes which bring together a range of complementary and multi-disciplinary skills, including data encryption, network security systems, wireless enabled security systems and intelligent video analysis. ECIT has a strong entrepreneurial culture with involvement in 22 early stage companies and six established spin-out firms.

Manufacturing Technology Centre, University of Birmingham, University of Nottingham and Loughborough University

2.2.26 The Manufacturing Technology Centre (MTC) represents a new model of collaborative partnership between industry, universities, and research and technology organisations. The MTC reflects the need for manufacturers to move away from competing simply on cost and to compete more on knowledge.

2.2.27 Founder industrial members of the MTC are Rolls-Royce, Jaguar Land Rover, Aero Engine Controls and Airbus UK. Research partners include the University of Birmingham, University of Nottingham, Loughborough University and TWI Ltd, the operating division of The Welding Institute.

2.2.28 The centre is industry-focused, operating in technology readiness levels 4-6, and will provide resources and a high quality environment for the development and demonstration of new technologies. The MTC exemplifies a cross-sectoral approach, developing solutions to high-value manufacturing problems that are applicable to aerospace, automotive, rail and energy sectors. The MTC forms part of a wider, fully complementary network of Advanced Manufacturing Research Centres.

KNT, University of Glasgow

2.2.29 KNT (Kelvin Nanotechnology Ltd) provides nanofabrication research, prototyping, process development and small-scale manufacturing services to industry. Founded in 1998, KNT builds on 30 years of nanotechnology research at the University of Glasgow.

2.2.30 KNT has a global market, working with companies in the UK, USA, Europe and Japan. It specialises in high resolution, large area, multilevel electron beam lithography for applications such as transistor gate writing, imprint masks, optical elements, photonic crystals and nanotextured surfaces With support from the TSB’s MNT programme, KNT has built capability in nano imprint lithography, working with end-users and equipment manufacturers to supply imprint mask plates for a wide variety of applications. Spinout and start-up companies are able to access a multi-million pound equipment base and the expertise of dedicated support staff at relatively low cost whilst building product credibility and a customer base. A combination of service provision, collaborative applied R&D and product supply has led to a sustainable business model.

Written evidence submitted by The Biochemical Society (TIC 70)

Introduction to the Biochemical Society

The Biochemical Society is a Learned Society and registered charity which promotes the advancement of the Molecular Biosciences both internationally and in the UK. We have 6,000 members and represent the interests of and provide support to those working in the sector.

The Biochemical Society welcomes the opportunity to contribute to the Science and Technology Committee’s inquiry on Technology Innovation Centres, focusing on Fraunhofer Institutes. It is important to note that Fraunhofer Institutes have not been publicly proposed as the model for the Technology Innovations Centres (TICs). The Hauser Review recommendations do not fully align with the workings of Fraunhofer Institutes.

Question 1‐ What is the Fraunhofer model and would it be applicable to the UK?

Background

[1]A brief history of Fraunhofer Institutesi

1949 The foundation of the Fraunhofer‐Gesellschaft as a non‐profit organization.

1955–1963 The first Fraunhofer research institutes gradually emerge, and as opportunities grow in the contract‐research market, there are consequently opportunities in this market for the Fraunhofer‐Gesellschaft itself

1964–1969 The Fraunhofer‐Gesellschaft qualifies for institutional funding granted by the German ministry of research and is thereafter acknowledged as the leading organization for applied research in Germany.

1970–1974 Restructuring and implementation of the “Fraunhofer model” makes basic financing by the government entirely dependent on contracts awarded by industry.

1984 –1989 Transformation of the Fraunhofer‐Gesellschaft into a market‐oriented organization providing R&D services. Creation of the first alliances to optimise internal collaboration.

1990–2000 Many institutes and specialist departments are successful in shifting their research efforts away from defense towards industrial contract research, which becomes the most important source of business revenue of the Fraunhofer‐ Gesellschaft.

[2]A 2008 report, ‘International Comparison of Five Institute Systems’ lists important defining characteristics of Fraunhofer research activities as: • Application and results‐oriented. Organisation pursues the implementation of innovative research findings in industrial and social applications. Its work is based on a dynamic balance between applied basic research and innovative development projects. • Decentralised. Structured processes are used to identify areas of technology of relevance to industry and the short‐term and long‐term demands of the contract research market. This information steers their choice of research fields. A parallel approach on the part of the various institutes leads to a wide range of creative solutions. • Fraunhofer‐Gesellschaft carries out publicly funded pre‐competitive research. This forms the basis of the contract research projects conducted for customers. Private sector earnings enable the organisation to finance a major proportion of its budget through its own meansii.

[3]The Fraunhofer‐Gesellschaft has 80 research units in Germany, of which 59 of these are Fraunhofer Institutes. It has an annual turnover of more than €1.3 billion. These institutes currently employ 17,000 people, of which the majority are qualified scientists and engineers. They are organised into seven groups:

• Information and communication technology • Life Sciences • Microelectronics • Light and surfaces • Production • Materials and components • Defense and security

[4]In addition to these groupings, individual Fraunhofer Institutes join existing alliances based around work in related fields. This encourages communication between FI working in complimentary fields, enabling the solving of complex issues. Examples of these alliances are found in the areas of:

• Cloud Computing • Digital Cinema • Nanotechnology • Numerical Simulation of Products, Processes • Optic Surfaces • Photocatalysis • Polymer Surfaces • Rapid Prototyping

Organisation

Fig.1 The organizational structure of Fraunhofer‐Gesellschaftiii

[5]The Senate is elected by an Assembly of Members and is responsible both for decisions concerning the basic scientific and research policy of the organisation and appointing the Executive board. The statute (last revised in 2003) sets out certain criteria for composition of the Executive Board. The Executive Board must be consist of the President and up to four other full time members, of which two must be qualified scientists or engineers, one must be experienced and well versed in business management practices and one must “possess qualifications equivalent to those required for employment at a senior level in the civil service”iv. The role of the Executive Board includes developing the organisation’s research portfolio, expansion and financial plans in collaboration with the Science and Technical Council in addition to developing the organisation’s science and research policy.

[6]In terms of policy formation, “Fraunhofer‐Gesellschaft acts autonomously in defining its own strategic orientation, on which it bases its planned research activities. This orientation is closely aligned to the objectives of national and European economic and research policy. It is an independent organization and takes a neutral stance with respect to the demands of individual interest groups in the domains of politics, industry or society.” v

[7]At present the Fraunhofer‐Gesellschaft’s front‐line themes arevi:

• Assisted Personal Health • Bio‐functional surfaces • Decentralized integrated water management • Integrated localization technology • Energy self‐sufficient sensors and sensor networks • Energy‐efficient modernization • Energy storage in power grids • Food Chain Management • Green powertrain technologies • Hybrid material structures • Solid‐state light sources • Visual analytics

[8]In response to whether the Fraunhofer model would be applicable to the UK, there appears to presently be confusion about what the Government perceives to be a Technology Innovation Centre. For example, the news that the Government may be considering the “high‐tech hub” in East London as one of the recipients of the £200 million designated for the creation of TICs within the UKvii.

[9]Whilst the terms “Cluster” and “TIC” have not been well defined, they should not be treated as synonymous. All the TIC models we have explored have purpose built buildings or, in the case of the French Carnot Institutes, specific laboratories with their own identity. Therefore, whilst TICs may form an important component of a cluster, they are not actually a cluster themselves.

[10]The Hauser Review proposes the creation of branded Clerk Maxwell Centres, within areas “where the UK has the potential to gain substantial economic benefit” located near UK research excellence in universities and outside of these, “along side industrial capability and absorptive capacity” with funding of 50‐100m over 10 years per TIC. The overall programme of activity in each TIC is to be “overseen by a business led steering group”viii.

[11]In putting together this response, we contacted over 200 Biochemical Society members based in Germany to ask for their opinion/experience of Fraunhofer Institute. In a succinct response, one member said, “To put it short: If you want to detect some fundamental new things in Biochemistry and have ambitions to win the Nobel Prize you will go to a Max‐Planck Institute or an institution of the Helmholtz‐Gesellschaft (such as the DKFZ). If you want to optimize an enzyme for a new application you go to a Fraunhofer institute.”

Question 3 ‐ What other models are there for research centres oriented towards applications and results?

[12]In answer to this question we will be providing information on models in: 1. France 2. Korea 3. Japan 4. Denmark

1. France – Carnot Institute

Background: [13]The Carnot Initiative was started in 2002, with the first call for candidates in 2004‐2005. The Carnot Institutes build directly upon the Fraunhofer modelix. The main aim of Carnot Institutes is to support partnership research, with “Carnot” acting as a label on public research laboratories which is received for a four year renewable period. The level of financial support received by each Carnot Institutes (from the French ‘Agence Nationale de la Recherche’) is based upon the volume of partnered research with socio‐economic partners undertaken. These socio‐economic partners are usually companies.

[14]Focus areas: The Carnot Institutes focus on six key competency areas: • ICT – micro and nanotechnologies • Materials, mechanics and processes • Environment and energy, propulsion, chemistry • Earth Sciences and natural technologies • Life sciences and health technologies • Building and land use planning

[15]Staffing and finances: At present, approximately 13,000 senior researchers and employees and 6500 PhD students are employed by 33 Carnot Institutes. According to their website, Carnot Institutes have a turnover of €1300Mx. In addition there is €470M from contractual finances which comes from research partnerships with enterprises, one half directly paid by them.

2. Korea – Electronics and Telecommunications Research Institute (ETRI)

Background: [16]ETRI is a non‐profit, government‐backed research organisation which was established in 1976. It has successfully developed technologies such as TDX‐Exchange, High Density Semiconductor Microchips, Mini‐Super Computer (TiCOM), and Digital Mobile Telecommunication System (CDMA) and the “WiBro technology” behind mobile internet. The institute has a strong focus upon the fields of information and telecommunications. ETRI has either memorandums of understanding or is conducting joint research with 22 countries and 69 organisations – although, these are mostly technology based institutesxi.

Focus areas: [17]ETRI is formed from five Research Laboratories: • IT Convergence Technology Research Laboratory • Software Research Laboratory • Convergence Components & Materials Research Laboratory • Broadcasting & Telecommunications Convergence Research Laboratory • Internet Research Laboratory

[18]ETRI also has three research divisions: • Contents Research Division ‐ focus on research and development in computer graphics, high‐quality video and gaming content production, virtual reality technology, copyright protection, distribution and management technologies, and u‐learning technology. • Creative & Challenging Research Division ‐ aims to develop a medium and long term research strategy for future technologies, to conduct pilot research projects, and to coordinate research projects. The division “strives to conduct world class research in fundamental research areas, to identify large global brand technology fusion projects, and to conduct open R&D through the joint international cooperation between academia and industry.xii” • Technology Strategy Research Division ‐ mission to “pursue the technology development that is needed by society through research in the direction of IT and IT convergence technology development, the economic feasibility of technological development, and the development of industrial ecosystems” and “determine the direction the nation’s IT strategy must take.”

[19]The Technology Strategy Research Division has five main strategic directions: • to create new knowledge about the economic/policy/market of the IT convergence industry, • to provide high quality information through the utilization of various methodologies, • to develop new business ideas and planning, • to design a new ecosystem between developers (technology development) ‐ private companies (commercialization) ‐ customers (end‐user), • to determine the direction of new technological developments through discovering future market needs. With these strategic directions, the division supports the nation’s planning for IT.

[20]In addition to these three research divisions there is also a Technology Commercialisation Division, through which ETRI provides supporting services and projects to SMEs, aiding their competitiveness. Staffing and finances: [21]ETRI employs a total of 1,736 staff members. According to their website, over the last five years, ETRI has created royalty income of more than KRM 228.5 billion, with 3992 international and domestic patent applications last year (2009) alone.

3. Japan – National Institute of Advanced Science and Technology (AIST)

Background: [22]AIST has over 50 autonomous research units, located at 9 research bases and several sites (smaller than research bases) of AIST all over Japan. Whilst the present AIST was established in 2001, there have been a number of predecessor organisations which date back to 1876xiii.

Focus areas: [22]The AIST conducts research in the areas of: • Life Science and Biotechnology • Information Technology and Electronics • Nanotechnology, Materials and Manufacturing • Environment and Energy • Geological Survey and Applied Geoscience • Meterology and Measurement Science

Staffing and finances [24]About 2500 research scientists (about 2000 with tenure) and well over 3000 visiting scientists, post doctoral fellows and students are working at AIST.). AIST has a number of international research collaborations, including with the Centre National de la Recherche Scientifique (CNRS), France and the Chinese Academy of Sciences, China.

[25]AIST received 80,799M yen in 2010 (approximately £615 million) of which 61,407M yen were funds provided by the public sectorxiv.

4. Denmark – Advanced Technology Group (GTS)

Background: [26]GTS is a grouping of nine independent Danish research and technology organisations. A GTS central body handles common interest of the institutes in relation to any outside parties and facilitates internal cooperation. GTS undertakes a significant amount of work with SMEs, the share of companies under 250 employees doing research and development has risen from 27% in 1997 to 36% ten years laterxv.

[27]The GTS Board of Directors consists of the CEOs of each of the nine independent GTS institutes. The Board of Directors elects its chairman or vice‐chairman every year and appoints the Managing Director of the organisation.

[28]A March 2009 report recognised that ‘The GTS institutes have co‐evolved with the economy around them, changing their roles as needs have changed. Some important broad trends of increased knowledge intensity of production, globalisation and growing needs for synergy with the higher education system have affected the institutes in recent years, too’xvi.

Focus areas: [29]The GTS works with the latest technological development in fields such asxvii: • Innovation and society • Construction and security • Food, health and biotechnology • Production • Information technology • Energy and environment • Transportation and logistics

Staffing and finances: [30]GTS employs approximately 3,500 employees and in 2008 had a total turnover of €380Mxviii.

[31]As the Government seeks to develop Technology Innovation Centres in the UK, we have identified the following issues/questions to be addressed: • In Germany, Fraunhofer has strong brand recognition amongst both scientists and the general public. How will UK TICs be marketed both in the UK and internationally (aside from the creation of an online presence)? • Many TICs (including those listed above) have a strong focus on international collaboration – will this be an aim of UK TICs? • Many TICs in other countries have incentive schemes for their workers to generate spinoffs – will such a scheme be put in place in UK TICs? • What will the protocol be for dealing with ownership of Intellectual Property arising from TICs collaborations?

[40]As the UK Government seeks to establish TICs in the UK, there is much to be learnt from the experience of other countries. It is crucial that as many opportunities as possible to learn are created and taken to ensure that UK TICs are able to compete internationally.

The Biochemical Society

02 December 2010

References: i ‘Profile of the Fraunhofer‐Gesellschaft ‐ Its purpose, capabilities and prospects’ http://www.fraunhofer.de/en/publications/brochures/Profile_engl_dez2005_tcm6‐42295.pdf ii ‘International Comparison of Five Institute Systems’ Åström, Eriksson, Niklasson and Arnold ‐ December 2008 iii Fraunhofer website: Structure and Organization of Fraunhofer‐Gesellschaft http://www.fraunhofer.de/en/about‐fraunhofer/structure‐organization/ iv ‘Statute of the Fraunhofer‐Gesellschaft’ Revised version 2003 http://www.fraunhofer.de/en/Images/Statute%20of%20the%20Fraunhofer‐Gesellschaft_tcm63‐8090.pdf v ‘Fraunhofer Mission – Position in the Scientific, Industrial and Social Communities’ http://www.fraunhofer.de/en/about‐fraunhofer/mission/position vi‘Fraunhofer Research Topics – Fraunhofer frontline themes’ http://www.fraunhofer.de/en/research‐topics/frontline‐themes/index.jsp vii ‘PM announces East London Tech City’ 04.11.2010 http://www.number10.gov.uk/news/press‐notices/2010/11/prime‐minister‐announces‐east‐london‐tech‐ city‐56642

viii ‘The Current and Future Role of Technology and Innovation Centres in the UK’ Hauser ‐ March 2010 http://www.bis.gov.uk/assets/biscore/innovation/docs/10‐843‐role‐of‐technology‐innovation‐centres‐ hauser‐review.pdf ix ‘ERAWATCH Country Report 2008: An assessment of research system and policies’ http://www.eurosfaire.prd.fr/7pc/doc/1240907467_jrc_erawatch_france.pdf x ‘Laboratory for Analysis and Architecture of Systems – Key figures’ http://www.laas.fr/2‐30664‐Key‐figures.php xi ‘Electronics and Telecommunications Research Institute – President Greeting’ http://www.etri.re.kr/eng/int/int_0101030000.etri xii Electronics and Telecommunications Research Institute – President Greeting’ http://www.etri.re.kr/eng/int/int_0101030000.etri xiii ‘National Institute of Advanced Industrial Science and Technology (AIST) – Outline’ http://www.aist.go.jp/aist_e/about_aist/outline/outline.html xiv ‘National Institute of Advanced Industrial Science and Technology (AIST) – Facts and Figures’ http://www.aist.go.jp/aist_e/about_aist/facts_figures/fact_figures.html xv ‘A Step Beyond: International Evaluation of the GTS Institute System in Denmark’ March 2009 http://www.teknologiportalen.dk/NR/rdonlyres/5A0D95D9‐FD3B‐4A44‐B7C2‐ AB619D20C98A/3663/AStepBeyond_web_1.pdf xvi A Step Beyond: International Evaluation of the GTS Institute System in Denmark’ March 2009 http://www.teknologiportalen.dk/NR/rdonlyres/5A0D95D9‐FD3B‐4A44‐B7C2‐ AB619D20C98A/3663/AStepBeyond_web_1.pdf xvii ‘GTS – Advanced Technology Group – Services’ http://www.teknologiportalen.dk/EN/Services?i=3 xviii GTS – Advanced Technology Group – ’Key figures and facts’ ‘http://www.teknologiportalen.dk/EN/About+GTS/Key+figures+‐+Facts/ Written evidence submitted by Fraunhofer-Gesellschaft (TIC 71)

I. Official part of the inquiry

1. What is the Fraunhofer model and would it be applicable to the UK?

Research of practical utility lies at the heart of all activities pursued by the Fraunhofer- Gesellschaft. Founded in 1949, the research organization undertakes applied research that drives economic development and serves the wider benefit of society. Its services are solicited by customers and contractual partners in industry, the service sector and public administration.

With its clearly defined mission of application-oriented research and its focus on key technologies of relevance to the future, the Fraunhofer-Gesellschaft plays a prominent role in the German and European innovation process.

Applied research has a knock-on effect that extends beyond the direct benefits perceived by the customer: Through their research and development work, the Fraunhofer Institutes help to reinforce the competitive strength of the economy in their local region, and throughout Germany and Europe. They do so by promoting innovation, strengthening the technological base, improving the acceptance of new technologies, and helping to train the urgently needed future generation of scientists and engineers. Fraunhofer successfully bridges the gap between fundamental research and industrial demand.

The Fraunhofer model combines stable core financing of part of its budget, a close alignment and collaboration with universities, a decentralized management model and autonomy of its Institutes performing demand driven research with scientific excellence.

Fraunhofer's well-defined position in the innovation system is reflected by its financial model. Two thirds of its budget is earned competitively: one third in direct bilateral contract research with industry and one third in publicly funded projects from national or EU funding sources. The remaining third of the budget is provided by the German federal and state governments as core financing, enabling the institutes to develop their competencies in anticipation of the future demands of companies. Similar funding models are characteristic for many major research and technology organisations in Europe, e.g. TNO in the Netherlands, VTT in Finland, and SINTEF in Norway. In all these countries, a continuous and stable core financing for RTOs is provided by the respective governments.

The success of Fraunhofer relies on the following key principles:

• Scientific excellence and state of the art infrastructure combined with market experience/know-how and professional project management capabilities

• Institutional cooperation and scientific alignment of each Fraunhofer institute with a partner university (often located on the same campus), typically through dual appointment of key personnel

• High level of autonomy of the individual Fraunhofer institutes

• Simple and uniform corporate governance principles, strong brand, and lean central management

• Unique potential for interdisciplinary research and capability across knowledge domains within the Fraunhofer portfolio, covering information and communication technology, life sciences, microelectronics, photonics and surface technologies, production technologies, materials and components, defence and security research.

As a corollary to this working model, Fraunhofer researchers also excel in creating patents and spinning out companies. Fraunhofer is typically among the top twenty German organisations with respect to patent filings and it leads the statistics of German research organisations with respect to spin-off companies. Fraunhofer is also regularly considered by university graduates as one of their favourite potential employers.

There is no apparent reason why an abovementioned model should not be applicable and successful in the UK. Next to stable and adequate core funding a necessary prerequisites is a culture of contract research. Industry must realize and accept the advantage of outsourcing R&D to an application oriented R&D organisation. As a significant proportion of the industrial revenue of Fraunhofer Institutes comes from European countries, among them the UK, it can be assumed that the necessary culture of contract research also exists in the UK.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

Referring to Fraunhofer-type research centres the Hauser Review stated that “the UK has invested in equivalent structures” however “the current UK approach is by comparison sub critical; follows no national strategy; and pays insufficient attention to business requirements and the location of relevant expertise”. “Government funding cycles have also not supported the need for long-term investment in TIC’s.“ Fraunhofer's impression can only be an outside view on the British landscape and mostly relies on experience from EARTO (European Association of Research and Technology Organisations). Yet we also think that our British RTO colleagues have less favourable framework conditions in terms of providing contract research to industry than e.g. Fraunhofer researchers in Germany. Moreover the close collaboration with, and link to universities, which is so critical for Fraunhofer Institutes, seems often not to be developed sufficiently. The British RTO TWI attempted recently to establish university links, whereas PERA does not work on an institutionalised basis with universities. Also the new Technopolis survey “Impacts of European RTOs”1 highlights this importance of cooperation with universities.

A key success factor of Fraunhofer Institutes is their access to the Fraunhofer network of 60 Institutes covering various knowledge domains as mentioned above. Strengthening and complementing such a network of application oriented research organisations in the UK should increase the overall effectiveness of the applied research sector.

1 Impacts of European RTOs. A Study of Social and Economic Impacts of Research and Technology Organisations A Report to EARTO, Technopolis Group; 20 October 2010

3. What other models are there for research centres oriented toward applications and results?

In Europe research centres oriented toward applications and results are commonly referred to as RTOs (Research and Technology Organisations). Even though they differ somewhat in their organisational structure and contract research culture in the respective countries the successful ones all follow similar management models and missions, e.g. TNO in the Netherlands, VTT in Finland, and SINTEF in Norway and Fraunhofer. All receive comparable long-term core financing and have a strong tradition of industrial engagement.

The previously mentioned Technopolis survey concludes in a similar way. It also identifies slight variations of legal and organisational form of European RTOs; however it stresses the importance of their comparable and successful management model. The survey adds: ”The narrow definition of an RTO is that its societal role is recognised and it receives core or “capability” funding from the state in order to fund his advantage. Most RTOs thus operate with an explicit or implicit innovation model that involves

• Exploratory research and development to develop an area of capability or a technology platform

• Further work to refine and exploit that knowledge in relatively unstandardised ways. Often in collaborative projects with industry

• More routinised exploitation of knowledge, including via consulting, licensing, spin-off company formation”.

