Science and innovation framework 2004-2014: next steps consultation
22 Jun 2006
1. Introduction and Background Responding to the challenges laid down in the Science and Innovation Investment Framework 2004-2014, the regions are increasing business productivity through innovation and greater engagement with the knowledge base. RDAs have significantly increased spending on innovation, from a baseline of £240m pa in 2003-04 to an average spend of £379m pa over the current 3-year planning cycle, rising from £325m in 2005-06 to £418m in 2007-08 (14% of RDA spend). This high rate of growth, has been achieved by refocusing existing budgets from the single pot and through savings and efficiencies. The only additional devolved funding stream from SR 2004 is the Grants for R&D (£25m pa). The RDAs are also spending around · £600m pa on enterprise to support business development and growth and · £100m pa to support the skills needed for economic growth, and this spend also influences the science and innovation agenda. 2. Questions addressed The Science and innovation framework 2004-2014: next steps document seeks responses to questions in five areas. The RDA response focuses mainly on Chapter 2, “Maximising the impact of science on innovation” in how we can further develop the regional role in releasing the value, in increased business productivity and global competitiveness, from the government’s investment in the knowledge base, through more effective innovation and knowledge transfer. We address the following questions in detail: What are the barriers limiting greater business innovation and business-university collaboration in the regions, and what more can be done on a national and regional level to tackle these barriers effectively? What are best practice models for business-university collaboration? How can we encourage businesses to work with universities for the first time, perhaps by introducing short-term, low-cost mechanisms for business-university interactions? The RDAs share the government’s concerns expressed in Chapter 6 about progress on Improving the Supply of Scientists, which has a direct regional economic impact. RDAs are not core funders of education and skills, but do address market failures and support solutions which require local/regional engagement and more effective partnership between suppliers and business demand. 3. Maximising the impact of science on innovation 3.1 RDA Role The RDAs’ unique strengths in addressing the barriers to innovation and knowledge transfer are that RDA Boards and Science and Industry Councils are predominantly business-led and able to articulate the needs of business – a key market failure identified in the Lambert report – and are responsive to local and regional priorities, addressing social and economic challenges of both regeneration and innovation. These responses are informed by a 10 to 20 year Regional Economic Strategy developed through extensive regional consultation. Additionally RDAs: · Understand the strengths of regional businesses and the knowledge base, and identify with the advice of Science and Industry Councils, priority areas where RDA engagement can make a significant economic impact. · Provide the focus for SME involvement and investment. RDAs can provide the support needed to overcome the barriers to participating in innovation initiatives. · Catalyse and coordinate partnership working and collaboration between businesses, between universities, and between business and HEIs. RDAs, supported by the single pot mechanism, were established to develop and deliver business led interventions that integrate policy aims and avoid a narrow approach to specific areas of activity, for example, investment in incubator units can meet the policy aims of enterprise, innovation, skills and regeneration. Through simplification of business support there is much we already do to use existing funding streams more effectively, and more that can be done to coordinate national-regional support for innovation and knowledge transfer. Many of the societal and technological problems and challenges we face need businesses to find the solutions. As a business-led agency we therefore have a unique role, which complements that of the Technology Strategy Board, in promoting the UK’s knowledge economy, stimulating more open innovation and knowledge transfer through procurement and whole supply chains. RDA science and innovation priorities are driven both by the agreed new core output for collaboration between businesses and the knowledge base in response to the Lambert recommendations, implemented in 2005-06, and by an increased emphasis on innovation through encouraging the development of new products, processes and services. For example, during 2005-06 RDAs delivered over 3,000 new collaborations between businesses and the knowledge base. The “Strategy for Success” programme developed by the ONE Science & Industry Council has delivered over 1500 new business collaborations with the knowledge base since its inception, as well as creating more than 30 businesses, over 500 new jobs, and establishing 5 national business-focused research centres. 3.2 Barriers to innovation We should firstly recognise the need to take a much broader view of innovation than the development of new products driven by science and technology. If we are to achieve a globally competitive economy into the future, and we believe that innovation is a key driver, then we need to recognise that this will only be achieved by and through businesses raising their competitiveness. The most innovative and competitive companies are operating in a much more open and diffuse innovation regime than appears to be recognised by the 10-year framework. Businesses will predominantly work along value chains and these mostly involve suppliers, customers, competitors, and importantly, other organisations that can contribute value to them. Universities, or the knowledge base, are just one of these ‘other organisations’. Businesses do not necessarily fail to understand that our universities produce good science, but they need to see value propositions from this good science. R&D investment by business is not the only measure of success – the effectiveness of this investment is equally important. The Value Added scoreboard