Take a broader economic view on procurement, give the Technology Strategy Board more money, promote clusters and provide SMEs with customers, not grants, a panel of aerospace experts tells a government committee tasked with helping commercialise products from ideas.
Experts from the aerospace and defence industry have given a government Science and Technology Committee a range of recommendations on how to “bridge the valley of death” in getting products from universities to market.
The hearing took place on Monday at the Advanced Manufacturing Research Centre with Boeing (AMRC) near Rotherham, a complex of buildings which has exemplified how academic ideas can be commercialised since its inception in the early 2000s.
The role of SMEs in innovative cluster groups
Industry panellists told the Select Committee, chaired by Andrew Miller MP for Ellesmere Port and Neston, that for companies, especially SMEs, to grow, collaborations and clusters such as the AMRC needed to be encouraged.
It was felt that parts of the ‘innovation landscape’ were under-funded, but more important than grants were visibility and orders, which SMEs could see more clearly in a market structure supported by big international programmes, like Boeing’s with the AMRC.
Sir John Chisholm, who privatised defence research firm Qinetiq and founded a venture capitalist company, said that science and engineering had very different needs in the economy. To promote growth in engineering, he said, “you need to pull all the elements together into an ecosystem, including OEMs, SMEs, science, money – fully integrated.”
The Committee asked how SMEs can be ‘pulled’ into these networks to help commercialise ideas.
All the panellists advocated the power of clusters to assist SMEs. Andrew Miller referenced the Crick Centre, funded by the Wellcome Trust, which has helped pharmaceutical SMEs.
Dr Ruth Mallors, director of the Aerospace, Aviation and Defence KTN, said the Harwell Science Park in Oxfordshire had attracted big foreign companies to locate there, which had helped smaller businesses on the campus, and had spawned new companies in space, aerospace and defence.
The AMRC was lauded as a good demonstration of how this can work. After a long gestation period, SMEs are benefiting from the Centre’s work. Professor Keith Hayward, head of research at the Royal Aeronautical Society said with the Boeing and Rolls-Royce structure of the AMRC, “SMEs can see their return on investment in becoming involved. It’s a question of the risk profile, which goes down when a large systems integrator is involved.”
Prof Hayward warned of the potential risks with giving investment directly into big programmes run by global companies, where sometimes the SMEs do not benefit. But in principle these ‘integrated partnerships’, exemplified by the AMRC’s partner structure, worked very well he said.
Rees Ward said the Aerospace Growth Partnership had proved to be a very effective partnership, helping the UK to realise 17% of the value of the global aerospace and defence industries.
Blue skies versus applied science
The Committee asked whether pure, empirical research was less important than research designed explicitly for commercialisation.
Sir John Chisholm said that the evidence showed that you get the best value from research “when you give researchers full control to solve research problems themselves, especially when the research has an identifiable application.” He added that such research needs “avenues” to help draw them into the real world and there was a bigger role for companies in this.
Rees Ward CBE, chief executive of ADS the defence and aerospace trade group, said that one competition organised by Technology Strategy Board was 20x oversubscribed. The evidence here, he said, “suggests there is just not enough funding for high tech projects that companies need. It is not a zero sum game.”
One panellist said the Technology Strategy Board was not properly funded, given the spectrum of sectors it needs to serve. He said the TSB needed to focus more on projects at higher Technology Readiness Levels to pull these more commercially viable decisions through to market.
Ruth Mallors said the Defence Science and Technology Laboratory, received funding of about £400m a year for non-nuclear defence research programmes (about 60% of this is disseminated to industry and academia). In contrast, the TSB receives a similar amount but has to fund programmes in multiple sectors, from digital infrastructure and ICT to high value manufacturing and healthcare.
She added that the marketplace for funding for SMEs was confused and needed simplifying. “The KTP (Knowledge Transfer Partnership) should be the single measure of success for making funding decisions.”
The TSB funds sectors outside manufacturing and engineering. This was important, added Dr Mallors, but she suggested the digital industries and biotech are often more attractive to venture capitalists while longer term engineering-based sectors had greater need for money, with arguably as much return on investment to offer.
The panel referred to models used in other countries. The Israeli model was highlighted as effective because whatever the private sector put in to help develop a technology – especially for the US military – the Israeli Government would match fund.
Sir John Chisholm said the Israeli model worked because there was an identifiable and reliable market, the US Armed Forces. He emphasised that customers are worth far more than (private or public) investment for growing SMEs. “Customer power is worth 10x investors’ power,” he said.
Henner Wapenhans, head of technology strategy at Rolls-Royce, endorsed having direct access to government support – in the form of facilities – where the case for growth and a supply chain was evident. “We [companies in the UK] have competition from countries with direct access to government facilities which we don’t have in the UK. The [gas turbine] testing facility in Batternburg outside Berlin for example was funded through the German government.”
Dr Wapenhams went further on government involvement, advocating the Joint Technology Initiatives. “We see a big advantage in having a construct here, with for example, a 10-year development programme such as renewable energy technology. Under JRI, we provide £5 million per year which is matched by the Government, giving us the confidence to do this research properly. We hope the Catapult [TSB devised network of technology innovation centres] will work in the same way.”
Problems in how defence programmes are articulated to industry were inevitably debated, with comparisons drawn about the nationalism of some countries’ procurement strategies.
In the US, said Sir John Chisholm, “the US Government will identify a specific need and will look to industry to find a company to do this work. This pulls products and other companies with it.”
Prof Keith Hayward pointed out that in the UK defence industry it is “often somebody else’s government who’s doing the buying. The UK Ministry of Defence is still a very important buyer,” he said, but he had concerns about its procurement strategy.
Rees Ward of ADS articulated this further, referencing the the MoD’s recent procurement policy of focusing on purchasing off-the-shelf equipment. “It really plays to a narrow notion of value for money. There is a much broader view here for UK plc that should be taken into account, that allows for job creation, the cost of jobseekers’ allowance, tax receipts and wealth creation.”
Other panellists endorsed the view that the MoD tends to keep itself too much at arm’s length in procurement decisions.
When asked is the Government’s view on an industrial strategy too risk averse, Keith Hayward said: “The MoD’s view on how it selects [military] programmes needs to have a broader understanding of how it affects national welfare.”
Sir John Chisholm added that it the Government must attempt to assess the success or failure of funded projects with more analysis before stopping support. “Investment can be paid off through the economy, outside the core project. The Government may decide a project has failed. The project itself may be deemed to fail but the innovation it spawned is now spread out into the local economy. Bristol’s benefit from the aerospace cluster, for example.”
After the hearing committee chair Andrew Miller MP said the panels’ comments had galvanised his view of the importance of clusters, especially in the mould of the Daresbury Research Centre, a cluster of high technology SMEs. He said he understood the greater importance of orders for SMEs than direct investment. Academia and industry were working more closely across the country he said, but the missing piece in “bridging the valley of death” was still money.
He expected that, in the vein of the Fraunhofer centres model in Germany, places like the AMRC with Boeing would provide investors with much more confidence to back SMEs involved with the centres.
The meeting was the fourth in a series of five Science and Technology Committee hearings in the ‘Bridging the valley of death’ series. Full transcripts of each meeting can be found on the www.parliament.uk website 4-5 days after each meeting.