Besides RTOs in Germany, some University Institutes have closer relationships to industry. However, they rather address the industries’ need in more fundamental and longer term questions than application and results for immediate market needs. For this reason the close alignment of Fraunhofer Institutes with Universities works so synergistically. Some government laboratories (sector institutes) like the Helmholtz Institutes follow an application orientation to a certain extent. Generally they are owned by the state and focus on the delivery of services and policy-relevant information to government. Their work is mission- and programme oriented and under a longer term time scale.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

The general coordination of a network of innovation centres in order to leverage complementarities and foster cooperation across knowledge domains could increase the overall effectiveness of innovation. A large organisation like the British TSB could therefore coordinate certain framework conditions such as:

• Definition of minimum standards

• Securing evaluation procedures based on commonly accepted criteria

• Facilitating benchmarking and exchange of best practise

• In a second phase (steady state) making available funding for strategic investments or joint pre-competitive research of several innovation centres.

A central coordination of the actual research of the innovation centres however would somewhat contradict the idea of applied research following the needs of industry in a market driven way, especially SMEs. The research management should rather be decentralized with each innovation centre defining its own strategy based on clients' needs. Evolving competition between the Innovation Centres in some fields is desirable and without detrimental effects provided it does not disadvantage industrial customers.

As long as the mission of these Fraunhofer-type institutes is focused on the needs of a contract research market they will not negatively interfere with the work of other Research organisations or scientific players. In Germany Helmholtz Institutes (national labs) and Fraunhofer Institutes only compete in a wider public research funding context, hardly ever in their work for Industry.

Fraunhofer Gesellschaft and Max Planck Gesellschaft have orthogonal missions which are clearly defined and complementary within the innovation system. Both organisations cooperate strategically in joint programmes.

In Germany, Universities which are aligned with Fraunhofer Institutes profit from the increased critical mass on campus and also as an R&D site due to spanning activities from fundamental research to the end of the TRL scale.

II Additional Fraunhofer part of the inquiry

1. The wider context in which Fraunhofer Institutes work within Germany

The wider context of the work of Fraunhofer Institutes in Germany is best reflected in our Mission Statement.

• The Fraunhofer-Gesellschaft promotes and undertakes applied research in an international context, of direct utility to private and public enterprise and of wide benefit to society as a whole.

• By developing technological innovations and novel systems solutions for their customers, the Fraunhofer Institutes help to reinforce the competitive strength of the economy in their region, throughout Germany and in Europe. Their research activities are aimed at promoting the economic development of our industrial society, with particular regard for social welfare and environmental compatibility.

• As an employer, the Fraunhofer-Gesellschaft offers a platform that enables its staff to develop the necessary professional and personal skills that will enable them to assume positions of responsibility within their institute, in industry and in other scientific domains.

The translation of this mission to Fraunhofer Research means:

Application- and results orientation: Fraunhofer research activities are application- and results-oriented. The organization pursues the implementation of innovative research findings in industrial and social applications. Its work is based on a dynamic balance between applied basic research and innovative development projects.

Autonomy of the Fraunhofer institutes: Fraunhofer research activities are decentralized. The Fraunhofer Institutes use structured processes to identify areas of technology of relevance to industry and the short-term and long-term demands of the contract research market. Their choice of research fields is based on this information. A parallel approach on the part of the various institutes leads to a wide range of creative solutions.

Publicly funded pre-competitive research: Fraunhofer-Gesellschaft carries out publicly funded pre-competitive research. This underpins the contract research projects conducted for customers. Private-sector earnings enables Fraunhofer to finance a major proportion of its budget through its own means.

Excellence in research: Research conducted by Fraunhofer Institutes is of outstanding quality. These institutes strive to achieve or maintain a leading position in the European contract research market.

Scientific practice: In its research work, Fraunhofer-Gesellschaft observes the principles of good scientific practice. Clearly defined procedures are used to investigate any cases of suspected scientific misconduct.

Sustainability: Fraunhofer-Gesellschaft supports efforts directed toward the sustainable development of society, industry and the environment. The Fraunhofer Institutes play an active part in such efforts through a responsible approach to the implementation of new technologies and through research and studies conducted on behalf of public-sector clients.

The main partners besides industrial customers are the Universities with which each Fraunhofer collaborates and cooperates. The Director of a particular Fraunhofer Institute is also a research Professor at the associated University; this is a joint appointment by the University and Fraunhofer.

2. The success or failure of Fraunhofer Institutes in countries outside Germany

Following the globalization of their national and European customers, Fraunhofer institutes reach out to international research markets and excellent scientific partners abroad. Over the last years the amount of industrial contract research revenue from abroad increased to over 20%. Europe is at the core of Fraunhofer's international activities. Fraunhofer has developed a set of models for international cooperation to follow a well-managed planning phase and to minimize the risk of failure of engagements abroad.

Fraunhofer Centres are set up in close collaboration with local universities under the umbrella of a Fraunhofer legal entity in a foreign country. They receive core funding from local authorities and adapt to the respective local and national environment to form an integral part of the given innovation system while maintaining the core Fraunhofer principles and business model. Local integration of these centres is facilitated by their mainly local staff and management, and is achieved via the topical alignment with the partnering university (typically involving dual appointment arrangements), via participation in national research consortia, and via direct contract research for local industries. While these Centres act independently in their local environment, global integration within Fraunhofer is achieved by partner arrangements and management interaction between foreign centres and corresponding Fraunhofer institutes and by participation in Fraunhofer internal networks and alliances.

Recent examples of such Centres in Europe are the Fraunhofer Portugal Centre for Assistive Information and Communication Solutions partnering with the University of Porto, the Fraunhofer Austria Centres for Production and Logistics Management and Visual Computing in collaboration with the Technical Universities of Vienna and Graz, the Fraunhofer Italia Centre for Industrial Engineering with the Free University of Bolzano. The Fraunhofer Austria Centres for Production and Logistics Management and Visual Computing can serve as successful examples as they generated in 2009 shortly after being founded a higher industrial income than the average of all German Institutes.

Fraunhofer USA Inc. was founded in 1994. It started as a small team with the aim to apply the established Fraunhofer model to the dynamic R&D landscape of the US. Today, Fraunhofer USA employs 200 researchers, engineers and technicians in six Centres and operates a budget of 40 Million USD.

Among the Centres is the recently founded Fraunhofer USA Centre for Sustainable Energy Systems in collaboration with the MIT in Cambridge. An example of successfully commercializing internal research in their context is the development of materials, application scenarios and test methodologies for a smart vapor barrier that can change permeability depending on humidity.

The product is commercialized and manufactured by CertainTeed in the US (as MemBrain™) and remains to be one of their top products.

Another example is the Fraunhofer Centre for Molecular Biology and Manufacturing Innovation. They developed a vaccine factory for DARPA to rapidly generate large amounts of vaccines against new pathogens to address bioterrorism threats. It was adopted commercially by iBio and is in manufacture in USA.

Failure of Fraunhofer Institutes is seldom as it is implicit to the Fraunhofer model to be very adaptive to external influences. In the case a Fraunhofer Institute does not find its contract research market as planned then there is the option to close it or merge it with another suitable Fraunhofer Institute. This has been the case - in Germany as well as in the US. An example for the US is the Fraunhofer Centre for Manufacturing and Advanced Materials in Delaware, specialising in metal forming. In 2004, Fraunhofer USA closed this Centre and transferred the proprietary technology to a US company, Alulight of America. However, there is no difference in the criteria applied for this process whether the Institute is in Germany or abroad, a closure or merger is always dealt with in a very responsible manner.

3. Your thoughts on the applicability of the Fraunhofer model to the UK

The Fraunhofer model is applicable and will work in any country where an existing industry structure needs dedicated research and development and is willing to pay for this service. Please find more details in question 1 of the official part of the inquiry (1. What is the Fraunhofer model and would it be applicable to the UK?)

4. How private sector funds are leveraged in Fraunhofer Institutes

One third of the Fraunhofer budget comes from bilateral contract research for industrial clients. This amount of bilateral contract research is the dominant key performance indicator of the Fraunhofer Institutes. Fraunhofer serves about 7000 customers per year. These customers have to be kept aware of our professional R&D offer and be inspired by excellent scientific capability. Projects have to be managed professionally and create impact. In everyday work this means: industry projects have to be actively won. Fraunhofer researchers seek close contact to their customers, listen to their needs and requirements and come up with many individual ideas and possible solutions to be pursued in joint R&D. In internal pre-competitive research, covered by core funding, the emphasis is on scientific competency where “leading edge” compared with “state of art” is needed.

This ability and the brand of Fraunhofer strongly rely on the spirit of the Fraunhofer staff. Customer loyalty is evidenced by data which shows that, on average there will be 5 subsequent contracts following an initial project. This success is not easy to maintain. The performance of a Fraunhofer researcher must continuously produce positive customer feedback and that satisfaction must be recognized. Fraunhofer is managed in a way that fosters this performance.

Private sector funds are thus not leveraged but are rather an integral part of the Fraunhofer budget and model. You may argue that the private sector funds leverage the public core funding as the government gets 100% of applied R&D for one third of core funding.

Dr Raoul Klingner Head of Departmnet International Business Development Hansastr Fraunhofer-Gesellschaft

03 December 2010 Written evidence submitted by General Electric (GE) (TIC 72)

1 I am writing on behalf of General Electric (GE) to respond to the Science and Technology Committee’s inquiry into Technology Innovation Centres (TICs) in the UK.

2 GE recognises that there has been input to government in the form of the Ingenious Britain report from Dyson and the Hauser Review. These reports highlight that there is a gap between university conceptual research and the implementation of commercialised product technology and process in industry. The discussion assumes that TICs (in some form) could be utilised to fill this gap, and that the Fraunhofer model could inform the TIC Model.

3 By way of context, GE is a global company with a strong commitment to the UK, where we have had operations since the 1930s. Since 2002, we have invested over £12 billion in building our UK‐based high technology businesses, which currently employ over 18,000 people across 25 hi‐ tech industrial manufacturing sites, with over 60 sites in all. Today, all of our businesses are represented in the UK. According to the UK R&D Scoreboard published by the Department for Business Innovation and Skills, GE invested £158M in R&D in the UK in 2009.

4 Please find below GE’s responses to the questions posed by the Committee.

1. What is the Fraunhofer model and would it be applicable to the UK?

5 The Fraunhofer model is a German model designed to carry out application‐based research. In Germany, there are 59 Fraunhofer Institutes, with around 17,000 staff members who are predominantly qualified scientists and engineers. Each institute was started with government support and direction based on national opportunity. The model has also been applied globally in modified forms.

Remit:

6 The Fraunhofer Institutes are focused on application‐oriented research. They contain state‐of‐ the‐art facilities which enable research, prototyping and demonstration and act as contract research organisations for industry and government. They aim is to:

• transform scientific expertise into applications of practical utility; • undertake activity that goes up to, and beyond, commercial maturity; • develop solutions of direct practical value to technical and organizational problems; • and look at the wide‐scale implementation of new technologies and processes.

7 The research can be associated with societal, consortia and individual solutions and can involve working directly with a customer. 8 Some of the research undertaken is directly funded by the German federal ministry of education and research. This funding enables each Fraunhofer Institute to conduct advanced research into technological fields that will help pave the way to new markets and explore potential new profitable spaces and competencies.

9 The capability and expertise generated by the Fraunhofer Institute is then utilised by industry through collaborative or individual projects.

10 When more complex system solutions are required several Fraunhofer Institutes will work together to produce an innovative outcome.

Customers:

11 Research customers of the Fraunhofer Institutes include both government and industry. This includes companies of all sizes, in all manufacturing and service sectors. The Institutes are of special importance to small and medium‐sized companies, which may not have in‐house R&D departments. In this way they provide innovation, research and knowledge transfer along with the wider services required for technology businesses.

Funding Model:

12 As not‐for‐profit organisations, the Fraunhofer Institutes receive an annual research budget of €1.6 billion: two thirds comes from industrial contract research revenue or from publicly financed research projects, whilst one third is institutional funding contributed by the German governments.

Management:

13 The Institutes are overseen by a central organisation that ensures, through the basis of centralized control mechanisms, that strategic orientation is on track. This central element also limits the possibility of duplication and provides opportunities for cross learning between Fraunhofer Institutes. Daily management of each institute is decentralized. Each institute is free to utilise its entrepreneurial spirit to drive its own agenda.

Scope of engagement:

14 The Institutes also offer services to assist in the successful take up of any new technology/process, before and beyond new product introduction. As such, they also deliver:

• products and processes ready for commercial use, optimized through research, prototyping and test; • training, either on site or in associated Fraunhofer Academies; • support for business and technology uptake and development through mechanisms such as: – feasibility studies – analysis and surveys in areas such as market surveys trend analysis pre‐investment analysis – environmental audits – provision of funding advice, especially for small and medium‐sized enterprises – accredited test services.

15 Fraunhofer‐type technology and innovation institutions that have capability, in terms of infrastructure, people and service offering, to move technology further down the research and development continuum are attractive propositions. This is especially so if based on a not‐for‐ profit Public‐Private Partnership. Such institutions should look, as a long‐term objective, to models to generating revenue from IP and licensing.

2. Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

16 GE has not carried out an extensive analysis of all available centres in the UK. However, from its operational knowledge and with input from the GE Global Research Centre in Munich, Germany, we do not believe that there are currently any research centres that cover the complete remit of the Fraunhofer. There are elements of the Fraunhofer present in some centres but none are as yet complete.

17 Many UK research centres are strongly linked to a University, often integrated within them, rather than being part of an independent structure. While having an essential role in the research chain, University associated laboratories are naturally academically focused on early stage research. This does not tend to lend itself to understanding the wider industrial contexts and as such can limit thinking and inadvertently constrain this type of research centre. Universities’ expertise, in any technology area in the UK, is often spread across numerous University departments. Therefore, picking one as the location for a research centre limits the ability of that centre to pull from others. They also often lack the scale, processes, experience and management practice to recreate the entrepreneurial approach of the Fraunhofer Institutes.

18 However, a link between Universities and Fraunhofer Institutes is that the latter supervise PhD students. This model could operate in the UK. For example, the EngD students from EPSRC Engineering Doctorate Centres for example could find, the opportunity to develop their PhD project work within the TICs. This would offer a method of keeping the organisation fresh and flexible, help to attract the best and brightest graduates to the TICs and continue to create research that develops the UK’s capability.

19 In the field of healthcare, the UK is recognised as a world leader in medical research. However, infrastructure to support the movement of early phase research through to clinical validation via early development (e.g. device prototype development, pharmaceutical safety studies) is not widely available. As such, many ideas are abandoned prior to the stage where industry is prepared to invest more heavily to commercialise them. Dilution of investment through the UK university network may not be the most efficient manner to enable advances in healthcare.

20 Other research centres have been highly influenced by one sector or one or two companies. Others have been established by regionally focused grants. Therefore across the UK there is some duplication and narrow sector focus and an approach which is not founded on open‐ innovation. If the best advantages are to be taken for the UK, a landscaping of capability and need should be drawn up to establish gaps and overlaps. This would be key to effective planning of the proposed TICs.

21 Most current UK centres deliver a technology focused agenda but with limited interest in the wider picture. They are not concerned with the complete skills provision or greater business support found in Fraunhofer Institutes. While they are successful within their current scope, they do not deliver the same level of value to the UK Plc as Fraunhofer Institutes do to Germany. To achieve the broader scope, the remit of a UK research centre would need to include skills development and training provision, based on a sound workforce plan associated with technology product and process introduction in the future. It would also, for example, need to cover the transfer of knowledge and technology capability into the supply chain.

22 Further in the UK there is no central co‐ordination of the centres or even networking or linking to a central body that pulls across industries and sectors. This means that there is less ability to develop best practice across the research agenda, skills provision and supply, and business support agenda and approaches. There is also potentially less opportunity for several centres to work together to solve a complex problem.

23 That said where a research centre in the UK that is working on a key technology area in an open innovation way, its remit could be expanded and modified, and it could be provided with government support to better serve the needs of the UK Fraunhofer model. The newly formed National Composite Centre (NCC) in Bristol could provide such an opportunity to develop a UK version of a Fraunhofer Institute, potentially acting as a pilot, with its current remit extended to include the wider aspects of a more Fraunhofer type of centre.

24 For example its remit would need to:

• be extended to enable it to deliver the full UK strategy in composites; • expand its considerations and provision of business support and skills, acting as an entry point or ‘gateway’ for UK business; • expand its research coverage to go up to and beyond commercialisation and new product introduction stages of the product life cycle.

25 The NCC would require direct government funding to support the technologies and process with significant promise for the future and develop core capabilities and funding streams to support this expanded remit.

26 In our view new centres should only be set up in areas identified as containing potential high growth for the UK. Other units operating well but not in this category or different in nature of provision may need to be sustained by some other mechanisms.

3. What other models are there for research centres oriented toward applications and results?

27 GE recognises that there are numerous research centre models in the UK and globally, but does not have a detailed understanding of them all at a level that would enable comparative analysis. The USA has a network of centres and national laboratories that are based around the needs of their government departments, as well as national agendas such as National Aeronautical and Space Administration (NASA) and the Air Force Research Laboratories (AFRL).

28 UK based laboratories would include:

• Diamond • Qinetiq • National Physical Laboratories • Energy Technology Institute (ETI).

4. Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

29 The type of research carried out in a Fraunhofer Institute fits into the remit of the Technology Strategy Board (TSB), because of the technology readiness level at which it is undertaken, through to industrialisation.

30 If such centres where to be put together and there was an opportunity for them to work in conjunction with each other the TSB would be an excellent proponent to:

• help determine the nature and number of centres with input from industry and government; • drive and set a strategic view and input on which centres are needed; • link to national and industrial agendas; • coordinate linkage and continuity to universities for pull through of technology and concepts for university research; • and act to set the boundaries of their governance, control and content.

31 However, for longer‐term management some central coordination and control may be required (depending of the number and final scope of such centres) such as a new organisation or a widening of the existing scope of the TSB. This central coordination would enable shared best practices and services, joint approaches on funding and lobbying, and combined landscape setting and analysis.

32 In the setting‐up process, other bodies and sources of funds would have to be included from skills funders and agenda setters, business support, analysis and technology and knowledge transfer organisations, practice, thinking and funding mechanisms.

33 Many of the current centres in discussion are University owned. However if the Fraunhofer model and the increased industrial focus it brings is to be delivered, leadership will need to be reconsidered. Universities’ focus and incentives do not currently match that required in this part of the innovation landscape to ensure the new centres and their outputs meet the Hauser objective. Universities are not traditionally entrepreneurial or commercial in their culture or operation. The proposed centres will, however, need to naturally take an approach very focused on new opportunities, growth and commercial risk taking. Understanding the customer, agility and a focus on delivery of results to industry will be critical, and not elements well understood or exhibited in very early conceptual research approaches undertaken in Universities. The centres will need this type of research to continue to feed them and it is critical that it must be sustained. Placing the two sets of demands on one institutional type is unlikely to be the optimal conclusion.

34 An institute with Fraunhofer‐like objectives in UK could fill a well‐identified weak spot in the innovation spectrum/product life cycle. As Hauser identified, conceptual research needs to be developed and pulled through before it can be adopted and introduced to commercial production. Throughout that process, and during production, new issues, difficulties and opportunities will arise that research activity can overcome to deliver benefits. Transition of capability, know how, skill and expertise to business in all its forms are essential for success. Currently there is no cohesive model in the UK to take concepts at early technology readiness levels through to commercial introduction and production.

Conclusions

35 Two reports from learned UK committees on different places of the political spectrum, and a model operating in a similar European country offer evidence that an approach similar to the Fraunhofer model would bring significant value to the UK economy, helping to drive and support growth in significant areas and sectors. As a consequence it is suggested that significant further thought and development of these concepts, turned to the UK culture, structures, needs and practice be undertaken. The resulting TICs built on a ‘UK Fraunhofer’ model, correctly supported by government and industry, would deliver significant value for the UK and as such would benefit a strong UK identity and branding.

36 It is also suggested that the NCC be considered a pilot and worked with, to develop the UK model for an open innovation approach to technology and process delivery through to commercialisation, and in support of the wider spectrum of services and support required to achieve this.

GE UK

03 December 2010 Written evidence submitted by Cambridge 100 Group (TIC 73)

Technology Innovation Centres

1. Introduction

The Cambridge 100 is a business networking organisation founded on the principle that members benefit from getting to know each other and exchanging ideas. Its membership includes founders, managers and supporters of some of the most innovative businesses in the region. The aim is that businesses in and around Cambridge should benefit from better access to each others’ skills and experience. In order to encourage openness and freedom of information, all Cambridge 100 meetings are conducted under Chatham House Rules.

2. Business/University Liaison

The Cambridge 100 membership also includes University Business Liaison staff. Some members have had close connections with the erstwhile i10 organisation which had, until its recent closure, the mission of facilitating practical mutual liaison between businesses and all the ten universities in the East of England. The aim was the application of university research results and resources in Business and Industry. The Cambridge 100 finds the closure of i10 rather puzzling in the context of the new Technology Innovation Centre (TIC) initiative.

3. Fraunhofers and technology research

• It is our understanding that Fraunhofers aim to conduct research that leads to innovative products and processes, with various specialisations for each centre. By contrast, in the UK and elsewhere, much university research, even in technological departments, tends, quite justifiably, to follow its own lines of investigation in accordance with the agreed departmental research topics and staff interests and reputations.

• Whilst university research may well eventually find applications in Business and Industry, the application process poses the challenge that in many cases the research result turns out to be a solution seeking a problem to solve. This puts the cart before the horse: faster results can normally be achieved for Business by the more conventional approach of first defining the business problem or customer need and then working out a solution.

• It is our understanding that the Fraunhofers tend to work in this more effective way, of starting with the problem and aiming for a direct solution. They hence can provide a more prolific source of research benefits for Business. It would be our hope that any forthcoming TICs would conduct research aimed, like the Fraunhofers, more directly towards innovative growth in Business.

• To this end, it will be important that the TICs are managed by experienced business people with a strong commercial culture, rather than by academic leadership.

4. The importance of informal liaison and networking

It is our practical experience that the value of informal contacts between universities, research organisations and businesses is often underestimated. The Cambridge100, with its background in facilitating such informal networking, recommends that each TIC should embrace a strong commercially-aware network in which business leaders, service providers, business-orientated university staff, and researchers from the TIC itself can meet to better understand each other’s aims and cultures.

Our experience suggests that the knowledge and insight so gained from appropriate networks would accelerate the commercialisation of research and hence increase growth from profitable innovation in UK Business.

Dr Martin H Jones Chair Cambridge 100

03 December 2010

Written evidence submitted by the Plastic Electronics leadership Group (PELG) (TIC 74)

Technology Innovation Centres

Plastic Electronics – A Brief Introduction

This submission has been prepared by members of the UK National Plastic Electronics leadership Group as an input to the House of Commons Science and Technology Committee inquiry into Technology Innovation Centres.

Plastic Electronics is an emerging new industry where the combination of its forecast global value ($120Bn by 2020) and UK competitive position secured by substantial university, company and government investment makes it a very attractive high growth sector in which the UK must seek to extract maximum return. The combination of technologies within Plastic Electronics enables the deposition of electronic materials onto any surface, whether rigid or flexible, via low temperature (low energy), high throughput manufacturing processes, including printing. This in turn facilitates the creation of a range of new product categories illustrated by conformable and rollable electronic displays, energy-efficient solid state lighting and low cost solar cells. The UK National Strategy for Plastic Electronics published in December 2009 identified the key elements of this opportunity and described the key action areas required.