suggests that the UK can be quite effective in this respect and should further build on this effectiveness. Innovation is not just about new products. Innovation in services is an essential element of a competitive knowledge economy, while process innovation is important because it increases customer value. The Manufacturing Advisory Service (MAS) drives process innovation very effectively and companies very quickly appreciate the benefits. Design innovation also adds customer value. The main barriers limiting greater business innovation and business-university collaboration in the regions are: a) Many more businesses, particularly SMEs need to be more effectively engaged in innovation and knowledge transfer, as current national support mechanisms do not reach these businesses effectively. Nationally the government is involved with some 5,000 or so businesses, we need to engage at least ten times as many businesses to have more impact. RDAs are engaged with up to 100,000 innovation-interested firms, through their business support delivery arms, and can broker partnerships through their various business networks to raise innovation awareness and encourage greater business productivity through innovation. To encourage a change in mindset from a business perspective, we need an approach to innovation support which includes a raft of flexible regional and national solutions, for example through a. Voucher systems and demand-led brokering at a regional level, and b. Greater use at a national level of getting some of the taxes paid by businesses taxes into pump priming innovation. Government should simplify the R&D Tax Credit and make it more open to a wider definition of innovation. b) The £100+ billion public procurement process has great potential to drive forward innovation but not enough SMEs are involved. While government is responsible for the direction of public expenditure, there is a need to engage the RDAs to develop and support regional and pan-regional supply chain networks, to build robust consortia and “de-risk” bids for public contracts. Policy needs to be developed at the national level and implemented by all tiers of government (this is being addressed through Lord Sainsbury’s pilot programme). Regions should advise on this process, then organise business support to make sure that businesses take advantage of the new policy. This will ensure that public procurement drives innovation through far higher levels of SME engagement. c) Support for business innovation is complex, confusing and bureaucratic with national, EU and regional products. These are often supply driven and of low visibility and impact. Small and micro firms may be unaware of support available and currently interventions (e.g. KTPs) may be too expensive or inflexible to stimulate innovation or collaboration with the knowledge base. On the other hand few of the current support mechanisms for start-ups and large businesses target medium sized businesses, yet these businesses have the potential to make marked and rapid productivity gains, being small enough to identify new product areas but experienced enough in product development to allow rapid implementation. Innovation support measures, mostly targeting SMEs, include regional support and national and EU supply driven products such as Knowledge Transfer Partnerships, Innovation Relay Centres, National Contact Points, Technology Translators, and International Technology Promoters. Most businesses have little awareness of these products, or what would be most appropriate to help them drive innovation forward. RDA support for innovation has developed through a range of different regional products, including demand-led ones based on international good practice. There is a clear need, for a. Innovation support services which are flexible and demand-led, brokering and project managing solutions to suit individual businesses, and with minimal bureaucratic overhead. b. Pan-regional coordination of regional support to further share good practice. c. Integration or coordination of national and EU support resulting in simplification of the innovation support offer to business at a regional level. RDAs can extend their experience of simplification in enterprise support (led by emda and SEEDA) to innovation support services focusing on fewer, more flexible, initiatives that will be attractive to business and provide greater potential for change. For small and micro firms RDAs are able to be more responsive operating through small scale interventions (e.g. “mini-KTPs”, graduate placement programmes), identifying and encouraging business participation through RDA-supported sectors, clusters supply chains and knowledge networks. RDAs can best identify and support those medium sized businesses which can benefit from support to make significant economic impacts, focusing on regional priority emerging technologies, identified with the advice of their science and industry councils. d) The knowledge base, including universities, finds it difficult to engage efficiently with smaller business, while businesses need help in articulating their needs from the knowledge base, and developing new collaborative relationships. We recognise that HEIF and the PSRE Innovation Funds have done much to change the culture of the knowledge base in being more aware of and more responsive to the needs of the knowledge base. It is important that these developments are encouraged to align closely at a regional level with the RES. There is significant progress in increasing the spin-out and licensing activity often with RDA co-support. However more needs to be done in changing culture, including a. Stronger emphasis on support for existing businesses. b. Recognition that innovation is much wider than science and technology c. Collaboration between universities to provide a wider and more coherent offer to business. d. Encouraging more non-research intensive (RI) universities to develop innovation and regional engagement as a core ambition. RDAs through understanding the needs of smaller businesses and the strengths of the knowledge base, can broker more effective collaborations. (Examples include the LTN Business Fellows scheme, the YF/ONE centres of industrial excellence / collaboration.) The pilot HEFCE initiative for