Insights into UK manufacturing: Fraunhofer Friday

Posted on 19 Jul 2013 by The Manufacturer

Felicity Burch, EEF economist, blogs on her visit to a Fraunhofer Institute in Berlin and what she learnt from the trip.

I recently visited a Fraunhofer Institute in Berlin to see what the UK could learn from these centres. The Institute I visited is one of 66 Fraunhofer Institutes in Germany, which focus on applied research/innovation (this is different from ‘basic research’ of the type typically conducted in universities as it has more of a commercial focus).

The Fraunhofer Institute for Production Systems and Design Technology

There are currently 66 centres with around 22,000 staff, the majority of whom are qualified scientists or engineers, the annual research volume is around €2bn. The institutes have cutting-edge research and manufacturing equipment and are usually based on or near university campuses. They share researchers with universities and engage in research projects with business.

Why is this relevant to the UK?

The UK has traditionally excelled at basic research, but our performance when it comes to innovation has not always been as strong. The government has recognised this, and offers a range of support in this area. This includes the recent establishment of a network of Catapult centres, inspired by the Fraunhofer network.

As access to expertise and facilities are key barriers for companies when it comes to innovation, the Catapult centres are well-placed to help. It is encouraging that the government committed to additional funding for the centres in the 2015-16 spending round.

Nonetheless, as the network is new and still developing, it is important that it evolves in a way that delivers both valuable services for companies and value for money for taxpayers. Over the next couple of weeks I will be looking at some of the lessons the UK could learn from the Fraunhofer network.

Lesson one: engaging companies

If a Catapult centre is going to be successful, it’s going to need to engage companies. The initial signs from the seven High Value Manufacturing Catapult centres are encouraging, with some centres nearing capacity already. However, to date many of the Catapult centres have found it easier to engage with larger companies. This is an issue, because although companies of all sizes face similar barriers to innovation, smaller companies are likely to face these more acutely.

Looking at this from a Catapult centre’s perspective it costs just about as much to engage with a large company as it does with a smaller company, but there is likely to be much higher revenue from a large company. Large companies are also often able to donate equipment and other assets to the centres, making them important and valuable partners, especially as the centres seeks to develop early on.

Thinking about SMEs, they are likely to have lower levels of awareness of the Catapult centres (lower awareness amongst smaller companies tends to be a problem with all forms of innovation support). Cost is also a particular issue for smaller businesses. The cost of membership of a centre is roughly equivalent to that of hiring an engineer: quite a trade-off for a small company.

In Germany, industry as a whole has a high level of awareness of the Fraunhofer network, which helps with engagement. They also have simple ways of accessing the network. A company can engage with a Fraunhofer Institute in the following ways:

  • Approaching an individual institute
  • Contacting the Fraunhofer network HQ for advice
  • Calling a special central hotline

Despite this, it is worth noting that even for the Fraunhofer Institutes awareness is higher amongst large companies and companies that have done business with the one of the institutes in the Fraunhofer network before.

However, they see SME engagement as important for several reasons:

  • The institutes are incentivised to work with SMEs as a proportion of their funding is contingent on SME engagement
  • The institutes do not want to be over-reliant on a handful of large companies, as this might be unsustainable in the long-term
  • The institutes want to retain control of their research agendas so are keen to avoid one or two large companies having too much influence

As a result they do a range of outreach including:

  • Open days and 2-day workshops for businesses in the local area
  • Placing articles in national, local and trade press detailing interesting projects and collaborations
  • First engagement with an SME is usually a kick-start entry-level project so the company can understand how the Fraunhofer model works.

Policy thoughts

It is worth noting that engaging with smaller companies is an issue, even for an established network such as the Fraunhofer Institutes. However, the fact that the institutes are financially motivated to work with SMEs does help encourage outreach activities.

As the UK’s network of Catapult centres beds in, it makes sense that funding is not reliant on engaging with companies of particular sizes, especially as large companies have a lot of expertise and equipment to bring to the table, but longer term the government may wish to consider metrics or incentives that encourage Catapult centres to engage with SMEs.

In the next couple of weeks Felicity will look at other areas where we could learn from the German model such as Intellectual Property Protection and Measuring Success

The original blog can be found on the EEF website here.