Select Committee Questions

1. What is the Fraunhofer model and would it be applicable to the UK?

The Fraunhofer model takes fundamental and applied research to a point where technology can be derisked and assessed for both its commercial and technical readiness. This allows companies to take informed decisions regarding the commercial viability of technology and in this sense the Fraunhofers operate in the TRL 4-7 “valley of death” which was the focus of the original Hauser report into TICs. It is important to recognise what Fraunhofer are not – they are not universities nor are they research institutions (though R&D is done within them). While it would not be appropriate to use the Fraunhofer model “as is”, there are elements of the model which would address the UK’s strategic gaps in technology commercialisation. The more important elements that could be adopted are :-

(i) They provide a critical interface between research (both academic and company) and the target market(s)

(ii) They provide a valuable technology incubation environment especially in disruptive technology areas where both risk and reward are at their highest levels

(iii) They are provided with a funding mechanism(supported both nationally and regionally) which allows for continuity of mission over a medium term (5- 10 year) period. Remembering that the commercialisation of new technology platforms, certainly in the electronics and displays industries, can be a 20 year journey then this is especially important

(iv) They typically focus in rather well-defined technology areas, additionally providing valuable training for engineers and scientists in technology development and therefore becoming a suitable recruiting target for Industry. Whilst Universities and Research Institutes are better at training research engineers and scientists.

(v) They operate external to but are well connected to relevant universities

It is worth remembering that these characteristics are not restricted to just the German Fraunhofer model. Equivalent centres in Taiwan (ITRI), Japan (AIST) and Korea (ETRI) share many of the same attributes. While drawing these international comparisons it is interesting to consider annual budgets in these institutes, for example :-

ITRI (Taiwan) : $500 Million (50% Government, 50% Industry), 6,000 employees AIST (Japan) : £830 Million (94% Government, 6% Industry), 5,000 employees plus 4,000 secondees from industry/university

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

In the UK there are a number of centres which exhibit Fraunhofer-type models but in every case there are differences. The Centre for Process Innovation’s Printable Electronics Technology Centre is a good example of a Fraunhofer- like organisation in the UK though it is not equipped with the structure or funding model to provide medium term commitment. The UK’s Plastic Electronics sector enjoys the existence of other Centres of Excellence – Imperial College’s Centre for Plastic Electronics, the Cambridge Integrated Knowledge Centre, Manchester University’s Organic Materials Innovation Centre and Swansea University’s Welsh Centre for Printing and Coating. Each of these centres incorporates elements of the Fraunhofer model but it is the PETEC facility whose role most clearly mirrors that of a Fraunhofer Centre. In the absence of a Plastic Electronics Fraunhofer type facility, the UK community have sought to create a collaborative structure to address the key “valley of death” commercialisation challenge but this is hampered considerably by the investment required for these efforts to be internationally competitive versus ITRI/ETRI etc.

What is clear when considering all of these models is the need to identify a small number of areas where the UK should seek to be world-class in establishing the industries of the future. At all costs we must avoid the “keep everyone happy” pitfall in which relatively large sums of money are distributed across many institutions leading to the establishment of a number of sub-critical mass facilities.

3. What other models are there for research centres oriented toward applications and results?

Mention has already been made of the ITRI, AIST and ETRI centres in this submission. These centres tend to be centrally located and co-ordinated which brings benefits of scale in relation to services/management and also makes changes of direction/emphasis and consequent staff redeployment within the organisation straightforward as it doesn’t require any relocation of staff or facilities. The US Flexible Displays Centre benefits from the provision of central US Army funding to provide the medium term infrastructure and revenue funding to drive the commercialisation of disruptive flexible display technology. This is further supported by significant SME support via DARPA and SBRI schemes and by the FlexTech organisation (again largely US Army funded) which farm out priority projects collectively identified and funded by industry consortia.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

Characteristics of the coordinating organisation should be :-

(i) Must have a national accountability across all sectors and all TICs

(ii) Must define a consistent governance process that will operate across all TICs

(iii) Must be the “gateway” to funding models

(iv) Must provide “ownership” of over-arching TIC strategy and as part of this appoint and approve steering boards for each TIC

These criteria define a relatively small number of coordinating organisations – as already has been suggested the Technology Strategy Board would be a suitable group especlly with the TRL 4-7 focus for TICs which mirrors directly TSB’s existing collaborative R&D role

It is essential that while allocating resources to a network of Fraunhofer-type establishments that the excellence of the UK’s academic research is protected. TICs are not a substitute for university groups, they should be considered as a key exploitation route – one which will allow the UK to continue to be world- leading in academic excellence and critically also world-leading in the industrial exploitation of this excellence resulting in the generation of economic activity, jobs and wealth. TICs should therefore focus in areas where UK has key research credibility, IP, people and where there is potential for the creation of new businesses. Once the focus on TICs has been decided then supporting funding for existing Public Sector Research Establishments should be allocated on a priority basis to those sectors where TIC investment decisions have been taken. Only in this way can the UK continue on the journey to strength via reinvestment in the Public Sector Research base while accelerating the rate at which this base is exploited in its target markets. Therefore TICs should be industry focused taking new technologies to a point where there is sufficient proof of principle demonstrated to allow companies to take confident, well-informed decisions on exploitation strategies.

Dr Keith Rollins – DuPont Teijin Films and Chairman Plastic Electronics Leadership Group Professor Donal Bradley – Imperial College, London Dr Jeremy Burroughes – Cambridge Display Technology Dr Tom Taylor – Printable Electronics Technology Centre Dr Ric Allott – Electronics, Sensors and Photonics KTN

Plastic Electronics Leadership Group (PELG)

02 December 2010

Written evidence submitted by Sciovis Ltd (TIC 75)

Technology Innovation Centres

The Government has a desire to invest in key technology areas that are relevant to future UK societal objectives in areas such as sustainable healthcare, a low-carbon economy and a secure society, supported by new strategies in information processing. To meet such goals, it is essential that the UK makes the best use of its innovative skills, especially in areas which will lead to wealth creation through processes of product and market growth.

Traditionally, the UK has relied on its Universities as a source of new science and technologies (S&T), although it is recognised that small medium enterprises (SMEs) also play a key role in the invention and innovation process. But there has always been a challenge in translating that S&T base into new products, which provide the seed-corn of economic growth. Whilst the Universities have moved forward considerably in recent years in their efforts to exploit their research activities, the exploitation of the underlying intellectual capital has been less successful than in other nations. In the USA, for example, the exploitation process is enabled to a considerable extent by the US Government’s Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR) programme, which provides an annual funding pool of about $2.5B under the terms of the Small Business Research and Development Enhancement Act. The process is supported by the network of National Laboratories, which provide small businesses with access to technical facilities, well beyond the capabilities of any emerging enterprise in its initial growth phase. The US Department of Defense also supports an advanced Manufacturing Technology (ManTech) program, to ensure that technologies and processes are exploited on an affordable, timely and sustainable basis.

Other nations have different approaches, but very often rely on Research Institutes to bridge the gap between academic research and its exploitation in new products. In Germany, for example, the Fraunhofer model for enabling applied research provides some key features that would be of benefit if pursued in the UK.

The 59 Fraunhofer Institutes provide the basis for the coordination of activity across a diverse set of activities, ranging from Molecular Biology to Transport and Infrastructure Systems. They do not replace the role of Universities, but focus on the application of technology towards meeting society’s priorities. The Fraunhofer Institutes receive about one-third of their income from Federal and State grants, which is used to refresh capital facilities, maintain infrastructure and fund preparatory research. The remainder of their income is won through contracts with industry and government in selected areas of activity. To date about 150 companies have been spun-off from Fraunhofer Institutes, whilst a number of others have benefited from being able to access their facilities and the expertise of their scientists and technologists.

There are other examples in Europe. In Belgium, IMEC has grown into one of the world’s leading microelectronics research centres with major companies such as Intel and Samsung among its core technology partners. TNO was set up in Holland to provide companies and governments with objective, scientifically-based advice across a wide area of activity, including defence. Indeed, on an International basis, there are many other examples of such independent research institutes addressing applied research, including Battelle, SRI and SAIC in the USA. Of these SRI is particularly relevant because it has created about 40 new commercial ventures, capitalising on technology originally developed within its not-for-profit core business.

Virtually all of these Institutes operate on the basis of a not-for-profit business model and return operating surpluses back into their capital asset and human resource base. Where their activities result in commercially exploitable work outside their existing customer base, they will generally form a new company to support that exploitation, to avoid any penalty arising from charges relating to the higher overhead costs of the parent Institute. The research process per se is not capable of generating a high profit margin and even for large industries the associated costs are borne as a charge on product divisions.

The UK has in the past explored different approaches towards wealth creation. A notable failure has been in the case of AEA Technology, which is now a shadow of its former self and no longer able to compete on the international scene in the important area of atomic energy. Arguably another failure has been QinetiQ, which has pursued a business model for growth and wealth creation based on acquisition rather than growth and exploitation of its underlying intellectual capital. Currently the company is choosing to divest itself of its Emerging Technologies Group, which contains the few remaining components of the extensive facilities and knowledge base built up at Malvern over several decades by MoD to develop advanced electronic and photonic technologies.

In my role as Research Director of MoD’s Electro-Magnetic Remote Sensing Defence Technology Centre (EMRS DTC), I have directed the funding of research activities across academia, SMEs, Research Centres and manufacturing industry. There have been some cases where University research groups have failed to meet their research objectives, let alone generated exploitable concepts. This is partly because the Universities have success criteria based on publishing new work rather than spinning-off new products. In general their research teams are not always well-suited to address product development, which is the critical gap that needs to be addressed if the UK is to be able to exploit its intellectual capital.

On the basis of my experience in interacting with a number of different organisations over many years, including DARPA in the USA, I can see considerable benefit in the UK forming a well-coordinated network of Technology Innovation Centres addressing applied research. This would provide a focus for the incubation and development of new ideas and innovation in a stimulating environment by bringing together frontier researchers, technologists, industrialists and entrepreneurs.

The arguments for such a network have already been presented in the recent Hauser Report. There are already some centres in the UK that could be considered for the basis of such a network. Indeed QinetiQ’s Emerging Technologies Group at Malvern could potentially provide the basis of a centre focussing on electronic and photonic technologies underpinning advanced information processing techniques, a low-carbon economy and a secure society. It already has established links with key Universities, notably Warwick, Lancaster, Birmingham, Oxford, Imperial College and Bristol, as well as industrial partners such as Intel, Hewlett Packard, Oclara and Sharp.

I would suggest that the Technology Strategy Board would be best placed to coordinate activity at such Technology Innovation Centres, supported by existing Knowledge Transfer Networks in key areas of market requirement.

Professor Keith Lewis Director Sciovis Ltd

6 December 2010 Written evidence submitted by The Knowledge Centre for Materials Chemistry (TIC 76)

Technology Innovation Centres

Introduction

1. The Knowledge Centre for Materials Chemistry (KCMC) is a virtual centre of expertise providing multi-disciplinary research and innovative knowledge transfer based on world class capabilities in applied materials chemistry drawn from four leading research institutes.

2. While based in the Northwest of England with start-up funding from the NWDA, KCMC has established a strong track record in delivering benchmark levels of industry engagement and technology transfer in its area of expertise nationally, and can therefore provide useful insights to the practical application of new collaborative models.

3. This input reflects the views of industrial users of the KCMC i.e. innovator companies drawn from the “chemistry-using” industries with active programmes of collaborative research – in many cases multinational companies with options to do research outside the UK.

Question 1. Fraunhofer Institutes and Applicability to UK (Chemistry)

4. The Fraunhofer Institutes promote and undertake applied research spanning a very broad range of technologies and industries. They have established a strong institutional structure and brand with key features including excellence in applied science, professional industry engagement and high standards of project execution and delivery. Funding is by a combination of core government funding, competitively won applied research grant funding and private sector applied research income – spread approximately equally between all three categories.

5. Benchmark outputs from the Fraunhofer institutes include: • Overall applied research revenues typically 2/3 of the running cost – with half of this income derived from industry • Commercial opportunities (patents) established at ca £1.8million investment per patent • Spin-outs established at ca £17million investment per spin-out

6. While the Fraunhofer Institutes have established facilities in other countries, the great majority are based in Germany. Out of the diverse array of Institutes within the Fraunhofer, several are focussed on chemistry and related technologies – e.g. Applied Polymer Research, Surface Engineering and Thin Films, Chemical Technology.

7. The scale and dynamic of industrial R&D investment in Germany is different to the UK, therefore the Fraunhofer model may not directly translate. The greater R&D focus of German industrial activity provides a significantly different environment than the UK for technology translation (data from the Department for Business Innovation and Skills “2009 R&D Scoreboard”1). German quoted companies occupy a leading role in the global R&D rankings across a broad spectrum of industry sectors with 41 companies in the global top 500 R&D investors with annual R&D spend totalling £39billion. By comparison there are fewer UK quoted companies with 19 companies in the global top 500 R&D investors, and the overall R&D spend of these corporations is at a lower level with annual R&D spend totalling £14billion– foreign owned multinationals contribute very significantly to the UK R&D base on top of this. This trend holds for the manufacturing and process industries, where the UK has strong corporate presence only in certain key industry sectors (the “chemistry-using industry” is strongly represented in this).

8. As in Germany, R&D and Innovation in the "chemistry using industry" is crucial to the future economic growth and continued prosperity of the UK. However, the economic landscape in the “chemistry using industry” is changing faster in the UK than in Germany, with a shift from high volume, low margin businesses to lower volume, high margin businesses – for example performance chemicals, speciality polymers, nanomaterials – which is significantly more marked in the UK. This growth opportunity has been well noted in the Technology Strategy Board review of High Value Manufacturing2.

9. Given the current lower level of corporate industrial R&D spend in the UK than in Germany, the innovation infrastructure in the UK must be robust to a substantially different level of support from nationally based major corporations than is the case in Germany. This context means that the rigid application of a Fraunhofer model in the UK is not appropriate – further the existing level of industry engagement is generally much higher with research intensive UK universities than is the case with academia in Germany. For the UK a key opportunity is therefore to address the industry focus of the Fraunhofer model while leveraging the knowledge assets we already possess within companies, research institutes and academia. A framework which leverages these assets to deliver a combination of market insights, technical capabilities and commercial flair coupled with excellence in applied science, professional industry engagement and high standards of project execution and delivery is therefore strongly preferable and more likely sustainable.

10. Fraunhofers support industries and technologies with a range of maturities, and a priority should be to identify and learn from those Fraunhofer institutes which have contributed to or supported the delivery of knowledge intensive and high growth industry opportunities.

Question 2. Are there existing Fraunhofer-type centres in the UK?

11. For chemistry, there is a centre of expertise in process technology established in the Northeast of England (CPI – Centre for Process Innovation) - with some early TRL programmes in emerging step-out technologies in for example Plastic Electronics and Industrial Biotech - which broadly conforms to the Fraunhofer model.

Question 3. What other models are there for research centres oriented toward applications and results?

12. Aspects of the Fraunhofer approach have been adopted at centres established in various leading research institutes across the UK. The strong track record of delivery of spin-outs, numerous high profile industry collaborations and other commercialisation opportunities from UK academe (as enumerated in the “Sainsbury Review of Science and Innovation”3) have provided fertile ground for fostering applied research, with the potential to raise the activity to a new level in a more focussed national strategy setting.

13. One of these examples which we profile here is the Knowledge Centre for Materials Chemistry. This centre was developed in response to an identified industry need for improved innovation in the chemistry-using industries, building on a strong track record of chemical technologies impacting innovation across a high proportion of UK manufacturing and process industries. The focus on materials chemistry reflects the increasingly important role of molecular scale design in the development of new products and processes in a nanoenabled world. There are now many examples to illustrate the application of leading edge materials chemistry skills to the challenges of product design and development, with many of the products fabricated by advanced manufacturing companies thereby offering significant opportunities for competitive edge in international markets.

14. The KCMC is an “open-innovation” partnership between industry, four leading research institutes and Chemistry Innovation KTN, with physical assets and dedicated staff located within the research institutes, and industry engagement driven by a central knowledge transfer team hosted by the KTN. In the KCMC, industry partners lead the scale-up and commercialisation of new technologies, and research staff from within both the academic and industry partners are expected to operate flexibly in the partner laboratories according to project needs. The approach of the KCMC is encapsulated by five key elements:

• Pro-active engagement with industry, understanding needs/identifying opportunities • Technology development driven both by strategic industry relationships and market led interdisciplinary collaborations • Leverage of public and private funding (national, international and EU programmes e.g. TSB, FP7) to maximise returns on research investment • Professional and timely project definition, execution and delivery • Industry led exploitation

15. Like the Fraunhofers, KCMC harnesses strong industry leadership to bring new ideas and technologies to market through R&D collaboration between top quality applied research capabilities with innovator companies in the manufacturing and process industries. Industry income for applied research in KCMC is at a similar level as the Fraunhofers at approximately 30%. Distinct from the Fraunhofers, the industry partners lead and provide necessary expertise on scale-up and exploitation of new product concepts, rather than investing KCMC resources in large scale prototyping and pilot scale facilities. This sector- specific selection of resource deployment is key to minimizing investment risk. Capital investments in KCMC have focussed on laboratory scale facilities and instrumentation for chemical synthesis and processing which are scalable with established industry practice, in for example, synthesis of organic materials, high throughput technologies for materials discovery and fabrication of thin films by molecular deposition techniques. Where step-out new process technologies are being explored (as for example with the Ultra Mixing Processing Facility, or new technologies for exploitation of carbon nanostructures during the same period, specific projects are agreed which may involve investment in a KCMC research institute or within a partner research facility (company or specialist process facility), dependent on commercial issues and adaptability of relevant infrastructure.

16. In the start-up phase of operation, KCMC funding of applied research (representing approximately 1.5 years operation) is broadly comparable to the Fraunhofer benchmark, with revenue funding profile “to-date” (Q3 2010)

Core Public Sector Contribution: £2.6 million Industry income: £2.1 million Competitively won matching grant income: £2.7 million Knowledge Transfer Income: £7.4 million

17. Critical mass for world class research is further assured by additional funding for fundamental research which underpins the applied research activity. Materials chemistry knowledge generation grants have been awarded in the same period in excess of £16million – more than doubling the overall research income on the timescale of the grant. This grant income is important to the KCMC for the longer term as a source of new ideas and capabilities for future exploitation, and in the short term for maintenance of expertise and laboratory capabilities at a level appropriate to industry benchmarks. This is a core advantage over the German model as leading research expertise in the universities is integrated in the activity directly. As a two-way knowledge exchange organisation, the KCMC structure provides a targeted and efficient mechanism for keeping lead academics aware of industry technology needs and opportunities at a deep level, so helping to orient science programmes in areas with potential for longer term economic benefit.

Knowledge Transfer income and grants awarded: £7.4 million Fundamental research grants awarded: £16.0 million Total Research Funding awarded £23.4 million

18. The impact of KCMC in outputs relative to Fraunhofer benchmarks illustrates the viability of this approach:

KCMC vs. Fraunhofer outputs

KCMC output Comparable Fraunhofer (ass. same core funding) Applied research £4.8million (65%) £5.2million (66%) Income Commercial 10 patents, 2 licences 3 patents, 3 licences Opportunities Spin-outs 1 <1

19. Crucially, on the delivery of wealth from these collaborative activities, in addition to successful engagement with a number of major multinational enterprises, KCMC has also established a number of key relationships with small-medium enterprises, which are now contributing a substantial proportion of the industry research income (ca 17%), and have very immediate benefits on the commercial prospects of these businesses.

Question 4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

20. The TSB is most strongly placed to coordinate a UK-wide network of innovation centres because the TSB has prime responsibility for the national innovation strategy. From a KCMC perspective, although KCMC represents the largest single concentration of research in materials chemistry within the UK, it is not alone in the field. There are other highly relevant centres of expertise in UK academia, many of which are very complementary to the KCMC and which are essential partners for delivering high-performance interdisciplinary research against key industry technology needs. This diversity is a feature of the depth and breadth of UK science and provides a strong incentive to connect these resources with leading company innovators in the practical, results oriented environment offered by organisations such as KCMC. The main vehicle for this co-ordination with the UK wide network of research activities is with the TSB, via the Chemistry Innovation KTN. This is beneficial since it gives the appropriate industry focus to programme generation and delivery.

21. In the current challenging economic climate, it is vitally important to build and exploit critical mass for leading edge applied research, and to leverage in-depth industry engagement to maximum extent in order to deliver short and medium term benefits to the UK economy. Co-ordination of activities between TICS and existing centres of applied research will be a key to success.

22. With the formation of nationally recognised TICS, whatever the detailed model adopted, there will be opportunities to take a more strategic approach to industry exploitation of new technologies with potential for positive impacts on existing centres of applied research:

• A clear focus for the development of commercialisation strategies for risky new technologies bringing together the best minds in industry, academia and other relevant centres of expertise to address challenges at key stages of product and market development • The development of longer term plans and processes for building expertise and capabilities in the commercialisation of strategically important new technologies • Common standards in collaborative approach, interdisciplinary science and coordination of industry engagement activity, providing a powerful mechanism for leveraging the best available skills within UK PLC for tackling common industry challenges • A focus for developing R&D funding mechanisms in support of the commercialisation of new technology applicable to both industry and academia.

23. There are also significant risks from the adoption of the Fraunhofer-type approach in the UK

• Lack of co-ordination between existing academic and industrial activities and the new centres leading to loss of momentum and connectivity to the science base • ....leading to delays to the timescale of economic impact from government sponsored • research, given the multiyear timescales required to create effective innovation networks built on reputation, excellence in delivery and operational effectiveness • Difficulty to focus the current high level of industry engagement and in-depth business interactions from across the UK innovation landscape through a limited number of TIC’s, when compared to the German model (59 Fraunhofer institutes in Germany) • The regional business connectivity of the Fraunhofers is also important to their function – in the past the regional development agencies have had a key enabling role here in the UK which should be addressed for the future – previously the RDA’s have been able to offer a market and technical communication bandwidth tuned to the needs of business • Waste and duplication of resources where existing industry or academic facilities could meet the requirement all or in part for scale-up and commercialisation

Conclusion

There is much to commend the Fraunhofer model of applied research. Many of the key attributes of the Fraunhofer model are already applied within diverse research institutes across the UK. We believe that there are significant risks from seeking to concentrate innovation resources in a limited number of TICS without simultaneously ensuring a high level of continuity with existing industry science and innovation networks. We believe that there is an opportunity to raise the impact of these activities through the development of consistent standards and a sustained focus for applied research in the UK.

1. Department for Business Innovation and Skills “2009 R&D Scoreboard” 2. Technology Strategy Board review of High Value Manufacturing 3. “Sainsbury Review of Science and Innovation” The Knowledge Centre for Materials Chemistry

02 December 2010

Written evidence submitted by Universities UK- AURIL joint submission (TIC 77)

Technology Innovation Centres

Universities UK (UUK)

Universities UK (UUK) is the representative organisation for the UK’s universities. Founded in 1918, its mission is to be the definitive voice for all universities in the UK, providing high quality leadership and support to its members to promote a successful and diverse higher education sector. With 133 members and offices in London, Cardiff and Edinburgh, it promotes the strength and success of UK universities nationally and internationally.