third stream funding as a second stream has the potential to encourage greater innovation and regional roles for non-RI universities. e) We lack the world class high level skills base needed to reach the 10-year framework targets. This is of particular concern for larger multi-national businesses that can move R&D to competing global economies. In spite of the plethora of sub-critical initiatives highlighted by the STEM (science, technology, engineering and mathematics) mapping review there are still large gaps e.g. a. Providing far better information to 11-14 year-olds about employment in STEM businesses to raise career aspirations, b. Business engagement in curriculum development for 14-19 year olds and degree programmes, and c. Encouraging more STEM graduates to take up STEM-related employment, especially in SMEs While there are major national programmes underway as the Next Steps document highlights in Section 6, there are still gaps in support from national funding agencies, including LSCs and HEFCE, in the high level operational skills needs for innovation, including leadership and management skills, entrepreneurship, and technical skills. There is an additional need to provide support, coordination and encouragement to business at both regional and local levels. RDAs are piloting regional STEM support centres to coordinate and simplify the professional development and outreach roles of the regional Science Learning Centre and regional SETpoints, and to work with partner organisations to identify and support the most effective interventions of critical mass. Much of the business engagement is at sub-regional level, and RDAs can encourage both sub-regional engagement of key partners and to share effective practice and regional and pan-regional levels. There is scope for greater pan-regional and national coordination to deliver the most effective support, in developing world class management and leadership programmes to develop the capacity to drive innovation forward, since there is a gap in provision, and are encouraging wider dissemination of entrepreneurship skills in schools, colleges and universities (including through current partnership with the National Council for Graduate Entrepreneurship). f) The government investment of £3.4bn annually in the science base is potentially an important driver of business innovation. The mechanisms by which we can release value from investment in the knowledge base as product, process and service development, leveraging increased business R&D and innovation in a wide range of businesses, are poorly understood. There is a need to find ways to encourage businesses and the knowledge base to work together more effectively on major challenges which lead to globally competitive UK product development, and also a shortage of development facilities where business and the knowledge base can work together to take product development beyond the formal research stage to high levels of technology readiness. Government and regional investment needs to be more effectively aligned, and target a wider range of business, and could merit further investment to yield substantial progress towards delivering the aims of the 10-year framework. The work of the Technology Strategy Board (TSB) has a key role to play in developing the mechanisms to address this challenge. To ensure that the TSB is identified closely with encouraging more innovation in a wider range of business, the TSB could benefit from being an “Arms Length Body” to emphasise its business-led role. At present however the TSB has a ‘large business’ orientation, and could usefully take advice from a wider range of businesses including from the SME sector. RDAs though the advice of their science and industry councils, and their engagement with a much wider range of businesses have much to offer and a greater sense of co-ownership could be developed through joint RDA (and DA) - DTI co-management of the TSB. This would generate greater alignment and coordination of regional and national support to deliver the Technology Strategy and ensure opportunities for national/regional synergies are maximised. For example RDAs find it easier to provide capital support, complementing DTI revenue support, and can nurture the networks between universities and SMES regionally and pan-regionally. This new body could secure improved value for money, better delivery to business, and better national/regional integration of investment decision than at present. To release the value from this knowledge, any serious additional resources to help meet the high level aspirations of increasing BERD, new products and services, and economically effective business and knowledge base collaboration, should be targeted at stimulating business R&D through the regions, with a specific emphasis on getting new and innovative products to global market more quickly to stay ahead of international competition. The DTI and the R/DAs operating through the TSB should also oversee, in collaboration with other partners, including the research councils and HEFCE, the coherent development of: a. A suite of Innovation Platforms Innovation Platforms will address major societal or commercial challenges. There are many areas where RDA and national priorities can be more closely aligned to greater impact on the speed of business development with the potential to develop new products with international £bn markets. These task forces will involve those regions with relevant technology priorities and will help the UK develop a lead in new technologies. These major challenges, e.g. telemedicine and intelligent infrastructure, will bring together many technologies including healthcare, security, communications, ICT and advanced materials. b. A national – regional network of centres to support industrial collaboration with the knowledge base. The demise of corporate laboratories, with many businesses losing their in-house research facilities limits the ability of businesses to innovate through R&D, while newer businesses cannot afford well-found laboratories. Recognition of this problem has resulted in several national and regional initiatives aimed at developing physical locations where academics and industrial researchers can work together with a specific technological