Association for University Research and Industry Links (AURIL)

Association for University Research and Industry Links (AURIL) is the largest professional association that represents all knowledge transfer practitioners in the UK, working to ensure that the new ideas, technologies and innovations flowing from their organisations are taken up for the benefit of economy and society.

AURIL and UUK have welcomed the opportunity to respond to this inquiry. For both organisations, the main issues are that, whilst there are independent research institutes which work closely with business, the UK currently has nothing that looks like a Fraunhofer system in terms of volume, scale and approach, and the government does not seem to be committed to funding long term projects of this kind. The scale of proposed investment in innovation activities is welcome, provided that it does not ignore the track record and experience that Higher Education Institutions (HEIs) can demonstrate.

1. What is the Fraunhofer model and would it be applicable to the UK?

The Fraunhofer-Gesellschaft model is that of an applied or industry focused research and development centre on an ambitious scale, funded by a blend of government grants and (a majority of) private sector and government contract support. It is an integral part of the German innovation system and has an annual research budget of approximately €1.6 billion. Of this budget, €1.3 billion is generated through contract research (two thirds is derived from contracts with industry and from publicly financed research projects). One third is contributed by the German federal and Länder governments in the form of institutional funding.

1.1. The Fraunhofer platform encompasses more than 80 research units (including 59 Fraunhofer Institutes) at different locations in Germany, although there are research centers and representative offices in Europe, USA, Asia and in the Middle East. The Institutes are closely aligned with Germany’s research active universities and the Max-Planck Institutes (an independent not-for-profit research organisation) who carry out basic research and host large scale research infrastructures.

1.2. In comparison with the UK, Germany therefore hosts a far more differentiated research and innovation ecosystem with defined roles for each group. In contrast with the German HE sector, UK universities have well developed capabilities in knowledge and technology transfer and excellent relationships with industry, and have been supported in developing these via successive rounds of government support (through mechanisms such as HEIF). Any development of Fraunhofer type structures in the UK environment would have to take account of and adapt to these distinctions in order to complement and augment existing R&D and innovation mechanisms.

1.3. Although the Fraunhofer network could be applied to the UK, there are a number of pre-existing structures and boundaries that need to be acknowledged and taken into consideration in the development of the TICs network. Arguably, there is an embryonic Fraunhofer infrastructure emerging in the UK as a result of successive rounds of Government support through mechanisms such as HEIF and focused innovation funding via the Research Councils. For example, the Advanced Manufacturing Technologies for Photonics and Electronics IKC, funded via EPSRC based at University of Cambridge.

1.4. Any development of Fraunhofer type structures in the UK environment would have to take account of, and complement existing R&D and innovation mechanisms and funding should be deployed in a manner which provides additional investment for some existing structures, and pump-priming for others. Therefore, an element of funding should be ring-fenced for competitive allocation. In addition, a threshold of engagement should be agreed e.g. 30-40% income from industrial partners which, if not secured, results in a proportion of the core funding returned for re-deployment. In essence, embed a financial claw-back system.

1.5. The significant scale of the Fraunhofer network in Germany and the level of year-on- year national investment mean that any UK development would initially be a fraction of the size (assuming the £200 million proposed budget). Only a limited number of specific initial investments could be made on this basis and care should be taken to ensure that funding is not spread too thinly within any UK network.

1.6. In the UK context, there are a number of further considerations that need to be bourne in mind:

1.6.1. Any consideration of the value of the Fraunhofer model needs to proceed from a clear understanding of what purpose such Institutes will serve in the UK. The success of Fraunhofer Institutes as elite organisations which provide a business-focused capability that bridges research and technology commercialisation needs to be understood within the broader environment within which they exist in Germany. Any development of a network of similar institutes in the UK needs to be sensitive to the particularities of this context. Effective implementation will require careful consideration of how a network of institutes will map onto and complement the UK’s current innovation ‘culture’ and its existing ‘infrastructure’.

1.6.2. It is worth noting that the most successful and effective existing research centres in the UK have universities at their centre, such as University of Sheffield’s Advanced Manufacturing Centre with Boeing. We would argue strongly that universities have a central role in the new TICs, no least for the research expertise they can bring, but also as a source of highly-trained people with the capability of bringing a multidisciplinary diversity often absent from independent technology centres or research institutes.

1.6.3. We understand that it has been suggested that the new TICs should house capital equipment that individual HEIs may not be able to afford. This would be hugely costly in terms of capital, revenue and balance sheet (via rapid depreciation). In light of the levels of investment proposed, we would argue strongly that the focus of the new institutes should be on people rather than equipment and costly infrastructure. TICs should look to utilise and build on the sharing of existing infrastructure where possible.

1.6.4. It will also be important to give close consideration to the levels of core funding which will be provided to the new TICs. The new centres would require significant, long-term investment to have the capacity for significant outcomes, which would in itself take some time to build and emerge. They would therefore need a sustainable business model which recognises the level of funding required to develop and maintain the capability of the TIC from both public and private sources. On the latter, it is essential that the new centres supplement core public funding by winning additional income from sources such as contract research, commercialisation and subscriptions as reliance on demand from end users is crucial to encouraging innovation and boosting efficiency. To assist with this objective, minimum targets might be set for engagement (e.g. achieving 40% income from industry within a reasonable timeframe). When establishing this approach, it should be borne in mind that experience of similar ventures in other countries suggest that institutes become focused on the short-term and are ultimately unsustainable if they are required to generate too great a percentage of their revenue from commercial sources.

1.6.5. Care should be taken to ensure that the UK’s design thinking research expertise is taken into consideration when formulating TIC components. This would

enable a broader range of universities to engage with the innovation agenda which would greater benefit UK Plc. The UK has, in its diverse HE sector, a real and valuable strength which must be reflected in developing the new TICs, not only housing some very strong world-class research intensive universities but also with institutions with excellent records in innovation and knowledge exchange, as well as niche areas of world-class research. It is therefore essential for the UK global research base to be able to access and utilise the pockets of expertise that exist in a diverse range of institutions without dilution of critical mass funding. Similarly, the new centres should be multi-disciplinary in their total offering – a wide range of disciplines are critical in supporting the new knowledge economy which includes, but is by no means limited to, STEM disciplines.

1.6.6. Within the UK, it is not clear how the Local Enterprise Partnerships (LEPs) will be able to contribute to the TICs in some areas, especially if, as in the Greater London area, there is a question about the availability of Regional Growth Funding (RGF) to support development. Until the full extent and range of the LEPs and RGF become evident, the TIC funding and leverage assumptions linked to regional development should be acknowledged, but not incorporated into any funding model until the future is clearer. Whilst the Technology Strategy Board (TSB) should lead the co-ordination of the TICs (see paragraph 4.1), it is essential that there be a joined-up national and sub-national innovation strategy (for example, through the new LEPs) to avoid a disconnect between the two approaches.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

2.1. There are a number of existing UK university research infrastructures that are similar to the Fraunhofer business model, that is, large scale interaction with business. For example, the Advanced Manufacturing Research Centre in Sheffield with Boeing and Rolls Royce is a world-leading research centre dedicated to developing innovative technology solutions for advanced materials, cutting-edge technologies and providing practical solutions to manufacturing problems.

2.2. The Eco-design Centre (EDC) University of Wales Institute Cardiff, conducts international best practice research in eco-design and eco-innovation and support knowledge exchange with industry and other key stakeholders (e.g. educators, policymakers). EDC undertake applied research; participates in UK and international networks and collaborative projects and international best practice scanning. EDC have been working with Fraunhofer on various levels over the last number of years and are starting a new collaborative FP7 project with them in January.

2.3. Similar facilities operated by the University of Liverpool have benefited from having a physical, rather than a virtual, presence. This provides an opportunity for researchers and businesses to work on projects side-by-side. The ability to undertake short-term work in a flexible manner is important as it helps to build relationships and establish

trust between partners. This can be achieved through core funding for post doctorate- level staff capable of delivering large, as well as smaller, commercial projects. A second important lesson is that initiatives will only succeed where there is a focus upon a sustainable area of technology in which the barriers for business to undertake projects themselves are too high. There are of course many further research institutes in the UK working to a similar business model as Fraunhofer institutes, involving both universities and businesses, which are too numerous to list here.

2.4. However, what these centres lack is the long term government commitment to core ring-fenced funding which is fundamental to the sustainability of the Fraunhofer model. Without this, such ventures may represent a potential financial risk to their host institutions if appropriate operational frameworks are not adopted.

3. What other models are there for research centres oriented toward applications and results?

3.1. A more common model observed in the UK is that of major university research centres backed by significant funding won in competitive processes from RCUK and other sources, working in conjunction with KT support from central or devolved university resources. In particular, the highest quality STEM research activities tend to attract industry contract research, collaboration and co-investment which operate alongside, and are complementary to, basic research support from RCUK (e.g. research funding charities, EU Framework Programmes, etc.).

3.2. This is fundamentally different to the Fraunhofer model, yet has advantages in terms of cross-fertilising industry focused activities with the newest and most cutting-edge research concepts and results.

3.3. Previously, the UK innovation system has also included former Government research facilities such as those of MoD/DERA. In that instance, the loss of specific capabilities, capacity and expertise which followed privatisation and the creation of QinetiQ can be viewed as a key example of why ongoing government co-investment is needed in order to maintain R&D resources of national importance.

4. Whose role should it be to co-ordinate research in a UK-wide network of innovation centres?

4.1This coordination activity should fall to the TSB, which is ideally positioned to take advice from its Knowledge Transfer Networks (KTNs). KTN membership is broad based and includes academic, industry and public sector inputs - all of which have useful experience to offer. The views of RCUK are also key if TICs are to be introduced in a manner which enhances the knowledge transfer activities of the university sector.

4.2 By delivering competitive advantage, innovation centres have the potential to anchor knowledge-intensive activities of globally mobile companies and form part of a wider- ranging innovation architecture within given localities. In this respect, it is essential that

consideration be given to how any co-ordinating body will engage at local level to ensure that growth opportunities and the benefits to the UK of location in a given area are maximised; there is also a corresponding imperative that localities establish how they wish to engage with any UK network. The new TICS are likely to be a very strong magnet for inward investment, a factor that should be carefully considered when determining TIC location and specialisation.

4.3 Similarly, Universities UK and the Association for University Research and Industry Links (AURIL) have key experience and expertise in a wide range of structures and frameworks for managing innovation activities and would be pleased to act in an advisory capacity.

5.1 Government would need to ensure that the Fraunhofer or TIC offering in the UK is distinct and builds on existing capacity, as opposed to duplicating it. There is also a risk associated with diverting scarce government funds from proven, successful research models, with the risk of disrupting and compromising the relationships and linkages enjoyed with business partners (potentially to the considerable detriment of private sector stakeholders).

5.2 Engagement between a UK co-ordinating body and LEPs will be important; the presence of senior HE representation, as well as business leaders on LEP boards, should therefore be viewed positively. The connection between local growth agendas and UK innovation policy suggests that consideration should be given to how TIC funding may be leveraged against the Regional Growth Fund to maximise economic impact and assist the transition towards sustainable private sector-led prosperity.

5.3 The German model tends to be one dimensional and linked to a particular organisation/institution when the PSREs look to bring various organisations – HEIs/companies etc – together to collaborate often on an interdisciplinary basis e.g. the International Space Innovation Centre (ISIC) at Harwell and the Cockcroft Institute at Daresbury at which the partners are Universities of Lancaster, Liverpool, Manchester, and the North West Development Agency).

5.4 The UK’s academic community has a strong entrepreneurial spirit and this could be harnessed if Institutes provide attractive opportunities for development and career progression. A crucial consideration therefore – beyond the relationship between centres – is how academic staff will view their relationship with the Institutes and what opportunities they will provide for career development. The orientation of UK and institutional performance systems can militate against academics engaging in knowledge exchange activities. The establishment of a high-profile UK network will not alleviate this by itself and should therefore be considered within the context of broader UK HE policy.

Universities UK (UUK) Association for University Research and Industry Links (AURIL)

6 December 2010

Written evidence submitted by BIA Regenerative Medicine Industry Group (BIA RIG) (TIC 78)

Technology Innovation Centres

1. About BIA RIG

1.1. The BioIndustry Association is the trade association for innovative healthcare biotech companies in the UK with over 260 members involved in or supporting the development of new therapeutics. The BIA formed its Regenerative Medicine Industry Group Advisory Committee (RIGAC) to provide a voice for the emerging technologies that make up the field of regenerative medicine and in particular cell-based therapy. Overall there are around 50-60 companies engaged in developing therapeutics in the field of regenerative medicine in the UK. The BIA, through RIGAC, has taken an active role in the UK‟s regenerative medicine community since July 2008.

2. Introduction

2.1. The BIA supports the creation of Technology Innovation Centres (TIC) as a means to successfully translate research into commercial outputs. This paper aims to clearly highlight why a Technology Innovation Centre for regenerative medicine would be effective at bridging “the gap between universities and businesses, and helping to commercialise the outputs of 1 Britain's world-class research base.” This perspective is then used to test the fit of the Fraunhofer model to the UK context.

2.2. A TIC for regenerative medicine must bring together all partners in the field including academia, business, clinicians and the NHS. Ultimately investment in regenerative medicine will not just benefit the UK economy, but also develop therapeutics for generations of NHS patients with presently unmet medical needs.

2.3. A TIC would reduce the risk of failure during the research phases for new innovative products as it would provide an environment that would be more conducive to use-inspired research than other institutions as it would combine fundamental and applied research as well as providing a stable funding mechanism for further investment.

2.4. Due to the word limit for this submission we have elected to include lists of examples of institutions to give the committee extra information on the assets the UK holds in the field of regenerative medicine.

3. Why Regenerative Medicine – the Business Case

3.1. The UK is currently a world leader in the science of regenerative medicine; we now need a model which will allow us to benefit from this advantage. Without a TIC the UK will be unable to capitalise on the competitive advantage this UK sector currently possesses. Herman Hauser identified regenerative medicine as a candidate for a TIC for this very

1 TSB http://www.innovateuk.org/content/news/government‐invests‐200m‐in‐technology‐centres‐for‐.ashx

2 reason. Investment is currently accelerating the commercialisation of various regenerative medicine sectors around the world, this in-turn is attracting world class talent away from the UK.3

3.2. Estimates for the UK alone, suggest that regenerative medicine has the potential to materially improve the health of around 1 million people a year and generate around £5 billion of commercial activity, to achieve this would require around 15,000 highly skilled 4 workers in the sector. In addition to the economic growth the industry can generate from exports, regenerative medicines have the potential impact on national budgets through their potential to transform healthcare provisions. For example, the total annual cost of diabetes to the NHS has been estimated at between £1.3 billion in 2007. With an increasing number of people suffering from diabetes, the estimates for cost (both direct and indirect healthcare) and lost productivity are likely to increase. There is therefore the potential for over £1 billion 5 in economic impact for the UK with a RM-based treatment for diabetes.

3.3. While the UK currently excels at producing basic research in the field of stem cells and regenerative medicine there is still a significant shortfall in the amount of research being performed with the goal of commercial translation. The primary objective of a TIC would be 6 to pursue use-inspired research. This function is currently not being performed by any organisation in the UK to an extent which makes fully exploits our leading position in the regenerative medicine sector. To date the UK has produced more therapeutics than the rest 7 of Europe together, this trend can continue into the future if investment is targeted wisely.

3.4. The UK has a world class regenerative medicine science sector but it currently does not receive the appropriate level of translation funding. To date the Technology Strategy Board has invested £40-60 million in translation research in this sector compared to the $3 billion investment California is making in the sector. Bringing a new therapeutic to the clinic before the trial process begins costs at least £10 million, this figure demonstrates the need for innovative SMEs to find collaborators to share risks and investment.

3.5. Around the world regenerative medicine research is progressing at a rapid pace and the UK is not in an unassailable position. Globally over the past 10 years 2,765 trials involving 8 cell-based regenerative medicine have taken place. More significantly 51% of these trials were at phase II and III which begins to examine a therapeutics clinical effectiveness.

2 Herman Hauser, The Current and Future Role of Technology Centres in the UK, p.23 http://www.bis.gov.uk/assets/biscore/innovation/docs/10‐843‐role‐of‐technology‐innovation‐centres‐hauser‐ review

3 Financial Times, California tempts research specialists http://www.ft.com/cms/s/2/ea2c8b7c‐ddf4‐11df‐ 88cc‐00144feabdc0.html#axzz16I4EdYba

4 Finbarr Livesey, Enabling the Emergence of the Regenerative Medicine Industry in the UK, p.1 http://www.ifm.eng.cam.ac.uk/cig/documents/Workingpaper3.pdf

5 Livesey, Enabling the Emergence of the Regenerative Medicine Industry in the UK, p.10

6 Pasteur’s and Edison’s Quadrants http://openeducationresearch.org/2009/01/pasteurs-and-edisons-quadrants/

7 Jon Mowles, UKTI presentation at Life Sciences: Driving Economic Growth and Health Benefits, 24 November 8 Davie N, Culme‐Seymour E, Mason C: A Decade of Cell Therapy Clinical Trials: 2000 – 2010. From a manuscript in preparation for submission Q4 2010.

3.6. A commitment to the sector through the formation of a TIC would demonstrate the government‟s drive to supporting industry which in turn will attract greater inward investment. Pfizer has invested £10s of millions into the UK for regenerative medicine, a TIC will convince other large multinationals, who do not necessarily have the same experience with regenerative medicine, that the UK is serious about commercialising the technology and will provide the infrastructure to assist with this.

4. Specific Requirements for a TIC/Interventions in Regenerative Medicine

4.1. A TIC for regenerative medicine would have to cater to several unique aspects of the industry: including its resource intensive nature and lengthy timescales involved in the development of new therapeutics would mean the TIC would have to provide a model for collaborative working. To ensure that a regenerative medicine TIC would fulfil this role it must:

• be formed out of a collaboration between academia, business, clinicians and the NHS;

• provide SMEs access to facilities and technologies which they would be unable to afford to own or operate otherwise;9

• have capabilities in Good Manufacturing Practice and Advanced Manufacturing in terms of human resources, facilities, quality systems and expertise in process design for new products. It must also be able to measure the quality of the new products produced. A centre would also provide a means for promoting and sharing best practice;

• the funding model must provide an effective means of delivering a therapeutic to phase III of the clinical trial process;

• have the in-house expertise to provide guidance and oversight for the clinical trials process in a broad range of therapeutic areas;

• have strong connections which will allow access to and from the NHS and clinicians enabling the UK to be the first to be benefit from mainstreamed regenerative medicine products;

• the centre should also work with the MHRA, EMA and NICE on appropriate regulation and reimbursement strategies for innovative new therapies;

• facilitate access to funding, by having the capacity to provide proposal writing expertise which would benefit both the TIC and its project partners;10

• be linked to existing distribution systems to form networks to distribute therapies, together with direct linkages to the cold supply chain;

9 A TIC would provide the necessary expertise to effectively operate this equipment and develop processes for future commercialisation

10 Other Institutes globally have the capacity to do this, building collaborations with partners to access additional funding and applying for funding from different schemes such as FP7

4.2. There are also areas where the TIC should be able to work with other governmental and non-governmental entities to competitively position the UK‟s Regenerative Medicine industry by:

• facilitating access to international markets and understanding the reimbursement models of different healthcare systems. Also providing advice on international regulators such as the FDA in the United States and EMA in Europe. This could be done by the UKTI and trade bodies;

• meaningful mechanisms to allow the industry to network and speak with one voice. Also functions to ensure the work the TIC complements the other facilities and projects already successfully running in the UK – this can be, and is being, delivered by trade bodies such as the BIA RIG;

5. Questions:

What is the Fraunhofer model and would it be applicable to the UK?

5.1. Fraunhofer Institutes are physical facilities funded by government, academia and industry. The specific models for different Fraunhofer centres vary depending on the innovation systems they are a part of and the technology they are focused on. Fraunhofer- like Institutes are generally led by industry partnered with government and academia.

5.2. The traditional Fraunhofer model in Germany sees the institutes receive roughly equal funding from three sources: capability growth funding from the Fraunhofer Society, funding from single client projects directly funded by industry and funding from collaborative research grants won competitively. Fraunhofer Institutes rely on a sustained government funding stream to provide a stable platform to attract further investment and develop their technology capability for the future.

5.3. The start up costs of a UK „Fraunhofer‟ in an emerging industry such as regenerative medicine would require government to take on a greater share of the investment into the institute before becoming viable for other stakeholders. This is due to the unique aspects of medical technology such as extended development time-scales and the large investment required for research and development. In the case of regenerative medicine products, their manufacturing is an order of magnitude more complicated than the currently most advanced biopharmaceutical products. The UK would also differ from the German model significantly due to the funding and incentives individual Länder use to attract investment separately from the federal government. Therefore a UK TIC would have to work towards developing a new business model to fill the gap left by regional funding mechanisms.

5.4. Primarily the main industry projects Fraunhofer Institutes undertake are either on behalf of SMEs commercialising new technology or large companies looking to headquarter themselves close to communities of similar business and academia focused on their sector. Fraunhofer Institutes also add value to institutions through their brand‟s strong association with innovation. Institutes have to win the Fraunhofer brand before attracting the supporting finance model.

5.5. In Germany there are currently several institutes working in regenerative medicine which provide examples of the different forms the collaboration between different sectors can take. Appendix A outlines the work Germany‟s Fraunhofers perform in the regenerative medicine sector.

5.6. In terms of what would be suitable for the UK, several studies of intermediate institute models have produced, most notably Herman Hauser‟s The Current and Future Role of 11 12 Technology Innovation Centres in the UK and James Dyson‟s Ingenious Britain.

5.7. Additionally we recommend that the committee requests evidence from Erik Arnold of 13 Technopolis who is a specialist in the design and evaluation of the effectiveness of applied research programmes and has already been involved with regenerative medicine associated activities e.g. cord blood banking.14

5.8. The UK needs a regenerative medicine TIC which is a physical hub and possesses the equipment and capabilities to fully commercialise regenerative medicine research. A TIC will create a critical mass for the regenerative medicine industry in the UK to become self sustaining and to add value to the nation overall.

Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

5.9. There are currently no alternative models present in the UK that would fulfil the work of a Fraunhofer Institute in the regenerative medicine sector.

5.10. The UK does possess significant private and public assets that would complement the formation of a TIC and ensure that it worked effectively within existing systems and structures. While these centres and institutes are useful they do not provide the direct means to fully translate a promising piece of regenerative medicine research produced by academia/industry into a marketed therapeutic. These assets listed in Appendix B currently put the UK‟s regenerative medicine sector on a par with other countries, without further investment in a translation centre we will fail to benefit from the £100 million plus tax-payer investment to date in stem cell research.

5.11. The UK assets and complementary centres have provided the nation with a significant comparative advantage in the field of regenerative medicine. However even with the wealth of assets the UK possess there is still a critical gap which exists in translating new technology into commercial products.

5.12. Funding for academic research and grants by the Medical Research Council and the Wellcome Trust has meant that the upstream science for regenerative medicine has given us a world leading research base and this must continue in order to produce the basic science to advance the sector as a whole. Several other bodies such as the EPSRC, BBSCR, NIHR and NIBSC provide additional funding to basic research before it begins to be commercialised. Centres such as the MRC CRM have the goal to translate research into therapeutics but as yet have limited resources to engage with the commercial sector plus they are not fully commited to regenerative medicine. The TSB has invested £40-60 million

11 Herman Hauser, The Current and Future Role of Technology Centres in the UK, p.24 http://www.bis.gov.uk/assets/biscore/innovation/docs/10‐843‐role‐of‐technology‐innovation‐centres‐hauser‐ review

12 James Dyson, Ingenious Britain, p.38 http://www.conservatives.com/~/media/Files/Downloadable%20Files/Ingenious%20Britain.ashx?dl=true

13 http://www.technopolis‐group.com/cms.cgi/site/people/uk/erik_arnold.htm

14 http://www.dh.gov.uk/en/Publicationsandstatistics/Publications/PublicationsPolicyAndGuidance/DH_093175 into the regenerative medicine translation space, however it does not provide companies with direct access to expertise and crucial equipment that is required to fully commercialise regenerative medicine products.

What other models are there for research centres orientated towards applications and results?

5.13. Other countries have developed significant infrastructures to facilitate the translation of research. In regenerative medicine/translational medicine there are some key international Academic, Business and Clinical (ABC) centres:

• The McGowan Institute at the University of Pittsburgh has contributed significantly to the growth of the regenerative medicine sector in the USA. It has a focus on upstream science, clinical trials and application. Its parent, the UPMC, is now one of the largest medical systems in the North America (22 hospitals) and reinvests a portion of its income into McGowan. As a consequence McGowan is able to partner with industry and business – it therefore can make advantageous „deals‟ rather than 15 behaving as a pure for-service sub-contractor.

• Wake Forest Institute for Regenerative Medicine (Winston-Salem, NC, USA) is a several hundred million dollar funded centre that runs collaborative programmes with industry and academia. It has a guiding philosophy to form research alliances and identify strategic partners that are critical to the continued growth and success of 16 their research enterprise. The institute has achieved significant milestones in the 17 field of regenerative medicine such as the first laboratory grown bladder.

• California Institute for Regenerative Medicine. This does not have a physical presence instead it operates as a virtual model or as a „banker‟ for research on a large scale. The Institute receives around $3 billion of funding through California 18 State Proposition 71.

5.14. There are also alternative models in the UK which could be investigated:

• Research and Technology Organisations (RTOs) - RTOs are organisations which as their predominant activity provide research and development, technology and innovation services to enterprises, governments and other clients. This definition distinguishes RTOs from universities, the predominant activity of which is education, and from enterprises, the predominant activity of which is the production and sale of goods and services.19

15 See appendix D

16 http://www.wfubmc.edu/Research/WFIRM/Collaborations.htm

17 BBC News, Lab‐grown Bladders “a milestone” http://news.bbc.co.uk/1/hi/health/4871540.stm

18 http://www.cirm.ca.gov/pdf/prop71.pdf

19 http://www.earto.eu/fileadmin/content/05b_Membership/RTOs_and_the_Evolving_European_Research_Are a_WhitePaperFinal.pdf p.3

• Knowledge Transfer Networks - The HTM KTN is dedicated to accelerating innovation and technology exploitation in the broad health industries sector.20

• Technology Strategy Board managed Innovation Platforms - The TSB has run successful Innovation Platform programmes in areas such as stratified medicines. While these are successful at targeting funding at particular areas it cannot provide the physical equipment and other resources that are essential to commercialise research or the permanent expertise to guide new businesses.

• OSCHR - see appendix B

5.15. There are also instances of alliances, trade associations and lobby groups in the UK and other locations the BIA RIG in the UK, ARM in the US and RMIG in Germany. (See appendix C for more info)

Whose role should it be to coordinate research in a UK-wide network of innovation centres?

5.16. The Technology Strategy Board has continually demonstrated its leadership, excellence and impact as a body that successfully oversees the translational of research into commercial activity. We therefore most highly recommend the TSB co-ordinates UK-wide network of TICs.

5.17. For the governance of a specific TIC in regenerative medicine, the BIA supports the recommendation by Herman Hauser for centres to be industry led. An advisory committee consisting of stakeholders formed of academia, business, clinicians, the NHS and patient organisations would provide significant input into the governance of the centre and ensure the collaborative functions of the centre worked effectively.

5.18. A TIC must complement current UK assets and existing NHS centres as outlined in the answer to Question 2 (above).

5.19. The UK research institutes are currently primarily academically based with research funding up to TRL4 stage (research which seeks to evaluate the „real world‟ health outcomes application of basic research in practice) - this still leaves a significant funding gap before the research technologies become viable for business. A TIC‟s primary objective would be to successful cross this gap and thus provide a secure means to commercialise research.

20 https://ktn.innovateuk.org/web/healthktn/who‐we‐are

5.20. The work of a TIC would primarily be focused on the commercialisation aspects of TRL 4-6 but with elements working to TRL 9 and beyond.

5.21. Currently the TSB funds translational activities up to TRL 7 as this is the point where traditionally technology businesses become commercially viable. However, due to the need to new cell-based therapeutics to be tested and evaluated up until it receives full marketing approval the centre would also need expertise and to provide support for the later stages of product development and early manufacturing. With this joined-up multidisciplinary support, regenerative medicine SMEs will become more attractive to larger companies looking for partnerships or acquisitions.

5.22. Crucially for the emerging regenerative medicine sector ,a TIC would provide a focal point for many of the discussions and issues which the sector still has to address including appropriate regulation, scalable manufacture and reimbursement. It would also provide a central approach to engaging with the NHS and patients. Importantly as well, it would provide a means to look at models to capture the value of cell-based therapies and to develop the market models which will be crucial to the sectors commercial future. These will include both patient specific (NHS-embedded) and universal therapies (conventional pharma/biotech-based model).

5.23. A regenerative medicine TIC would enable the world-class stem cell and regenerative medicine science that is produced by the UK to be turned into safe, efficacious cell-based therapies that are capable of being scalably manufactured at a price that is affordable. The result will be a sustainable and competitive new UK healthcare sector – a win for patients, the NHS and UK plc.

BioIndustry Association (BIA)

02 December 2010 Appendix A: Regenerative Medicine Fraunhofers

1.1. The Fraunhofer Institute for Immunology and Cell Therapy IZI Leipzig The Institute was created to find solutions to specific problems at the interfaces between medicine, life sciences and engineering. The Institute’s core competencies are to be found in regenerative medicine

1.2. The Institute works especially closely with hospitals, performing quality tests and clinical studies on their behalf. Additionally it also provides assistance in obtaining manufacturing 21 licenses and certifications. The table below gives an overview of the projects the institute was involved in for 2009:

1.3. Fraunhofer-Gesellschaft : FhG-IGB Stuttgart, FhG-ISC Würzburg, FhG-IBMT Berlin The FhG-IGB Stuttgart, FhG-ISC Würzburg, FhG-IBMT Berlin make up part of the 22 Fraunhofer-Gesellschaft, Europe’s largest application-oriented research organization. Unlike Leipzig, none of these Fraunhofers focus solely on regenerative medicine, instead they contribute to the sector through the development and optimization of processes and 23 products which end up benefiting a variety of business sectors.

1.4. Each centre has a particular focus. Würzburg targets developing supporting implant materials for the regeneration of skin, bone and cartilage. Stuttgart specialises in the development and optimization of processes and products for the business areas of medicine, pharmacy, chemistry, the environment and energy. The Berlin campus works in close collaboration with industry offering solutions in the areas of biomedical and medical engineering as well as industrial process automation and in-line/on-line process control, in 24 particular for the food, chemical and pharmaceutical industry. It is the only institute in Germany which has permission to import human embryonic stem cells.

21 http://www.izi.fraunhofer.de/izi.html?&L=1

22 http://www.isc.fraunhofer.de/Regenerative‐medicine.regenerative_medizin.0.html?&L=1

23 http://www.igb.fraunhofer.de/www/profil/start.en.html

24 http://www.ibmt.fraunhofer.de/fhg/ibmt_en/profile/index.jsp

Appendix B: UK Complimentary Centres and National Assets

1.1. Complimentary Centres UK Centre for Medical Research and Innovation (UKCMRI): • This £600 million collaboration between the Medical Research Council, Cancer Research UK, Wellcome Trust and UCL will be an interdisciplinary medical research institute. UKCMRI will encourage ground-breaking research across a range of scientific disciplines and facilitate the translation of discoveries into treatments as quickly as possible.25 However it is not currently known whether UKCMRI will have any major involvement with the regenerative medicine community plus the centre itself will not be completed until 2015.

1.2. Scottish Centre for Regenerative Medicine incorporating the MRC Centre for Regenerative Medicine (MRC CRM).26

• Brings together world-leading basic stem cell research and established clinical excellence to deliver a ‘bench-to-bedside’ approach in addressing the challenges posed by degenerative diseases.

• The MRC Centre in Cambridge brings together leading researchers in two Cambridge faculties (School of Biological Sciences and School of Clinical Medicine) and enables them to translate their individual research into clinical use by providing them with dedicated stem cell research resources and a forum for collaborative interactions, including state-of-the-art stem cell culture facilities, seminars and a training programme.

• EPSRC has made significant investment in research infrastructure in regenerative medicine including the EPSRC Centre for Innovative Manufacturing in Regenerative Medicine. This Loughborough University led partnership including Nottingham and Keele universities, has focuses on upstream (TRL1-4) industry collaborative research to enable the regulated manufacturing and supply of regenerative medicine products.

• The EPSRC and TSB funded Innovation and Knowledge Transfer Centre in Regenerative Therapies and Devices in Leeds facilitates collaboration between companies, engineers, scientists and clinicians to develop innovative biomaterial- focussed technologies that help the body repair and restore function. The IKC invests resources in TRL 3 and 4 to bridge the specific gap in proof of concept studies.

1.3. Other UK national assets National Institute for Biological Standards and Control (NIBSC)

• The NIBSC role is to play a major national and international role in assuring the quality of biological medicines through product testing, developing standards and reference materials and carrying out applied research. It supports health policy development and implementation through provision of expert evidence-based advice and technical support and is an important component of the Department of Health’s risk management strategy for public health.27

25 http://www.ukcmri.ac.uk/about‐us

26 http://www.crm.ed.ac.uk/about

27 http://www.nibsc.ac.uk/about_us/mission.aspx

1.4. UK Stem Cell Bank • The UK Stem Cell Bank was established within NIBSC to provide a repository of human embryonic, foetal and adult stem cell lines as part of the UK’s governance for the use of human embryos for research. Its role is to provide quality controlled stocks of these cells that researchers worldwide can rely on to facilitate high quality and standardised research.

1.5. NHS Blood and Transfusion Service • NHSBT manages the consent, collection, and delivery to patients of over 2,000 adult heamopoetic (blood) stem cell transplants and 13,000 human tissue allograft p.a; giving it a unique position to support the growing regenerative medicine market. The delivery of viable treatments is supported by a strong research function, including driving innovative technology development in collaboration with universities. Utilising its knowledge and facilities it also provides contract manufacture services to SMEs and clinicians.

1.6. Office for Strategic Co-ordinated Health Research • OSCHR’s mission is to facilitate more efficient translation of health research into health and economic benefits in the UK through better coordination of health research and more coherent funding arrangements.28

1.7. NHS • The greatest potential asset the UK has for any form of medical research is the NHS. The ability to access a centralised patient population with the potential to work with a single centralised system would provide researchers with ability to recruit and monitor patients easily.

28 http://webarchive.nationalarchives.gov.uk/+/http://www.hm‐ treasury.gov.uk/d/pbr06_cooksey_final_report_636.pdf

Appendix C Best practice models for translational research centres in medical technologies

A Joint Loughborough University - University Hospitals of Leicester MRC IDBA International Innovation Workshop, ABHI, London 23 January 2008

Introduction

It is becoming recognised that there is an international requirement to create translational research centres in medical technologies. Such centres of excellence will work by integrating clinical professionals, industry and academia and are targeted at generating practical improvements in human health and business opportunities. This will be achieved by enabling the systematic research needed to translate inventions into practical technology platforms which have the potential to be exploited to the benefit of patients and the businesses which can produce them. This in turn will further enhance national and regional economic activity progressing national and regional innovation agendas and enhancing the role of healthcare provider organisations as an engine for regional economic growth.

The purpose of the workshop was to share best practice nationally and internationally to explore the essential strategies for success in the development of such centres of excellence and to have a timely influence on UK policy.

The workshop formed part of the work of the innovation strand of the Joint Loughborough University/University Hospitals of Leicester NHS Trust MRC funded Interdisciplinary Bridging Award (IDBA).

The core of the meeting was formed from presentations by Dr Mark Beggs, Programme Manager of the Wyeth Translational Medicine Research Collaboration (TMRC), Dundee, and Dr Alan Russell, Director of the McGowan Institute for Regenerative Medicine, University of Pittsburgh Medical Centre, and the ensuing discussion. This note summarises the presentations and discussion, including some subsequent to the meeting. Attendees are shown in the appendix.

During the meeting Jill Dhell gave an update on the status of the National Institutes for Health Research (NIHR) stemming from “Best Research for Best Health” and of the two pilot Healthcare Technology Co-operatives (HTC) linking academia, business and clinicians, indicating that they were to be announced in the next few weeks. Each HTC is to be provided with core funding of £275k p.a for two years and is aimed to prime infrastructure for medical technology research in areas of unmet clinical need, centred on the patient. The role of the topic-specific research networks, and the UK Clinical Research Collaboration and associated networks was also noted.

Data on two other examples of significant internationally recognised translational medicine centres, The Langer Lab at MIT and the Translational Centre for Regenerative Medicine in Leipzig, were also tabled. Translational Medicine Research Centre at Dundee, Mark Beggs, Wyeth

Mark’s presentation began with an explanation of the motivation for the Dundee Centre. A major problem for the pharmaceutical industry is the very high level of product attrition rates that occur within Phase 2 clinical trials, which continues to worsen. Wyeth believe that the development and application of bio-markers which can be used for drug discovery and development will decrease attrition rates through the product pipeline. They see the key to success in the creation of TRMC as being an appropriate combination of academic research, NHS involvement and industrial collaboration. All parties bring different sets of attributes, which when combined help overcome the major impediments to the development of new bio-markers.

The TMRC model involves four universities (Dundee, Aberdeen, Glasgow and Edinburgh) as well as 4 NHS Trusts, Scottish Enterprise and Wyeth each with complementary skills. The latter contributes $8m via operational funding and $45m via research contracts and Scottish Enterprise provide $35m; half as an R&D grant on the basis of a 5-year renewable award and half as a loan. Having a defined time limit focuses minds upon successful delivery. The TMRC acts as a hub for the translational community.

Governance of the collaboration is important as this is not a grant funding scheme nor is it as rigid as contract research. Full economic costs are paid to academia and any resulting IP is assigned across the collaboration partners depending on its application. The initiative represents a balanced middle road to collaboration where all parties receive mutual benefit.

The mechanics of the scheme involve ideas being jointly generated by the company and the Principal Investigator (PI), which are then peer reviewed by the PI and his or her opposite number in Wyeth – to ensure strategic business fit – followed by further review by the TMRC. Project costs are paid for by Wyeth and infrastructure support by Scottish Enterprise. To allow for flexibility, research plans may be modified to the mutual agreement of all parties. IP is jointly owned via a complex model which permits academic publication subject to prior protection.

The dedicated Core Laboratory base in Dundee acts as an analytical centre of excellence for the four Universities and is run as a central service with the extremely high quality standards required for exploitation. The Core Laboratory is also responsible for all ethics and governance control as well as ensuring that all base data are collected and handed over at the end of a project. It focuses on the development of platform tools and technologies including genomics, proteomics, assay development, bio-statistics and informatics. By 2011 deliverables expected include, from the commercial perspective: IP development, economic growth, new diagnostic tests, earlier diagnosis of disease and an increase in the number of novel therapies. From a research perspective, highly cited publications and the development of new research areas and topics will be key outputs.

Immediate discussion that followed centred on the issue of state aid, and the reasons why Wyeth had chosen Scotland. Responses to the latter included the readiness of the Scottish network and its geographic concentration, the historic familiarity with clinical trial work in Scotland due to certain disease prevalence, the relative simplicity in progressing discussions and the availability of electronic patient identification in Scotland. McGowan Institute for Regenerative Medicine, University of Pittsburgh Medical Centre, UPMC, Alan Russell

The presentation began with the background to the development of the UPMC and the economic regeneration of the former steel town. A great deal of the city’s wealth is now generated as a direct consequence of the prowess of its universities (Duquesne, Pittsburgh and Carnegie-Mellon) including their interaction with the health industry. The UPMC has undergone significant growth since its foundation as an academic medical centre in the early 90’s. It is now one of the largest medical systems in the US (22 hospitals) and has an operating margin of around 5% on a revenue of more than $6bn. As a consequence it is able to partner with industry and business – it makes deals rather than behaving as a mere sub-contractor. UPMC is now the sixth largest recipient of NIH funding ($375.8m) and has some 1,800 faculty members. It has been working in regenerative medicine for twelve years and in 2000 it visibly established its focus via the McGowan Institute with the sole passion to bring new regenerative technologies to its patients as quickly and as safely as possible – clinical translation. Importantly, McGowan will apply other peoples work too. UMPC pump primed McGowan at a significant level ($3-5m). It is important to recognise that this focus has also enabled significant success in for example spin out (14) and job creation (~470) for the region. It also has 10-15 clinical trials in progress and significant Department of Defence funding. While McGowan includes 215 faculty across the region, one third of whom are clinicians, the core of McGowan is 35 faculty located in two new buildings – income to the core faculty is around $15m per year with $73m to the wider organisation.

The success of the UPMC and the McGowan Institute can be directly attributed to the level of its interdisciplinary research, many of the successes would not have been achieved without different disciplines learning how to effectively work together whilst remaining focused on a common goal. This requires a critical mass of individuals/expertise and getting people to work together. Consequently a focus on clustered teams has been a priority from “day one”. It was emphasised that interdisciplinary work is unnatural and that traditionally academics are happy to work in their individual silos, it requires behavioural change and the resetting of clinical ambitions (by buy-outs for research). Alan emphasised the work of McGowan was sited in Pasteur’s Quadrant – that of value laden use inspired basic research (see Donald Stokes, Pasteur’s Quadrant: Basic Science and Technological Innovation, Washington DC: The Brookings Institution, 1997) – in effect representing the journey from bench to bedside and back, translational medicine.

Alan highlighted the key lessons learnt in successfully establishing the Institute. These included: the need to secure commitment from individual academics and groups of academics which then enables these to be linked together; the activity must take place on a large scale ($10m is a minimum to make an impact, in reality >$50m is required); individuals need to be 100% committed to the concept of interdisciplinary working and “fakers”, non-collaborators just in it for the funding, are rooted out early; the focus has been objective driven (patient-focused). Additionally, the whole working environment and related “hygiene factors” need to be excellent, there has to be sufficient “foundations and scaffolds” for individual groups to build their “castles”. He reinforced the need for bottom up buy-in, empowered leadership top down facilitation and management, clear management structures, the need for a mixture of central dedicated facilities and the ability to offer appropriate incentives to staff to facilitate their participation. A common barrier to facilitating interdisciplinary research is an existing negative culture and overly complex tiers of bureaucracy/hierarchy. Some level of project failure is to be expected and encouraged if internationally leading and valuable work is to be carried out. Inter- institutional collaborations are also not without problems: for example, an attempt to use common IP terms and conditions in contracts between institutions have not worked in Pittsburgh.

He closed by saying that the Institute and the UPMC wish to export their model and are establishing some other worldwide translational science centres, including one in Palermo, Sicily at a cost of EURO 350M. They also have aspirations to perhaps establish similar centres in Ireland and the UK. UPMC will undertake management, under contract, of a hospital facility in the UK in the near future.

Following the presentation, discussion began with questions on the McGowan model but subsequently broadened to other areas. In summary it included the following:

• Research on a large scale is essential because of critical mass requirements and a pragmatic recognition that at least 30% of activity will never generate the anticipated outcomes. True solutions only tend to be found where a significant level of activity is duplicated between competing groups. The $50m threshold for work of value requires identified leadership, the scientific and business/economic case for the particular field and influencing at the right level of government. The evidence for the business/economic case is both the hardest to generate and to evaluate. Any business case is likely to be phased.

• It would be of value to have a more extensive survey of the different models of translational research centre to assist in the preparation of business cases for any UK initiatives.

• The importance of physical/regional co-location and joint working of a core was also emphasised as evidenced by both models – being there must be part of the daily work of the people. Choosing the full time team is also critical. This challenges some of the current UK emphasis on networks and committees of involved but not committed stakeholders.

• Often the initial ideas for such institutes occur bottom-up in an informal setting and are usually only taken forward successfully where a charismatic leader exists. The leader must build a persuasive scientific and business/economic case and give directional leadership to the emerging enterprise. The operational details then follow. The theme of such an institute, the “big idea”, will inevitably match a local need but resonate at a larger scale, embrace risk and probably “change the rules”.

• It was acknowledged that within the UK there is a growing national and regional recognition of the need to think bigger, as has been evidenced in recent aerospace and energy initiatives. Large institute models are under consideration for a national nanomedicine initiative. The importance of developing national and regional “joined up thinking” between individual RDAs, the Research Councils, the Technology Strategy Board, industry, the NHS and universities was emphasised.

David Williams, Oliver Wells and Peter Townsend, February 2008 Attendees at IDBA Innovation Workshop ABHI, London 23 January 2008

Richard Archer Managing Director Two BC Ltd Dr Mark Beggs Programme Manager TMRC Wyeth Pharmaceuticals, Dundee Michael Carr Executive Director of Business East Midlands Development Agency Services (EMDA) Dr Steve Cook Research & Innovation Policy Association of British Healthcare Industries Ltd (ABHI) Jill Dhell Innovation and Industry R&D Relations Research & Development Directorate, Manager Department of Health Sue Dunkerton Director and Business Manager, Health Technologies Knowledge Transfer Processes Network (HTKN) Dr Merlin Goldman Lead Technologist - Bioscience and Technology Strategy Board Healthcare Martin Hindle Chairman of the Board University Hospitals of Leicester NHS Trust (UHL) Dr Huw Jones-Jenkins Business Development Executive Faculty of Medicine and Health Sciences, Nottingham University Dr William Maton- Principal Research Officer for Public Department of Health Howarth Health Dr Joe McNamara Board Programme Manager PSCSB Medical Research Council Dr Kedar Pandya Programme Manager Engineering and Physical Sciences Research Council (EPSRC) Lucy Pollock Marketing Manager - Service Solutions Medtronic CRDM Prof David Rowbotham Director of Research and Development University Hospitals of Leicester NHS Trust (UHL) Dr Alan J Russell Director McGowan Institute for Regenerative Medicine Prof Tom Spyt Consultant Cardiothoracic Surgeon University Hospitals of Leicester NHS Trust (UHL) Peter Townsend Director, Research Office Loughborough University Oliver Wells Chair, Research & Innovation Policy Association of British Healthcare Group Industries Ltd (ABHI) Prof David Williams Professor of Healthcare Engineering Loughborough University Brian Winn Head of Technology and Product National Innovation Centre, NHS Institute Introduction for Innovation & Improvement (NHS III)

Appendix D: Regenerative Medicine Trade Representatives

BIA-RIG, UK - Regenerative Medicine Industry Group represents the UK cell-based therapy industry – currently over 50-60 small and medium size entities (SMEs) in the UK plus growing interest from big pharma. BIA-RIG embraces every option for regenerative medicine including tissue engineering, adult and embryonic stem cells.