focus. Regional examples include Centres of Industrial Collaboration / Excellence (ONE and YF), Biocity (Nottingham), the BAE Systems / Loughborough University Systems Engineering Innovation Centre, Daresbury and Harwell Science and Innovation Campuses, and Composite Structures Development Centre in Bristol, while national initiatives include the EPSRC Integrated Knowledge Centres (two to be announced). HEFCE is also willing to support greater university collaboration through these centres or ‘Innovation Hubs’. This approach is however, unco-ordinated, and leads to sub-optimal developments, which does not reflect local strengths and opportunities, or collectively reflect the overall UK-wide technological opportunities. There is a danger that we not achieve full impact without a coordinated approach which ensures that these centres are located in areas of appropriate business and academic strengths. A more strategic national-regional partnership approach to such ‘Innovation Hubs’ would build on regional/local business and knowledge base strengths in the context of a national overview of the collective strengths and priority technology foci for such centres. A national network of perhaps 30-40 such centres developed, adopting some of the best national and international practice (e.g. Technium in Helsinki and aspects of the Fraunhofer network), will provide collectively both international excellence and extensive competitive business-university engagement. g) National and regional networks for business support are not coordinated. National networks such as KTNs are sector driven and “top-down”, and do not engage with the locally and regionally driven clusters and business support networks developed by RDAs. To engage more small businesses in national innovation we need much closer integration and engagement between regional and national networks, coordinated by the “arms length TSB”. Closer and more effective pan-regional working as well as regional-national partnership is also needed, since knowledge transfer does not stop at regional boundaries, but can be effectively aggregated by building on regional strengths. Significant and successful examples are: (i) The UK Micro and Nano Technology Network. The Network’s goal has been to drive the commercial use of micro and nanotechnology for the economic benefit of the UK. Through the cooperation of all of the RDAs and DAs it has had a remit to engage on a strategic national basis.Through working together the RDAs and DAs have ensured that no unnecessary duplication has occurred and that as wide a range of commercial activity has been covered that is possible for the UK. (ii) The National Composites Network is pulling together the activities and expertise spread across the UK and focusing them to a common goal. It will feed back into industry and apply the capability developed to and across several industrial sectors. The Regions are investing £14 million, the DTI £5m and Industry is investing £30 million. The NCN connects 5 regionally located facilities focussed on developing and maintaining the UK’s competitive edge in this field. (iii) ASTRAEA (Autonomous Systems Technology Related Airborne Evaluation & Assessment) is a national programme that focuses on the technologies, systems, facilities and procedures that will allow autonomous vehicles to operate safely and routinely in the UK. This is an example of how we can achieve real, tangible wins for business which could only have occurred through business, regions, and national government working jointly to each of their strengths. h) The 10-year framework targets need large initiatives of more critical mass, which bring a much wider public and private engagement in promoting innovation and science, including through science cities. Six regions are developing science cities – Birmingham, Bristol, Manchester, Newcastle, Nottingham and York. The other three regions are working to develop the Greater South East as an international science city region. Science cities can act as test beds for policy and initiatives in regions where they do exist. Science Cities are geared up to new approaches, and can be the testbeds for innovation and growth. A wide range of complementary actions will work together to build the confidence and strength of a Science City. Action on a range of fronts, with different partners, is required to create the effective culture of a successful Science City. It is this developing culture of having a strong tangible focus on the exploitation of science and technology which raises the game and delivers added-value. A more detailed consultation response is being provided separately, focusing on the role of Science Cities in delivering the 10 year framework. 3.2 Best practice models for promoting business-university collaboration Many RDA and national products encourage deep engagements between businesses and universities, but even quite short interventions can make an impact. RDAs encourage many new businesses to work with universities for the first time, including through short-term, easy access, low-cost and low risk mechanisms for business-university interactions. Examples include: a) Brokering schemes can be very cost-effective ways of bringing businesses and universities together. The London Technology Network regional technology brokers scheme for example, which is used by two RDAs, trains university Business Fellows to identify and support business responsive academics. Through regular highly focused, by invitation, brokering sector focused events, the scheme: · increases the capacity and capability of universities to engage with companies · stimulates innovation demand from companies (of all sizes and most sectors) · brings “innovation supply” and “innovation demand” together to increase economic outputs. University capacity is enhanced by the recruitment and training of research scientists to assist their departmental colleagues in developing a better understanding of when and how to engage with industry. Leverage on investment is 10+ to 1, and the scheme generates a high percentage of successful research, consultancy, training, testing/validation, licensing etc deals per negotiation. b) Through identifying and promoting university strengths to business, regionally, nationally and internationally, the