ARM, US - The Alliance for Regenerative Medicine (ARM) is a Washington, based non-profit organization whose mission is to educate key policy makers about the potential of regenerative medicine and to advocate for favourable public policies.

RMIG, Germany - The Regenerative Medicine Initiative Germany has been established to act as a cross-sectional, multidisciplinary network within a broad spectrum of biological material research concerning stem cell biology.

Written evidence submitted by Technical Strategy Advisory Group (TSAG) (TIC 79)

Technology Innovation Centres

As Chair of the rail industry’s Technical Strategy Advisory Group (TSAG), I am responding to your consultation on Technology Innovation Centres. TSAG is a senior, cross-industry group representing all stakeholders in the rail industry (train operators, rolling stock owners, infrastructure, freight, government and regulator) and develops the whole-system, 30 year technical vision for the railway. This group has been remitted by DfT to develop the 2012 edition of the Rail Technical Strategy.

A TSAG subgroup representing all railway stakeholders has prepared this response and, as Chair of TSAG, I endorse the content. You can find more information about TSAG at www.futurerailway.org

TSAG’s mission is to identify and support the introduction of future technologies that are likely to have a major impact on the railway over the next 30 years. To frame innovative technical thinking at the right level, TSAG has identified the 4C challenge, namely to halve costs and carbon, and double capacity and improve customer satisfaction. To do this, we need to introduce new technologies to the railway and work better with the existing technologies. We see technology innovation centres as a key enabler in doing this safely, economically and to the required timeframe. The railway costs £12bn pa so halving this is a prize worth pursuing.

Impacts of this nature require step change; we have shown that incremental change will not get us there. Examples of the technology innovations that will contribute to the 4C challenge are at Appendix 1 and Appendix 2. It can be seen that there is high technical ambition but the need to prove the technology solutions before they are released on the live railway is self-evident.

Turning specifically to the questions in your inquiry, we have responded only in those areas where, as an industry, we can add most value.

Question: What is the Fraunhofer model and would it be applicable to the UK?

Answer: The following link describes the Fraunhofer model: http://en.wikipedia.org/wiki/Fraunhofer_Society

The practical application of the Fraunhofer model for the rail industry includes:

• Product Development: There is a need for research and development of new products and solutions based on new and existing technology from other industries. The technologies need to be developed as integrated solutions if they are to become applicable to rail’s needs. Examples to progress in this area include energy storage/saving devices, low adhesion detection equipment, lightweight vehicle design, obstacle detector development, etc.

• Process Improvement: Developing innovative approaches to some of the current processes used in the rail industry so as to make these more efficient and safe but also reduce costs. Examples include automated maintenance (based on robotic technologies), customer end-to-end journey (customer information systems, logistics, and real time options), etc.

• Solution Testing & Trialling: Innovation in the rail sector is hindered by lack of efficient and up-to-date test facilities. New technology introduction needs efficient proving of concepts through simulation, relevant type testing, commissioning and reliability development at the both sub-system and system level. Examples include in-train cab-based signalling solutions, remote condition monitoring for both infrastructure and trains.

Question: Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective?

Answer: Appendix 3 is an overview of the subject and describes a number of specific UK examples that could provide insights for the development of a transport/rail technology innovation centre. More narrowly, from a rail sector point of view, there are examples of some in-house research by major suppliers to the industry like Siemens, Invensys, and others.

Question: What other models are there for research centres oriented toward applications and results?

Answer: We are not yet well placed to respond to this question but have established a team representing all technical aspects of the railway; this group is charged by TSAG with investigating the development of a bid for a technology innovation centre for transport. Success in this area is thought likely to have significant impact on introducing new technology into the railway and work is underway to provide the evidence for this and build the case for such a centre.

Question: Whose role should it be to coordinate research in a UK-wide network of innovation centres?

Answer: We have established relationships with the Technology Strategy Board and see the coordination of technology innovation centres as a natural extension of their work in establishing and running Knowledge Transfer Networks, the Transport KTN being of particular interest to our industry.

Answer: Research establishments that have in the past been established with Government support, for example TRL, MIRA, TWI, would benefit from being linked more strongly to the rail industry potentially through the creation of a transport innovation centre adopting Fraunhofer principles, where best practice in one sector can be transferred to another eg via a spoke and hub model.

In summary, the rail industry has recognised the need for a rail or transport technology innovation centre and there is a great deal of energy going into building the case for this.

Steve Yianni Chair, Technical Strategy Advisory Group

02 December 2010

Appendix 1: An overview of examples of whole system, technical innovations

TSAG has identified four technical ‘game changers’ which need to be researched and developed now so that decision makers in organisations can collectively identify and draw on the appropriate benefits and take technology decisions in a 30-year time frame.

1) Establish the Next Generation Traffic Management: Centralisation of rail traffic control into a single system or ‘guiding mind’ to optimise the network’s capacity and increase customer satisfaction, reliability and safety. This will require the bringing together of commercially available systems and integrating them. Increases in rail’s delivery potential will be reflected in revenue increases, income which might currently be out of reach through capacity constraints, while reducing operations costs through better management of the network, better utilisation and lower energy consumption.

2) Optimise energy strategy: We must make savings on the railway’s annual £500m traction energy bill through better exploitation of new and existing technology. This will include ideas like ‘discontinuous electrification’ where difficult sections of route (eg tunnels and complex junctions) don’t have to be wired because the trains use a combination of on-board and overhead power systems, thus reducing scheme costs.

3) Build in whole system reliability: A business case for a whole system strategic approach to reliability is needed. This would help reduce the £600m annual cost of delays and a host of other related business performance costs in agreeing delay claims. Technology can help deliver better asset management through things like remote condition monitoring and systems for sharing performance data.

4) Provide smarter data and communications: We promote a strategy for rail mobile communications which relies on commercially available, off-the-shelf systems to provide enhanced information in line with the needs of both front-line railway operations and customers.

Appendix 2: An Overview of Technology Opportunities (Reference the Rail Technology Strategy Consultation Document – October 2010 http://www.futurerailway.org/Pages/Consultation.aspx)

Appendix 3: TECHNOLOGY INNOVATION CENTRES

It has been recognised for some time that there is a need to have effective structures in place to ensure that the value of academically based research is developed to the point where it can be brought to the market. These have been referred to as ‘translational infrastructure’, designed to bridge the gap between universities and industry. The government’s view is that since the demise of many large company-based central research laboratories (example given are IBM, Phillips and GEC – but the BR research centre in Derby could be included in this list), the overall effort has been fragmented and of variable quality. The Fraunhofer Centres in Germany have been identified as best international practice and it was with this in mind that the previous government asked Dr Hermann Hauser, a Cambridge-based physicist and entrepreneur, to report on the current and future role of technology and innovation centres (TICs) in the UK.

In his report published earlier this year, Hauser identified 50 innovation centres already in existence, which have collectively received £150 million in public funding since 2008. Whilst it is undoubtedly the case that a great deal of excellent work takes place in these institutions, there are a number of structural problems that reduce their effectiveness in maximizing the UK’s competitive position. Hauser noted that there was inadequate integration into the national innovation system, that a great deal of work was duplicated and that the funding model was not geared to the long-term. Public funding has been chanelled through the Regional Development Agencies (RDAs) in England and the devolved administrations elsewhere in the UK; the funding model varies but typically the TICs have been expected to become commercially viable within three to five years – an arrangement that Hauser criticises as unsuited to emerging areas of technology or where the research is still a long way from commercialisation.

Hauser’s starting point in making his recommendations is that he champions the cause of public investment in key sectors that have great commercial potential in the very long run, and where the UK already has an advantage in science and technology research. His proposed funding model is one-third government infrastructure, one-third industry and one-third government and EU project funding. He suggests a number of candidate sectors, including regenerative medicine, renewable energy, future internet technologies, plastic electronics and advanced manufacturing; this list is not intended to be exhaustive and there would appear no reason why the railway industry should not be included.

One difficulty inherent in the current arrangements is that there is no readily available way of identifying the institutions that are undertaking relevant work. Many organisations include ‘technology’ and ‘innovation’ in their name but this does not necessarily mean that they are involved in leading edge research. Hauser therefore recommends branding the new institutions as ‘Clark Maxwell Centres’ after a 19th century physicist whose work on electromagnetism laid the foundations of the modern IT industry. The intention is that this group of centres, whilst autonomous, would be part of an overall national strategy.

The change of government in May caused some uncertainty as to how or if this initiative would be progressed, but in October Vince Cable, the Business Secretary, announced government acceptance of the broad proposals to be established and overseen by the Technology strategy Board (TSB). The requirement for a high degree of autonomy was emphasised, so that the centres will be responsive to industry, and each centre will focus on a specific technology. The TSB will decide which existing centres to invest in by April 2011 and will then consider the requirement for new centres. It is considered important that this will not be a mere rebranding exercise.

The current proposals therefore place a high degree of emphasis on developing bespoke centres responsive to specific needs, albeit within an overall strategic framework, so it should not be assumed that one of the existing centres would act as a template for others. Nevertheless, the details of the Manufacturing Technology Centre (MTC) currently being developed at Ansty, on the outskirts of Coventry, may be worth considering. This initiative represents an investment of £130 million jointly from the private and public sectors; it is intended that it will employ 100 to 150 ‘highly qualified’ technical specialists, and will benefit the aerospace, automotive, energy, electronics, and heavy duty construction equipment sectors. Economic impact assessments show that the project will return £46 for every £1 invested. The MTC, which will be fully operational from the summer of 2011, will be operated by a partnership consisting of the University of Birmingham, University of Nottingham, Loughborough University and the operating division of The Welding Institute. Founder industrial members of the MTC are Rolls-Royce, Aero Engine Controls and Airbus UK, although of course it is intended that the list of industrial members will expand. £40 million of funding for buildings and equipment was provided by Advantage West Midlands and the East Midlands Development Agency who see manufacturing as vital to the economy of the Midlands.

Another example of existing provision is the Advanced Manufacturing Research Centre (AMRC) in Sheffield which seeks to build on the city’s metalworking heritage. It was initially set up as a partnership between the University of Sheffield’s faculty of engineering and Boeing, with the purpose of ‘identifying, researching and solving advanced manufacturing problems’. It currently employs about 120 researchers and engineers who work with companies of all sizes on a consortium basis; members pay an annual fee to have access to the facilities and expertise. ‘Tier one’ members help to determine the R&D agenda include the likes of Boeing, Rolls-Royce, Siemens and BAE Systems; a lower tier of members pays lower fees and has access to AMRC’s generic research projects.

A slightly different example is the Stevenage Bioscience Campus in Hertfordshire, which was first announced in late 2009; the cost will be £37 million. It will be funded by a partnership of the government, GlaxoSmithKline (GSK), the Wellcome Trust and the TSB. The intention is to create a ‘world-leading hub’ for biotech companies and, it has been claimed, up to 1,500 jobs could be created. The campus will be on the existing GSK site.

Further examples of TICs include:

• The Centre for Process Innovation (CPI): The CPI is a technology innovation centre for the process industries, established in 2004. Its approach is to undertake market analysis to define a technology or market need and then to assemble a team of experts to develop technologies to meet this need. It uses both private and public investment to build and operate the development assets which are then used by private companies, together with CPI expertise, to develop their own technology. These companies then invest their own funds to take the technology to market, but the development assets remain with the CPI for future use.

• The Advanced Composites Centre for Innovation and Science (ACC): This centre which brings together the University of Bristol and industry undertakes composites research. The concept is to set up strategic partnerships with industry companies and government funding agencies to develop and exploit this research. Research sponsors include Airbus, Rolls Royce and the Systems Division of GE Aviation. Much of the research

activity includes input from other universities, in some cases on an international basis.

• The Energy Technologies Institute (ETI): This centre, based in Loughborough, undertakes research on low-carbon technologies, ‘bridging the gulf between laboratory proven technologies and full scale commercially tested systems’. It operates as a limited liability partnership between industry companies and the government; industry members include BP, Shell, Rolls Royce and EDF Energy. The ETI has a target of securing up to 10 private sector investors, each contributing up to £5 million per year for 10 years, with the UK Government matching these investments to create a potential £1 billion investment fund for new energy technologies.

Written evidence submitted by the Design Council (TIC 80)

Summary The Design Council welcomes the opportunity to respond to the House of Commons Science and Technology Committee inquiry into Technology Innovation Centres (TICs).

The Design Council is the UK’s national strategic body for design and government advisor on design. Our views are drawn from a strong evidence base from our design support programmes for technology start ups and science teams in leading universities to help commercialise new technology.

Both the Hauser and Dyson reports suggest the creation of an elite network of technology centres, modelled on the German Fraunhofer Centres, to help bridge the gap between research and development.

While the Design Council is supportive of the purpose of the Government proposal for Technology and Innovation Centres and strongly believes that such environments have the potential to promote innovation and entrepreneurship, to model them entirely on the Fraunhofer Institutes would risk underplaying the role of design in accelerating research and innovation to market.

Although design’s role in the economy is more widely acknowledged and it is understood that many successful high- tech businesses like Apple and Dyson are design as well as technology driven, this link is still not strong enough in the early stages of commercialisation. There remains a lack of awareness and use of design by UK scientists to help 1 identify market needs and make new concepts viable and appealing.

The Temple Review pointed out: “The economic goal of generating more wealth from new science demands multidisciplinary teams of designers, engineers and technologists designing around the needs of customers.”2

The UK has two globally recognised assets: our design industry and science base - but they are not in any way sufficiently joined up. Market and system failures exist - scientists and technology-intensive start-ups lack an understanding of how design can help to commercialise their ideas. In addition there are few support mechanisms to correct this and the design industry does not readily see the opportunities.

The benefits of integrating design in the early stages of scientific development, is that the focus shifts from the technical functionality to what end users need and want, which in turn helps to reduce the risks in bringing new ideas to market, increases the potential value within the IP and helps attract and secure investment earlier.

The Design Council therefore recommends that for proposed new Technology and Innovation Centers to add value they must build on UK strengths and integrate design support in their offer.

1. Design is a vital and often missing ingredient Design is among the UK’s strongest creative sectors, and ranks highly against international competition.3 When businesses exploit the skills of UK designers, significant performance benefits have been demonstrated – for example, manufacturers who invest in design see significant outcomes as a result, including improved quality of goods and services, and increased market share.4 And companies that spend double the average amount on creative inputs, including design, are 25 per cent more likely to introduce product innovations.5

Creative sectors such as design are seen as drivers of innovation and growth throughout the UK economy.6 Policymakers and academics have recently moved beyond focussing on technical and research activities to recognise 7 the importance of design and creativity to innovation activities.

1 The Race to the Top, A Review of Government’s Science and Innovation Policies, Lord Sainsbury (2007) 2 Temple Review, BIS (2010) 3 Moultrie, J. & Livesey, F. (2009) ‘International Design Scoreboard: initial indicators of international design capabilities.’ Cambridge: University of Cambridge 4 HM Treasury (2005) ‘Cox Review of Creativity in Business: building on the UK’s strengths.’ London: HM Treasury –citing results for UK manufacturers from the Third Community Innovation Survey. 5 Bakhshi, H., McVittie, E. and Simmie, J. (2008) ‘Creating Innovation: Do the creative industries support innovation in the wider economy?’ London: NESTA 6 Sunley, P. et al (2008) ‘Innovation in the Creative Production System: the case for design.’ Journal of Economic Geography 8. Oxford: Oxford University Press; NESTA (2008) ‘Hidden Innovation in the Creative Industries.’ London: NESTA; The Work Foundation (2007) ‘Staying Ahead: The Economic Performance of the UK’s Creative Industries.’ London: Department for Culture, Media and Sport ; DTI (2006) ‘DTI Occasional Paper No.6: Innovation in the UK: indicators and insights.’ London: DTI 7 Moultrie; Cox; DTI;

Most of the UK’s universities produce world class science and technology innovations. Much of this research and innovation has commercial potential and efforts to exploit this resource for competitive advantage have improved. But there is still scope to help technological and scientific experts turn their ideas into products and commercial opportunities that investors will back and customers will buy. This is where design can add significant value.

Designers have a range of specialist skills which enable them to make a unique and valuable contribution early on in the technology transfer process. These skills include creative problem solving, visualisation techniques but above all a focus on the end-user benefits. This shifts the focus of technology transfer offices (TTOs) from pushing a new technology based on its functionality, to understanding how it can be developed in order for a market to want and buy into the idea. In addition this approach helps to identify how further value might be unlocked by exploring the benefits of applying the technology in other markets not previously explored. Dr George Rice, Manager of Technology Demonstrator at University of Nottingham Innovation Park shared with us his experience of using design:

“From all the work we’ve done the key learning point has been to take a step back and reconsider the opportunity in terms of features and benefits to the ‘end user’. In the main we find that what we have is still good, but we’re selling it wrong – and this is often where design inputs can put us back on the right path.”

Our work at the Design Council has demonstrated that the economic benefits of using design to commercialise technology are significant.8

The Design Council’s Innovate for Universities programme has taken design experts into the six leading university TTOs9 to accelerate new applications for academic research, moving ideas closer to market.

The TTOs report that the strategic advice and design projects have helped each technology project in a different way. Outcomes include: • license deals secured and over £1,000,000 of fresh investment accessed • a reduction in the risk taken by the TTO. 80% of projects report a reduction in risk • increased IP value. 50% of projects say they have increased the value of their intellectual property by working with designers • accelerated time to market. 30% of projects report they have got closer to market quicker by working with designers

Despite the potential gains that could be realised, design remains under-exploited by our universities. For David Secher, Chairman of PraxisUnico this is the result of information and system failures: “Due to a lack of awareness, little engagement between the design and research communities and an inability to fund design related projects, the value of design for technology transfer is under recognised.”

The Design Council believes that this is something that the Technology Innovation Centres must urgently address.

2. Other models for research centres oriented toward applications and results Over the last few years, a number of multidisciplinary centres emerged across the UK bringing design, business, science and engineering education closer together. Universities are also working closely with businesses to ensure that the courses they offer and the research they produce is meeting the changing needs of industry, and that students are gaining experience of working on live multi-disciplinary projects. Examples include:

• Design London builds on a heritage of cross-institutional collaboration to provide design-led modules for MBA students, designers and engineers, with a focus on business incubation (www.designlondon.net) • University College Falmouth operates a multi-disciplinary research and development laboratory and a creative facilitation space (www.falmouth.ac.uk)

However, all this activity is still only taking place in a relatively small number of universities.10 With this in mind, we recommend that new Technology and Innovation Centres should build on and include key multidisciplinary design centres, such as Design London in its network.

3. Recommendations The establishment of Technology Innovation Centres provides a unique opportunity to “hardwire” design into the technology infrastructure. We are however concerned that it does not yet feature design strongly enough and would like to work with BIS to ensure that design input is built into the portfolio of services offered by the Technology Innovation Centres and we therefore recommend that:

8 Please see Owlstone Nanotech - Case-study in Appendix 9 The Universities of Aberdeen, Cambridge, Leeds, Nottingham, Oxford, UCL and York 10 Please see: Report and recommendations from the Multi-Disciplinary Design Network http://www.designcouncil.org.uk/Documents/Documents/OurWork/MDnetwork/MDNetwork_FinalReport.pdf

3.1 Given the world-class design talent in the UK, design should be more readily available and connected to the Technology Innovation Centres to promote faster commercialisation of ideas.

3.2 The Design Council national network of design mentors building the innovation capabilities of science based teams and signposting innovation projects towards appropriate expertise, has proved successful with TTOs. We recommend that extending this design support model to the new Technology Innovation Centres might be more cost effective, as opposed to having embedded capability within these centres. Design support could expand through re- distribution of small proportion of the overall budget for Technology Innovation Centres towards design mentoring at early stages, including for technology start ups and existing network of university TTOs.

3.3 Existing innovation enablers need to join up; and BIS has a role to play in bringing the TSB and rest of BIS-led Innovation Network closer together opening up opportunities for multi-disciplinary connections;

3.4 New centres should also include an emerging network of multidisciplinary design centres such as Design London.

Design Council

07 December 2010

Appendix

4. Definitions of Design Ingenious Britain’s definition (2010): “Design is not simply aesthetics; it’s the rigorous process that links new technologies to business – creating things that work properly.” The Cox Review (2005): “Design is what links creativity and innovation. It shapes ideas to become practical and attractive propositions for users or customers. Design may be described as creativity deployed to a specific end.” Design as a driver of user-centered generation (2009), the EC Commission’s working document: “Design for user- centred innovation is the activity of conceiving and developing a plan for a new or significantly improved product, service or system that ensures the best interface with user needs, aspirations and abilities, and that allows for aspects of economic, social and environmental sustainability to be taken into account.”

5. Owlstone Nanotech - Case-study Owlstone Nanotech was founded in 2004 by three Cambridge University researchers who had developed a ground- breaking chemical detection technology that’s the size of a five pence piece and can detect a wide range of chemical agents even in extremely small quantities. They wanted to develop their technological innovation and exploit its commercial potential and they needed to get investors on-side and work out a strategy for getting to market.

But they faced many of the problems common among high technology start-ups: - Explaining its technology – particularly challenging as it’s invisible to the naked eye - Communicating competitive advantage to a variety of audiences - from technical partners to investors, customers and media - Attracting investors, partners and high-quality staff - Choosing the best short-term and long-term applications for the technology and the strategy for market entry.

The Design Council’s design mentoring programme Designing Demand helped Owlstone tackle issues including their brand strategy, corporate culture, the needs of people using potential products, product development and plans for market entry. Owlstone worked with Designing Demand soon after launching in 2004 so the design input came early enough to ensure that brand, market and product strategy evolved together.

In May 2006, it launched a digital tool that allowed would-be customers in different sectors to sample the technology and assess how it could be incorporated most effectively into their work. Billy Boyle, Co-Founder and President of Operations, Owlstone explains: ‘For clients it was a low-risk way to evaluate the technology. Meanwhile for us the advantage was that we’d done 80% of the development up front and it was just a question of making modifications to suit different applications. So we spread risk too.’

Four months later, in September 2006, Owlstone attracted £1.25million of fresh investment and formed a technology development work partnership with a leading UK-based company.

The Designing Demand programme has left a legacy of innovation at Owlstone. Design thinking is used not only to define product and brand development, but it has also become part of core strategic thinking. Visualisation activities are now used as a key part of the decision making process, even by non-designers. Model building was entirely new to the company but it has proved to be important in making its advanced technology intelligible to a wider audience from potential partners to national and trade press.

Model building was entirely new to the company but it has proved to be important in making its advanced technology intelligible to a wider audience from potential partners to national and trade press.

Boyle says: ‘When you’re speaking to people from a non-scientific background it’s hard to articulate things like principles of operation. Visualisation has had a dramatic impact in helping us get the technology across. It’s part of everything we do. Aside from that we have a solid brand that will grow over time and that makes people sit up and realise we’re serious.'

Owlstone has developed more than six standalone products that apply the firm’s unique technology to different applications. ‘There are so many and varied potential applications for our technology that we have to stage and manage the way in which we pursue and resource them. There is massive potential for our sensor in particular in fields such as medical diagnostics and cancer detection, and in the long term this could be huge for the company,’ says Boyle. ‘But we are taking a highly focused and targeted approach to progress. Two years ago we had no significant revenue - around $200k - but in each of the last two years we have generated $3.5m a year.’

It has formed an ongoing partnership with SELEX Galileo, one of Europe’s foremost aerospace and defense organisations, and in January 2010 entered into an exclusive strategic development agreement with the company, executing a licensing agreement by which SELEX Galileo will obtain the exclusive right to develop and distribute Owlstone's FAIMS chemical detection technology products within the military marketplace.

In March 2010 it was awarded an $80k contract from an agency of the UK Ministry of Defence for a three-month investigation into the application of its core technology in ultra-trace vapour detection. Pending success of this proof- of-principle stage there is an opportunity for contract extension to a longer second phase in which field deployment trials would be undertaken.

‘If we hadn’t taken part in Designing Demand we would have missed a big opportunity. It exposed us to new ideas we could use straight away and which gave us shape and direction. Without it, we would have been a lot slower in getting to where we have,’ says Boyle.

More info: http://www.owlstonenanotech.com

About Designing Demand and technology start-up case-studies: http://www.designingdemand.org.uk/case_studies/innovate_case_studies

About Innovate for Universities and case studies http://www.designcouncil.org.uk/our-work/Support/Innovate-for-Universities

About the Design Council: http://www.designcouncil.org.uk/about-us/

Written evidence submitted by the Institution of Chemical Engineers (IChemE) (TIC 81)

Technology Innovation Centres

Enquiry Remit:

Introduction

“Intermediate institutes”, of which the Fraunhofer institutes are perhaps the best-known but not the only example, operate in many countries as a vital “bridge” between the academic research and technology base and the commercial world of industry and commerce. While varying in ownership, structure and modes of operation, they perform an effective and highly regarded role in many countries as part of the overall innovation system. Within Europe, organisations such as TNO in the Netherlands and VTT in Finland, along with Fraunhofer, have been widely studied as models that could be of value elsewhere.

There are a number of aspects of the Fraunhofer Institutes that make them successful, however, this does not necessarily mean that the model can be easily replicated in the UK, The research they carry out is generally demand led by specific market needs whereas in the UK research tends to be led more by fundamental research. They have had a significant length of time in which to grow and cement their position and reputation within the academic and business communities. Potential centres in the UK would need to establish themselves much more quickly in an already crowded research landscape both at home and abroad. But perhaps the most important aspect is that of funding. The Fraunhofer Institutes are heavily funded by both government and industry to the tune of €1.6bn per year, mostly through contract work, which is considerably more that the £200 million over four years being proposed in the UK. The funding of Fraunhofer Institutes also tends to be over a much longer-term than in the UK where grants only cover periods of around 3-5 years. This is critical as it enables the institutes to recruit high calibre staff and give them time to build their reputation.

Institutions of this type are poorly represented in the UK, where traditionally a great deal of reliance is placed on universities as drivers for the innovation process. Whilst the UK’s high quality university base makes an important contribution to this end, over reliance can raise significant problems. Universities are well placed to work with industry on genuine research and development through to the application stage. However, the “cultural gap” between academia and industry sometimes widens as the work progresses through to an exploitation stage and this inhibits effective collaboration at the pre- commercial phase. The incentives applicable to university staff and research teams are seen by many outside academic circles as being not conducive to the intermediate role, since they focus primarily on research performance and publication output as the basis of appointment, career progression and funding. The environment within universities is seldom as “businesslike” as industry would wish for pre-commercial research and development, with practical concerns about confidentiality and intellectual property management sometimes being raised. In addition, university staff enjoy a good deal of latitude to pursue their personal research interests (which often lies at the heart of innovation of course) and this can detract from a focus on the needs of industrial partners, who may have very specific views of how they wish to develop an opportunity.

That said, there are many good examples of university-associated institutes playing an important intermediate role. These include:

• Warwick Manufacturing Group

• Rolls-Royce Defence Technology Centres • Surrey Space Centre • Advanced Manufacturing Research Centre at the University of Sheffield • Cambridge Institute for Manufacturing

In addition to the university based organisations there are also Government facilities such as the National Physical Laboratory, the STFC sponsored science and innovation campuses at Daresbury and Harwell and industry based facilities with companies such as QinetQ (although these are in serious decline).

However, such institutions necessarily adopt a different ethos and employment terms to those which are the norm within the university sector and this can lead in some circumstances to tensions between the unit in question and the host university. This suggests that there is a strong case to be made for intermediate institutes that are complementary to, but separate from, universities. Moreover, this need has been heightened following the decline and closure of many corporate R&D centres. These centres often involved staff who were comfortable dealing with academics engaged in fundamental research and their disappearance has widened the gap between academia and industry – as such, the need for a bridging body is more pressing than before.

The working relationships between industry, business and universities have improved significantly in recent years, with many examples of successful exploitation through spin-outs, licensing and collaborative R&D. However, the absence of a significant network of ‘bridging institutes’ between academia and industry is seen by some as one of the factors at the heart of the UK’s well-known and long-lamented failure to achieve a commercialisation and innovation performance commensurate with the superb quality of our fundamental research base. If this shortfall is to be redressed, intermediate institutes will play a vital role.

These considerations were apparent at the beginning of the millennium when the newly-formed Regional Development Agencies sought to more fully exploit their regions’ R&D and knowledge assets in the interests of economic development. A further examination of this process is useful in identifying common concerns and potential solutions for innovation centres.

Centres of Excellence

The RDAs secured private sector consultancy support in order to address this challenge. Typically the process included a detailed and realistic analysis of each region’s R&D assets, a systematic strategy for innovation, and the creation of regional Science & Industry Councils designed to achieve a coherent view of needs and opportunities across industry and other partners on a regional basis. In the particular case of North-East England, a pressing need was identified to exploit some very specific knowledge assets to help transform the economy of what at the time was a severely disadvantaged region and one strongly dependent on the petrochemical and process industries.

The measures proposed1 included the creation of a number intermediate institutes, termed Centres of Excellence (CoEs). They were designed to “pioneer an innovative new model for industry-science links in the UK” and to “...address some of the difficulties encountered in relation to industry-science links, partly reflecting the very different cultures and reward systems that apply in industry and in the science base – especially in universities.” The concept was described as follows:

In essence, a Centre of Excellence (CoE) is an association of university, company and other R&D groups and associated teams that derive benefit from working together. If one makes a simple, albeit inadequate distinction between basic research, strategic research, applied research and development, the focus of the Centres will be primarily – but not exclusively - on the strategic and applied areas rather than on basic research, which might be best conducted in the universities, or on development of specific products and processes in a way best handled within a company. The Centres will provide a mechanism for ‘proof-of-concept’ projects, i.e. further downstream than a university laboratory project but not yet developed sufficiently to form the basis of a full commercial investment proposition.

1 “Realising the Potential of the North East’s Research Base”, Arthur D Little Ltd, Report to OneNorthEast, 7 August 2001

Projects within the Centres’ programmes will typically be conducted under a common project leadership and to an agreed plan by directly-employed staff and by partners (such as universities and companies), working in collaboration. The balance between them will vary from Centre to Centre and from project to project. An important aspect of the Centre’s work will be to facilitate, and where appropriate to manage, effective interfaces between the R&D base and businesses within the relevant clusters and beyond.

The Centres took account of a detailed analysis of stakeholder expectations: a sample analysis is presented in modified form in Appendix 1.

Several key success factors were identified that are relevant to any potential UK initiative:

• The active involvement and support of companies within the relevant clusters, based on recognition that the Centres will benefit their business interests; • The active involvement and support of the relevant universities, based on conviction that the universities’ own interests are served by the successful development of the Centres; • Effective support by the public sector, while allowing autonomy of operation and fast decision- making; • Access to a range of funding streams; • Ability to accommodate a diversity of participants and relationships, with some organisations highly dedicated to a Centre while others have a more selective relationship with it; • Recognition externally for research excellence and industry relevance; and • Creation, through the Centres, of an efficient and effective professional interface between the science base and industry.

Preventing potential conflicts was also a key consideration:

• The CoE must not be perceived as competing for profit with its own members / stakeholders – this points to each CoE as a company limited by guarantee; • Focus on right to use IP not on IP ownership; • Distinguish use for research and use for commercial gain, and avoid restricting universities’ or CoE’s right to use IP in future research; • IP ownership should normally rest with the lead party responsible for its generation: CoE ownership may be appropriate in some instances as a better alternative to messy joint ownership; • Universities must be able to accrue credit for CoE work (including if possible work done outside ‘university’ groups - e.g. via academic status for senior industry scientists, where the latter have the required track record in terms of external recognition, publications, etc); and • Companies must have easy access to academic expertise via a professionally managed interface, with guaranteed speedy response - a gatekeeper, but one who opens the gate and helps you through it, not one who gets in the way.

The Centre model was deliberately designed to accommodate both directly-employed staff and groups from companies and universities which could be hosted, physically or virtually, within the Centre. The role of the Centre Chief Executive and his/her team would be to marshal all of these groups around a common set of strategic aims. The model is described in more detail in Appendix 2.

The model offered flexibility within an overall “family likeness” taking into account

• Who is involved in a specific project, and who leads; • The extent to which participants draw on CoE activities as distinct from just being located there; • The mechanisms by which R&D is translated into products, processes and wealth creation; • The academic / industry balance; • The balance between long term and short term R&D; and • The degree to which the CEO / core team manage activity directly

The proposals were implemented by One NorthEast and as intended, the Centres evolved in different ways appropriate to their sector. Particular note should be taken of the New & Renewable Energy Centre at Blyth (Narec), Northumberland, and to the Centre for Process Innovation (CPI) on Teesside – recently merged with the Centre of Excellence for Nano, Micro and Photonic Systems (Cenamps). Both have proved extremely successful in building up strong reputations, excellent links with industry, and in

particular attracting and retaining major national and international companies within the UK, aided by access to both the physical facilities and the expertise available through the Centres

Conclusions

This experience suggests that institutes of this nature could play a central role in any future innovation system in the UK. It is not the only model available but the features listed above highlight issues that should be taken into account when designing innovation centres for the UK. It is also helpful to gain experience of working within the UK where the culture within both industry and academia may be a barrier to adopting other models from around the world.

Funding and governance arrangements are unlikely to follow the Fraunhofer model exactly given that it is better suited to an environment where substantial national and regional public funding are available – pressures on public expenditure dictate that this is unlikely to be the case in the UK for some time to come. It is important that such centres are able to achieve critical mass, both in business and academic activities, which means that they should be few and large, not many and small, and that they are given time to develop rather than being rushed into too rapid a move to financial sustainability, as the latter would drive an undesirable short-termism. They should focus on areas where the UK has a distinctive and sustainable strength in a particular sector, or at least a realistic opportunity of achieving and maintaining one. Both assembly and process manufacturing falls squarely into this category and the UK should build on existing centres, using further funding to consolidate and further strengthen that position and notwithstanding the loss of other sources of public support.

They should have access to research funding from sources such as Research Councils, typically in collaboration with universities. The relationship with universities and with industry should be underpinned by the availability of joint appointments both with universities (there is for example a precedent in this with a CPI-sponsored chair at Newcastle University), and joint appointments with major companies. It is extremely important that these Centres are be able to collaborate well with industry and universities. It is equally important that they do not duplicate/displace existing centres or relationships, or be seen to be in competition with universities (or other research organisations). There must be a net gain in capability rather than any potential substitution of a TIC, for, say existing established university- industry relations or we may find that the innovation base is eroded.

Coordination should be led by the Technology Strategy Board (TSB) as they are already well placed to carry out the function of networking the centres. However, care should be taken to ensure their role is to provide a strategic overview and enable innovation through collaborations and not to add an unnecessary layer of bureaucracy. IChemE believes that in this manner the strength of the UK’s fundamental research base can be more effectively translated into innovation and commercial success.

About IChemE

IChemE (Institution of Chemical Engineers) is the hub for chemical, biochemical and process engineering professionals worldwide. With a growing global membership of over 30,000, the Institution is at the heart of the process community, promoting competence and a commitment to best practice, advancing the discipline for the benefit of society, encouraging young people in science and engineering and supporting the professional development of its members. For more information, visit www.icheme.org

Institution of Chemical Engineers (IChemE)

08 December 2010

Appendix 1

Centres of Excellence - Stakeholder Expectations

INDUSTRY ACADEMIA • Access to resources (money) • Finance - research funding and investment in facilities. • Access to facilities and expertise (people). E.g. via: • ‘Kudos’ – i.e. for research-led universities, REF credit. The CoE must enhance and - Cost effective access to facilities / expertise not undermine success in terms of REF / knowledge that would not be justified ratings. on a company stand-alone basis. - No operational management (i.e. cost • Peer group recognition effective outsourcing). • CoE to have commercial/operating - Provision of a user friendly interface structure to facilitate the above (Industry/Research). • Maintain access to IPR for future research, - Enhance ability to attract ‘high calibre’ e.g. via ownership. Implications of CoE resource to the region. must not ‘constrain’ ability to develop future research • Enhanced competitive advantage, e.g. via improved foresight, ability to spot and exploit • Retain access to world-class facilities business opportunities • Maintain ability to profit from IPR, e.g. via • In some cases, fulfilment of personal ownership commitment / drive of company leaders • Improved commercial exploitation (CoE • Raised company profile; ability to make a visible may offer opportunity to follow higher risk contribution to the region/industry strategy). • Ability to influence/shape research activities to • Income from contract and consultancy respond to market needs/industry priorities. activities • Graduate retention • Enhancement of, not a ‘drain’ upon, existing academic resources (people, • For SMEs: reduced risk, access to services / funding, opportunities for facilities that they could not afford themselves, commercialisation, etc) access to good advice, and increased chances of survival and growth • Attract and retain talented staff • Opportunities for placements and secondments

PUBLIC SECTOR PUBLIC SECTOR (cont.) • Creation of high quality, sustainable, knowledge • Effective utilisation/exploitation of UK based jobs science & research base • Deliver radical change to sector productivity and • Development of a new and effective model competitiveness for science/industry collaboration • Exploitation of science base via 3 routes • Limited period of high public sector investment, and limited or no long term − Technology transfer to existing companies continued core funding requirement. − Provision of effective ‘route’ for new start- • Avoid a public sector body assuming day to ups day operational/financial responsibility − Attract inward investment/establish new • Improved innovation/R&D investment companies. • Long term sustainable co-operation across • Ability to attract and retain ‘high calibre’ people public/private sector interface.

Appendix 2

Centre for Excellence (CoE) model

The component groups of the CoE can include the following, each gaining specific advantages from participation in the Centre which are listed on the right:

1, 2, 3 are academic research teams • Access to facilities • Able to work side by side with company R&D teams • Potential for enhanced funding • Research capacity building • Professional interface with industry and investors (not just those on-site) • Shared services

4 and 5 are corporate R&D groups • Access, formally and informally, to academic and other expert knowledge • Access to shared facilities • Potential for enhanced leverage from R&D funding, by using it to gain access to wider R&D programmes and expertise • Research capacity building

• Professional interface with academia • Staff can gain academically accredited qualifications • Shared services

6 and 7 are standalone companies • Co-located with key customers These could be corporate or academic • Expert scientific, technological and spin-offs; or service companies for other business advice / support readily on participants on or off site tap • Access to facilities beyond the means of an SME • Full incubation support if appropriate, or shared services

Components 8 and 9 are groups managed directly by the core team. These could include:

• Analytical / measurement services (complementary to those in universities and elsewhere)

• Common scientific or pilot plant facilities

• Joint project teams with secondees from companies, universities and others

• Conference / seminar services

• Training services

• Technology transfer teams

• Investment / exploitation services

At the heart of the CoE are the CEO and core team, who:

• develop and implement a strategy for the centre as a whole, involving all participants and based around technology platforms of common relevance

• promote and expand its role

• initiate and co-ordinate collaborative proposals e.g. EU Framework, national facilities, inward investment propositions

• guide and facilitate ‘proof-of-concept’ work

• secure funding

• manage joint projects

• manage shared facilities

• provide a professional academic-industry interface, through understanding both ‘sides’ in depth

• understand and access financial and other resources for commercialisation

• provide a ‘window on the future’ for participants, e.g. by undertaking or facilitating forecasting / foresight of technology and related trends for companies; or by identifying and interpreting emerging research themes and industry priorities for academic and other researchers

• provide feedback to research providers on current and anticipated market requirements

Written evidence submitted by Rolls-Royce plc (TIC 82)

Technology Innovation Centres

Introduction

1. Rolls‐Royce welcomes the opportunity to submit evidence to the Committee’s inquiry. As one of the leading engineering companies in the UK, we have significant experience in pulling through innovative new technology into high value products and services. This experience has taught us that to do this and to compete effectively in a global industry requires partnerships with our suppliers, academia and government.

2. The Hauser Review highlighted the need for an effective mechanism for commercialising the rich and original output of our national university research base. However such mechanisms must be targeted to ensure they deliver technology and innovation that the UK industrial base is able to exploit and they must be adequately funded over a sufficient period to make them stable, desirable locations in which to foster our brightest and best scientists and engineers.

3. The Fraunhofer model suits the conditions of the German industrial base and although we believe that while the Fraunhofer model is not a direct fit for the UK it offers a good example of how such a mechanism can work for the benefit of academia, industry and government. A slightly more focussed model is a priority here, building on where the UK is already strong, or has a clear opportunity to be so, both academically and industrially.

Question 1 ‐ What is the Fraunhofer model and would it be applicable to the UK?

4. The Fraunhofer model is the product of more than fifty years of consistent investment in establishing a broad technological base for manufacturing industry in Germany operating across 59 centres. However, it is costly to establish and operate, currently running at €1.6bn per annum. A distinctive aspect of the model is that it is largely research led and takes considerable time and effort to transfer technology concepts into industrial applications. Such a model makes sense in a nation with many leading engineering and manufacturing firms. However, there is some overlap between centres – with consequent funding inefficiencies.

5. The UK’s recently developed Advanced Manufacturing Research Centre model is more based on industry pull, compared to technology push with the Fraunhofers. The UK model is largely focussed on application engineering to deliver best in class quality and cost solutions. This more selective and affordable approach with closer connections to markets, reflects our narrower industrial base and the urgent need to improve competitiveness. It derives its speed to market from linking strong University research directly with industrial sponsors.

6. The German system has a clear hierarchy of Government Research Institutes: a) Max‐Planck‐Gesellschaft ‐ for large‐scale, basic science research. b) Fraunhofer‐Gesellschaft ‐ technology‐focused research centres. c) Helmholz‐Forschungszentren ‐ research centres focused on industry sectors. Rolls‐Royce works closely with the German Aerospace Research Centre, DLR, which is a Helmholz institute.

7. However, the overriding lesson from Germany is that such centres must be funded consistently and at significant scale over time if they are to deliver the economic impact of which they are capable. In such a position they have been able to develop a strong reputation for performance and delivery, built up over decades , which is vital to their success. In contrast, the UK has, over the past 25 years, consistently dismantled its national research centre base with the loss of the Royal Aircraft Establishment, Marchwood and Leatherhead CEGB Centres and many others. It has also significantly reduced the scale and scope of remaining centres such as Culham, The National Physical Laboratory and the National Engineering Laboratory.

8. The funding of the Fraunhofer model is quite balanced with around one third of their budget coming from national or regional government directly, a further third aimed to be generated from public research projects bid for competitively and a final third from research contracts with the private sector. Expectations of continuous support – balanced by strong performance measures – are crucial to attracting and retaining high calibre people. Importantly we understand in Germany funding commitments are made for periods up to 15‐years with exit points to cover non‐performance. Some 50% of the funding for Helmholtz (e.g. The German Aerospace Institute, DLR with €750m p.a. turnover) comes as a block grant from central government and a further 30% from public research projects. Any UK Centres should be given 10 year grants with annual metrics and a 5‐year review point.

Reference: Fraunhofer Annual Report 2009, With Renewed Energy 9. Effective governance is critical for effective technology centres. Fraunhofer Institutes have a fairly complex structure including a general assembly and a Senate, which can set strategic direction, research activities and carry out performance evaluation. However despite this, as individual Institutes have a high degree of autonomy to set their own research priorities and pursue commercial opportunities, they can compete with each other to win funding resulting in potential overlap and inefficiencies. 10. The scale, complex governance and relatively slow technology transfer of the Fraunhofer models does not make them ideal for application in the UK, but the focus on applied technology working with industry and focusing on key technologies certainly represents elements of a model worth replicating.

Question 2 ‐ Are there existing Fraunhofer‐type research centres within the UK, and if so, are they effective?

11. Rolls‐Royce has led the development of two different types of research centre in the UK , University Technology Centres (UTCs) and a network of Advanced Manufacturing Research Centres (AxRCs).

11.1. Since the 1980's Rolls‐Royce has pursued a policy of developing long‐term relationships with selected universities and funding University Technology Centres. Close

contact with the best academic institutions gives us access to a wealth of talent and creativity and protects our capability in the future. We aim to balance Rolls‐Royce needs with academic advantages for the University. We now have 28 UTC’s worldwide with 19 in the UK.

11.2. UTCs are very beneficial for both parties as they provide the Universities with real‐ world problems and challenges requiring original and innovative solutions. Conversely Rolls‐ Royce gets access to an independent but focussed research groups, with appropriate protection in terms of intellectual property and commercial sensitivity. By agreeing longer term (typically five year rolling contracts) the UTC is able to make long‐term investments and commitments, and provide security to researchers.

11.3. Such partnerships provide an effective means of generating new technology and investigating new ideas specific to Rolls‐Royce, but are less good at providing wider engagement with our supply chain to leverage those technologies not solely relevant to Rolls‐Royce.

12. The network of AxRCs was established to stimulate and promote high value manufacturing and manufacturing competitiveness. There are currently five committed centres in the UK, the Advanced Manufacturing Research Centre (AMRC), Sheffield; the Advanced Forming Research Centre (AFRC), Strathclyde; the Manufacturing Technology Centre (MTC), Ansty; the Nuclear AMRC, Sheffield; and the National Composite Centre (NCC), Bristol. The first two of these are fully operational.

12.1. The AxRC model is unique, delivering ‘near to market’ technology based on strong industrial pull and utilising the full range of consortium capabilities including underpinning scientific knowledge, equipment and technology providers’ expertise. The pull ensures a high level of relevance to UK industry and makes exploitation of the developed technology in the UK economy much more likely.

12.2. The AMRC, Sheffield, already provides many good examples of the effectiveness of this model with newly developed methods being transferred rapidly into real production facilities.

12.3. The public policy attractions of the AxRCs model include the stimulus to dissemination and adoption of new manufacturing methods across multiple sectors, companies and supply chains thus helping positively to drive the well recognised and large scale spill‐over effects associated with R&D.

12.4. The AxRC model has a number of key characteristics. Individually, the centres specialise in a range of manufacturing process technologies (with limited overlap between centres). Their activities are focussed by an industrial membership that collectively funds (shared) generic research but also sponsors wholly commercial or grant supported research programmes. The centres operate in the traditionally difficult space for manufacturing innovation where university research is applied and developed in conjunction with full‐scale capital equipment, overcoming the “Valley of death” between technology validation and productionisation. They are very closely aligned to industry needs and are configured to deliver at industry pace.