RDAs play an increasing role in encouraging knowledge transfer. Examples include SEEDA’s Research Excellence directory http://www.reddirectory.org/. This promotes those university strengths with potential economic impact and has been well received in the region and overseas. EEDA’s i-10 sector networks http://www.i10.org.uk/help academics in the ten universities in the region and businesses engage more easily and work together more. The Yorkshire Forward programme KnowledgeRICH www.knowledgerich.com is a free service, that is helping to give businesses a competitive edge through innovation, connecting industry with world-leading expertise and facilities through a single point of access that can help them gain, and sustain, real commercial advantage and growth, including: · Reducing time, money and risk · Developing new, better and more efficient products and services · Helping to prepare for future challenges and opportunities · Identifying new markets & generating new ideas c) Networks, are supported and facilitated by all RDAs. These are very cost-effective ways of bringing businesses and universities together, and encouraging more collaborative activity. Such sector based knowledge networks can be effective in nurturing collaborative R&D proposals e.g. for the Technology Strategy Programme or Framework Programme 7. Universities, with support from RDAs’ Networks can also develop very successful Learning Networks (e.g. ProfitNET, led by the University of Brighton) to provide businesses with a hands-on practical approach to growing better businesses. This helps entrepreneurs and company directors to share their knowledge and expertise in order to establish new business practices that can push their businesses forward, making them much more competitive and profitable. Lifelong Learning Networks, supported by HEFCE and LSCs can also provide suitable forums for collective engagement with business. d) Innovation advice and support informed at a regional level by an understanding of the strengths and responsiveness of universities, can lead to efficient brokering of partnerships through targeted interventions, allowing SMEs access to the right university for their needs, and simplifying aspirations by universities to target SMEs. e) Funds to support university spin-outs are widely provided by RDAs (e.g. AWM Spinner), and RDAs have enhanced the HEIF funds available for developing new ideas through the proof of concept phase (e.g. SEPOC South East proof of concept funding). This combination of RDA and HEIF funds is helping to transform the culture in universities where a wide variety of funding and mentoring support has become available within the last few years. f) Mini-Knowledge Transfer Partnerships (mini-KTPs). KTPs are well established as a highly effective and evaluated knowledge transfer product, and several RDAs support KTPs, and also Industrial CASE awards which can also foster deep collaborations. However micro and small businesses can find that a commitment of ca £20-40K over 1-3 years for KTP and CASE is a too expensive and long term commitment. As a result shorter term, (3-12 month) lower cost programmes are being piloted by RDAs and by AHRC. g) Proof of Concept for Knowledge Transfer (PoCKeT) is a SEEDA “voucher” scheme to stimulate collaborative research between the business and academic communities at the proof of concept stage of development. The fund addresses an area of market failure due to the high levels of risk inherent to this early stage which has largely prohibited private sector activity and makes awards of up to £30,000 to SMEs with the potential for high growth. A low level of bureaucracy (including the use of standard Lambert IP agreements to speed up contracting) allows rapid and efficient response to customer needs, which has been highlighted by business as a benefit of the fund. Collaboration can be cross-regional with the academic partner in a different region. EPSRC is considering developing a PoCKeT scheme and LDA runs a similar scheme (Jump Start) h) Shell Technology Enterprise Programme (STEP) comprising 6-8 week student placement awards are also supported by several RDAs, as these short intervention can have a substantial effect on the productivity of SMEs. With a well managed scheme, these interventions can be very good value at ca £2k each, and the profile of this scheme should be raised to stimulate more businesses and universities to engage. SEEDA is currently piloting an adaptation of the STEP programme to focus specifically on innovation within companies. i) Several RDAs run successful graduate placement schemes (e.g. emda’s Graduate to Business programme. These schemes are successful at placing and supporting graduates into SMEs which may not otherwise have employed graduates. Such placements can substantially impact on company performance within a year. They also improve company management capabilities to manage product/process development. j) Quickmark is a SWRDA initial market assessment of a new product process or service. It is exploratory, qualitative desk research. It searches readily available databases and information sources. Research is conducted by post-graduate students recruited from the talented pool of the participating universities, and is supervised by professional University staff. k) Curriculum development through employer-led degrees, brokered by RDAs can bring together several businesses and universities to develop highly innovative courses and curricula appropriate to business needs. An example is the Information Technology Management degree, facilitated by an RDA and e-Skills UK, with encouragement from several companies including IBM, Dell, BT, Lehman Brothers, IBM and HP. The course is now delivered in universities in three regions with a much wider roll-out planned, and engagement of a wider group of businesses including SMEs. Universities can also provide more responsive training modules for businesses which offer ‘real life’ solutions to everyday business need, while providing students with real life experiences from people in business, addressing the need for HEI courses to have more relevance to the world of work. ANNEX - Selected Case Studies detailing RDA and pan-RDA support for Innovation and Knowledge Transfer are available.