12.5. Whilst the AMRC model has worked well for manufacturing technology, it is not limited to manufacturing. The same model could be used for other near‐to‐market, cross‐ cutting technologies, for example hybrid electrical systems, autonomous systems and control, advanced simulation and synthetic environments, etc. 13. We are supportive of the concept of ‘Maxwell’ Technology Innovation Centres (TICs), as outlined in the Hauser report, but note that simply branding does not in itself provide substance to such institutes. Equally it is important to retain autonomy, avoiding overarching superstructure of government control that would discourage the pace and drive for results reflected in today’s centres. While a simple formula may not exist for successful centres, the following are considered amongst the desirable characteristics: i) Strong industrial drive and market pull ii) Cooperative industrial leadership iii) Measures and incentives to recognise and encourage engaged patterns of behaviour by academics (including changes to the Research Assessment Exercise). iv) Mechanisms that encourage recruitment of world class specialists and leaders with entrepreneurial skills, including from overseas e.g. Engineering and Physical Sciences Research Council (EPSRC) Star Appointment scheme. v) Strong links to University research base and alignment of objectives. vi) Assured long‐term funding both at infrastructure (capital) and programme (capital and revenue) levels but without capping any upside. vii) Structure that is friendly to EU research or reconstruction and development funding and other external sources. 14. It is important that in the changes to the regional business support structure, the research centres retain their fundamentally national role. The aim must be a network of national centres, regionally deployed, and not multiple, competing local centres. 15. It is suggested that the existing AxRC network could form the basis of the first Maxwell centres focussed on Advanced Manufacturing in the UK. This configuration would provide an ideal umbrella to : i) Integrate technical capabilities, process knowledge and improvement techniques ii) Leverage consortium membership to exploit product, process and equipment knowledge iii) Facilitate the leadership of large, well structured and delivery efficient, research programmes. This framework will maximise impact across sectors and through supply chains by exploiting its direct alignment to current and future needs of UK industry.

16. The continued effectiveness of the current AxRCs is dependent upon maintaining their growth momentum through access to grant supported research programmes from sources such as the EU and the Technology Strategy Board (TSB). It is essential that large scale, near market collaborative programmes such as Strategic Affordable Manufacturing in the UK through Leading Environmental Technologies (SAMULET), continue to attract public funding and that subsequent follow‐on programmes are also supported.

Question 3 ‐ What other models are there for research centres oriented toward applications and results?

17. The U.S. government sees its role in research as primarily supporting basic research of fundamental technologies in which industry does not see a near‐term opportunity to capitalize upon. A large amount of R&D funded by the Government is focused on military applications. Our major US competitors benefit significantly from such programmes (often 100% funded by Government). They have become very adept at turning this military‐derived technology into civil application to great commercial and competitive advantage. The US Agency DARPA funds longer‐term research on new concepts.

17.1. NASA has a multi‐billion dollar annual budget for space and aviation research throughout its network of research centres. American companies have wide access to the research generated. They can also engage at favourable costs in join programmes through the “Space Act Agreement” in which companies carry their own costs, but get access to NASA’s considerable facilities and expertise free of charge.

17.2. The federal government does fund significant applied research if it encourages activity in a particular area, such as energy efficiency green technologies. It also supports more applied research if the funding would spur the growth and development of a small business through the Small Business Innovation Research (SBIR).

17.3. State governments in the US however are more inclined to provide funding for applied research. For example, it is common for a state government to fund applied research in a particular technology area, such as life sciences, in an effort to attract large corporations to make a matching investment in their state. In this instance, the state would create a fund and allow companies to bid for research support, provided they pledge a certain amount of matching investment and/or job creation.

18. The French government has utilised existing institutes to deliver the Carnot Programme aimed at supporting the development of research in partnership with industry by bringing closer public research actors to the socio‐economic world while facilitating and bridging the gap from fundamental research to industrial application.

18.1. While the Carnot Institutes Network consists of existing public research institutes they gain additional funding based on what they raise from contractual research with industry.

18.2. There are 33 Carnot Institutes with a budget of €1.3Bn. €530m is spent on research in partnership industry with funding roughly 50:50 public and industry money.

18.3. However the emphasis of the Carnot is primarily partnership between existing public institutes and industry and not explicitly on the pull through of any developed technology for industrial and wider economic benefit.

19. The Dutch TNO organisation is independent but acts to help the Netherlands government and industry (including international industry) to innovate by applying scientific knowledge.

19.1. Its budget of €576m is sourced roughly one third directly from the Dutch government, a further quarter from Dutch public bodies and the remainder from international (23%) and Dutch (18%) industry.

19.2. While an independent and semi‐autonomous body, TNO works closely with government, SMEs International companies and its own spin‐off companies. As such it has a very wide range of interests and does work across the research and technology spectrum from developing applied research to creating start‐up technology companies. However it does differentiate itself from pure research institutes by emphasising value‐adding tangible applications and innovations for customers, and through a customer‐focussed approach, improving competitiveness of companies and assisting governments with policy matters.

20. The Electronics and Telecommunications Research Institute (ETRI) in South Korea is a government funded institute with an explicit objective of technology transfer, through commercialisation of growth technologies for industries. It has been focussed on electronic and telecommunications research since its inception in 1976 and that focus has led to South Korea becoming a major semi‐conductor producer.

Question 4 ‐ Whose role should it be to coordinate research in a UK‐wide network of innovation centres?

21. The Technology Strategy Board (TSB) has already been created to provide leadership in business innovation. It has been effective in working with different parts of Government to simplify and connect the innovation landscape and has tried to develop the UK’s capabilities in underpinning technologies, addressing the major challenges in creating new business opportunities and investing in people, networks and creating a culture supportive of innovation.

22. We would support the TSB playing a bigger role in managing the Government’s contribution to R&D – such as through Technology Centres. But there is an issue of scale with the core funding of the TSB perhaps 5‐10 times too small. The UK’s level of R&D as % of GDP is low and falling and a long way from the last Government’s 2.5% GDP target or the EU goal of 3%. Should the UK wish to raise UK R&D from 1.8% to 2.5% of GDP, there would need to be a further national investment of c. £10bn each year. If a third of this were to come from public stimulus through the TSB then the TSB’s budget would in turn have to be around £3bn a year compared with its current core budget of £300m today.

23. However, with this body already well placed and focussed on these tasks it would seem both best qualified and best placed to coordinate research in a UK‐wide network of innovation centres. As such we would welcome TSB’s involvement but would request: i) Not to overlay a structure of government control that destroys the pace and clock‐speed of the AxRC model. We need the centres to operate in a federation in which market incentives can operate. ii) To ensure there is an adequate scale and continuity of funding to the centres. We think the Hauser suggestion of around £5‐10m per year, per centre makes sense for continued

development of infrastructure and central support. In addition there is a need for public support for programmes through TSB (also replacing the Regional Development Agency (RDA) money). The returns to the economy from this sort of intervention are significant. Rolls‐Royce has looked in detail at the issue of the economic spill‐overs from R&D in conjunction with Oxford Economics and believes that there is strong evidence that the wider economic returns to R&D are very large and more so when referenced to public intervention required to stimulate R&D investment.

Question 5 ‐ What effect would the introduction of Fraunhofer‐type institutes have on the work of Public Sector Research Establishments (PSRE) and other existing research centres that undertake Government sponsored research?

24. The impact on PSRE and other research centres should be positive, as the new institutes will operate as a means to develop and apply a wide range of technologies (many of which will have been initially developed in the UK PSREs) into innovative, exploitable capabilities and concepts.

25. The creation of Fraunhofer‐type institutes and even more so the open innovation environment created in AxRCs, is one where all stakeholders in research and innovation can participate and bring their relevant expertise.

Rolls Royce plc

December 2010 Written evidence submitted by C-Tech Innovation Ltd (TIC 83)

The Innovation Vacuum : Filling the gaps left by the demise of the RDA’s and Business Link

UK SME’s are in crisis and their capacity for innovation is on the wane ….

The demise of the Regional Development Agencies is leaving a vacuum in SME’s for the provision of research, innovation and business support. The landscape of the support that was available had been simplified by the Business Support Simplification Programme, to make it easier for businesses to understand and access the support that was historically available, however today much of this support is disappearing. Grant for R&D is on hold, KTP are frozen, support programmes such as Envirowise are now part of WRAP and delivered via a web portal and it appears that BusinessLink is also heading in this direction. This has resulted in the disappearance of much of the one-to-one business support that is so essential in helping British inventors turn their ideas into products and jobs.

For the average SME owner-manager looking to ‘step-up’ and take on the challenge of growing Britain’s economy as the Public Sector shrinks, there are still many questions left unanswered and much more detail needs to be provided. For these companies, who had grown steadily by adopting a pragmatic approach to business support from the Public Sector, the proposed centralised Business Link web / helpline format seems a pale imitation of the kind of support these more established companies had previously benefited from. So who will provide the more intensive support these companies need and where will the funding come from?

David Willetts (Minister of State for Universities and Science) recently announced that the Technology Strategy Board would be placed at the centre of future developments in innovation, both for universities and business. It is clear that the government intends to establish a series of national Technology and Innovation Centres (TIC’s) based on the recommendations of the Hauser / Dyson reviews, which are similar to the German Fraunhofer Institutes, and that these would be funded by the Technology Strategy Board (TSB). These seem to be a logical focus for the development and strengthening of the UK’s lead in certain specific key technology areas. The centres also seem to be a natural conduit for the University sector to transfer knowledge and other intellectual property to industry, ably assisted in this by the TSB’s own Knowledge Transfer Networks.

Indeed the University sector does have an important SME business support role to play at local level also. But this needs to be based on the proven strengths of the Universities such as the provision of training and the management of business incubators and an increased ability to “talk the language of business”.

However, if the TIC’s do follow the Fraunhofer model in having a physical geographical location and a single sector specific remit, e.g. ICT, Advanced Materials, Environmental Technology, these centres could end up adding value to only their local SME’s and companies with technology needs beyond the remit of their regional TIC’s would not be able to access such badly needed support. The BusinessLink model has proven that SME’s respond better to business support delivered within their business and that remote “hands-off” support is a poor “second best”.

So how will the Innovation Supply Chain work from the high level national strategy of the TSB and TIC’s, down to the localised needs of the UK’s SME’s?

A potential solution is through Local Enterprise Partnerships (LEP’s) however these will be constrained in their ability to do this as it has already been stated that no central funding is available to cover the costs of running these entities. A review of most LEP bids shows that although some have local SME business support plans, many intend to focus on larger infrastructure projects, such as Transport, Tourism and Retail as a means of stimulating growth at the Macro level and will therefore be bidding into the £1.4 billion Regional Growth Fund (RGF) to support such projects.

If not the LEP’s, then who else will champion the cause of SME innovation at a local level?

The answer to the dilemma of how to provide more intensive business support to SME’s in the current cash-strapped climate, lies in the role of the, as yet little known, Regional Growth Hubs (RGH’s) and the activities of private sector knowledge transfer specialists such as independent research and tech-transfer organisations (RTO’s) and consultancies. With proper business planning RGH’s can fill the SME business support vacuum left in the regions, by providing a vital co-ordinating function between LEP’s, the TSB and it’s Knowledge Transfer Networks (KTN’s) and the University Sector. These RGH’s could facilitate the kind of intensive business support, such as 1:1 mentoring and coaching of SME owner-managers as well as embedding an understanding of the requirement to secure IP and develop processes that shorten the “time to market for new projects. This approach has been successfully proven through a number of programmes run by the former RDA’s. The RGH’s as part of this process could also provide a vital role in catalysing the outcomes University research and “know how” into new product for both “spin-outs” and SME’s. In a sense not just helping Universities to reach out, but also reaching in to provide vital ‘market’ knowledge to Universities on research, skills and training needs.

Clearly this co-ordinating role requires an intimate knowledge of all of the key players and influencers within the innovation landscape. In many cases independent Research and Technology Organisations (RTO’s) and consultancies have a very successful track record in having delivered such activity. So the historical evidence proves that they can play a vital role in the future delivery of high level business support to stimulate the innovative capacity of UK PLC.

There are a number of potential funding streams for RGH’s to draw upon to support their activity, e.g. the TSB, the RGF and pots of as yet unused European Regional Development Funds (ERDF), which lie within the regions. As yet there is no clear message from government which of these sources is most relevant to RGF’s, so it is vital that decisions are made soon to clarify the position.

The inevitable changes that have been forced upon UK business by the recession gives us the opportunity to take the lesson learnt and develop more effective mechanisms to provide a superior innovation and business support policy and strategy that is fit for purpose.

Immediate action is required to support SMEs and the business support community, universities, research and technology organisations, including other players in the UK knowledge base are ready to rise to this challenge. What is lacking is a clear framework so that they can work together to accelerate the recovery of the UK from the recession.

Ged Barlow Managing Director C-Tech Innovation Ltd

09 December 2010 Written evidence submitted by the Business and Innovation and Science Boards, Institute of Physics (TIC 84)

The Institute of Physics is a scientific charity devoted to increasing the practice, understanding and application of physics. It has a worldwide membership of around 40 000 and is a leading communicator of physics-related science to all audiences, from specialists through to government and the general public. Its publishing company, IOP Publishing, is a world leader in scientific publishing and the electronic dissemination of physics

This submission was prepared in consultation with the Institute’s Business and Innovation and Science Boards.

Technology and Innovation Centres

1. What is the Fraunhofer model and would it be applicable to the UK?

The Fraunhofer-Gesellschaft has operated in Germany since 1949, working in the space between academic research and the commercial exploitation of science and technology1. It operates 59 institutes in Germany, along with a small number of international centres, covering a breadth of science and technology disciplines. The essence of the ‘Fraunhofer model’ is that each centre is dedicated to a specific, individual application area, such as applied polymer research or laser technology. The institutes are physical locations, established and typically maintained over decades, growing, evolving and, ultimately, closing as the technology matures. The institutes themselves are often located adjacent to, and strongly coupled with, universities with relevant interests. The numbers of people involved are usually a few hundred per institute, with relative autonomy from the Munich HQ but with some central specialist support in areas such as legal, commercial and IP.

Key features of the operation of the Fraunhofer institutes include:

• People

The people working in the Fraunhofer institutes range from early career students, to mature researchers and also include, importantly, mid-career, experienced and high- quality technical staff. The latter, stable (i.e. not on short, fixed-term contracts) grouping in particular has no obvious analogue in the UK academic research system, but act as a vital link to industry. The Fraunhofer institutes have also shown some success in staff mobility. It could be perceived that the population of staff is static; in practice, it is natural and expected that careers develop so that people move voluntarily in and out of the institutes, to/from academia/industry. In some cases, there is almost complete integration of researchers and students between institute and university, not just serially from role to role, but throughout their studies and research (shared projects, facilities, common rooms etc). For example, researchers are able to take their concepts to use through the companies involved, moving flexibly from employment by the university, to institute to company. A key value- adding component is the facility for industrial researchers, identifying a demand for more fundamental studies, to choose to undertake research or move into the

1 http://www.fraunhofer.de/en/ research institute later in their careers. In this case, the relative proximity of the institutes to universities and businesses can be seen as an asset, as there is less disruption of personal circumstances resulting from such moves.

• Financing

The funding for individual institutes is relatively stable, drawn from local and national grants and government and industry contracts. The themes of the institutes are selected and championed by the researchers and companies jointly to meet both local and national needs. To gain funding, institutes are selected and costed properly against formal business plans and programmes are able to be stopped if the progress is not in accordance with goals. If novel outcomes emerge from the work undertaken, they can be pursued flexibly by local agreement. Projects are not peer reviewed by academics to gain funding but by business people alongside technical specialists; output is not measured by academic quality or publications but by industry relevance and support.

• Market culture

Each institute is strongly coupled with a small number of market sectors and/or business communities. As such, industry needs and drivers are accommodated automatically and research developments are transferred to the user communities. This arrangement also has the benefit that knowledge of supply chains and market cultures pervade the institutes. The institutes have been in place for several years, and the relative stability of the structure means that industry and business trust and rely on the Institutes.

In terms of how the model could be applied to the UK, there is a long-acknowledged ‘gap’ between the strength of research in universities and other institutions, and commercial applications within UK industry. The business-focused remit of the Fraunhofer Institutes is something that could be replicated in the UK to fill, at least parts of, this gap. However, for this to happen, it will be necessary to (a) determine which business sectors need such research support, and (b) what the scope is for this research to be co-funded in an appropriate way. Both of these decisions will need to be made following extensive consultation with both industry and academia.

However, it should be noted that there are many significant differences between the German and UK research ecosystems, ranging form the tax system to local geography, which must be understood and taken account of if such centres are to be of benefit to the UK. One important difference is that the German university sector is not nearly as research intensive as the UK system and the creation of new centres may have unintended detrimental impacts on this strength. An indirect effect of creating such Institutes may well be to put further pressure on the universities which use research contracts as alternative sources of funding. It will be important, in considering the Fraunhofer model in the UK, to determine such second order impacts on other research institutions.

The coalition government has recently announced2 that it will create UK analogues for the Fraunhofer institutes: ‘Technology and Innovation Centres (TICs), proposed and described by Hermann Hauser in his review3 earlier this year. These centres are

2 http://nds.coi.gov.uk/content/Detail.aspx?ReleaseID=416174&NewsAreaID=2 3 The Current and Future Role of Technology and Innovation Centres in the UK, a Report for the Department of Business, Innovation and Skills by Hermann Hauser.

expected to be allocated £250 million over a four-year period. This level of funding suggests that there will be around five new centres created, at least in the first instance. In contrast, the 59 Fraunhofer Institutes have an annual research budget of €1.6 billion; €1.3 billion of which is generated through contract research with both industry and government. The remainder of the budget is in the form of state grants. When considering the appropriate level of funding for the new UK centres, it should be remembered that one of the reasons that industry goes to universities for collaborative research in the UK is because they are relatively well-equipped. The costs of reproducing some of these facilities in the institutes should not be underestimated. Additionally, given the relatively small number of centres likely to be created, and the stated aim of the new TICs to support high-growth sectors where the UK has the potential to be a world player it is essential that there not be too much co-ordination, which would run the risk of stifling new ideas through the establishment of 'clubs' which have a vested interest in following a single path and fixing research at a single point in time.

Related to the funding allocated to each centre is clearly the size and sustainability of the centres. In the past, initiatives such as the Research Associations have suffered from being too small to survive in the longer term, being unable to fund research to renew their intellectual competitiveness which had knock-on effects on the industrial sectors they supported. Additionally, it should be emphasised that the success of the Fraunhofer Institutes in engaging with businesses was not instant.

2. Are there existing Fraunhofer-type research centres within the UK, and if so, are they effective

The UK has had in the past, and has currently, many successful research facilities which have tried to fill the gap between academic research and the commercial sectors. The coordinated nature of the Fraunhofer institutes, and also their direct industry focus, have not been defining features of current UK centres. What has now become the Harwell Campus has a strong history in developing technologies for commercialisation, and retains much of this expertise across broad fields. In the past, defence research centres such as the Royal Signals and Radar Establishment (RSRE) at Malvern have shown demonstrable result of developing technologies such as LCDs and semiconductors which were subsequently brought to the commercial market.

There are many newer excellent research centres across the UK, such as the Southampton ORC4 and the NaREC renewable energy centre in Blythe5, and, while these are not ‘Fraunhofer-like’, they, like many others could make a case for being ‘converted’ into TICs. Additionally, other models such as the Warwick Manufacturing Centre may come close to being an industry-focused centre, additionally some science parks, though it could be argued that theirs is a very different model.

3. What other models are there for research centres oriented toward applications and results?

Hermann Hauser’s review describes many of the current programmes operating around the world, such as the ETRI centres in South Korea and particularly the role http://www.bis.gov.uk/assets/biscore/innovation/docs/10-843-role-of-technology-innovation- centres-hauser-review.pdf 4 www.orc.soton.ac.uk 5 www.narec.co.uk

of DARPA in the US. Closer to home, the “Competence Centre” model which is being used in Northern Ireland and the Republic of Ireland, comprises collaborative centres tasked with performing industry-facing research and development. A slightly different approach that should not be neglected is that of the Rolls-Royce University Technology Centres6 which have shown considerable success in linking academic research with the demands of corporate development.

4. Whose role should it be to coordinate research in a UK-wide network of innovation centres?

For the TICs to succeed, they will need to be trusted by the business communities. To foster this, the centres should have strong business elements in any leadership structures, and there is a need for high-profile appointments, rather than secondments. Additionally, there is a need to have a clear idea of business sectors in the UK and their needs in terms of technology translation. The Technology Strategy Board has been suggested to operate the TICs, and we would agree that it is are well placed, both in terms of its own expertise, but also, perhaps more importantly, its ability to draw together figures from relevant industries and also its ability to work with the research councils.

In Germany there are other national and corporate labs in addition to the Fraunhofer institutes which have distinct roles and all work well together within the broader innovation ecosystem. Similarly, in the UK, there are several stand-alone and ’arm’s length’ research centres which may be able to work alongside TICs in the same way (though any refocusing of existing funding will undoubtedly have some impact). However, as mentioned previously, a significant difference between the German system and the UK version is the research strength of UK universities. The role of the TICs with respect to these must be carefully examined. While the briefs and main objectives of the two bodies will be different there may well be significant overlap in activity – or even on occasion with TIC based within a university itself -- and also conflict for public funding.

It should be remembered through any implementation of TICs that their success, and, more widely, a significant proportion of UK economic growth is ultimately predicated on the strength of the research base. The funding and governance of the TICs should not impact deleteriously university research and any new model should be considered in the whole.

Professor Marshall Stoneham FRS CPhys FInstP President

John Brindley Director, Membership and Business

Institute of Physics

09 December 2010

6 See, for example: http://www.shef.ac.uk/systemsutc/index.html

Written evidence submitted by Retail Asset and Deposit Products, Barclays Bank (TIC 85)

Following our conversation last week I have set out some thoughts on the financial challenges faced by SMEs in the technology sector. It is helpful to segment the evolution of these companies into three phases:

(1) proof of concept (2) commercialisation (3) profitability.

In stages (1) and (2) the risks of failure are high and the funding model remains an equity one. This equity is obtained from a number of areas including personal resources, friends and family, wealthy entrepreneurs and specialist tech and VC funds. The role for bank funding (i.e. loans and overdrafts) really only applies once the business moves into stage (3) and this is where Barclays continues to be very active.

For a bank to provide debt facilities it is important to see and buy in to sustainable and profitable cash flows into the medium term. This is where a banks judgement and competitive forces come into play. Where technology companies differ from other businesses is the intrinsic value placed on them. The real value lies in the IP embedded in the company but the value placed on this can vary significantly from one investor or bank to another.

Whilst technology start-ups and businesses will always face challenges getting their ideas commercialised and funded we continue to believe in this sector and look for ways to nurture growth. Some examples and ideas:

1. We work with most of the major tech based universities, directly or indirectly, to support business being spun out of academia. In the early stages we are prepared to offer free or discounted banking tariffs to ease pressures on cash flow at this critical time. We can also advise on foreign exchange rates and other factors that can impact a young business.

2. Enterprise finance guarantees. Last year the government sponsored a risk sharing model with the banks and this was successful in delivering more access to bank finance. We would welcome an extension of this scheme.

3. A new form of funding could be a government sponsored tech fund which could be used to part finance early stage tech businesses where bank funding could then also be pledged as certain hurdles were met. (Let's Discuss).

Finally, we are very supportive of working with the TSB and are already in dialogue with them.

Managing Director Barclays Business & Managing Director Retail Asset and Deposit Products

23 December 2010