INTRODUCTION

  AIRTO is one of the largest communities of independent Research and Technology Organisations (RTOs) in Europe. It embraces 45 companies which employ some 8,000 scientists and engineers with a combined annual turnover approaching £500 million.

SUMMARY

  1.  For the UK to prosper and attain enhanced social objectives—eg improved healthcare, better educational facilities etc—greater awareness must be achieved among management of the contribution of science, engineering and technology (SET). The issue is a long-standing cultural problem. It will be cured only by a long-term consistent policy led by government and focused through education. The White Paper "Realising our Potential" was an excellent start but it requires a policy for strategic continuity by all administrations.

  2.  Government schemes in support of innovation and technology transfer require comprehensive review. A new approach should be based on developing past best practice, eg PTP and Carrier Programmes. As funds are limited, focusing on a limited number of key issues will be critical to success. The role of intermediaries has been ignored in recent years, this requires reassessment.

  3.  Attempts to create demand-side drivers for schemes related to innovation and technology transfer are sound in principle but have not been implemented successfully. Creating a demand market for technology transfer leading to innovation is a complex subject. Exploring the mechanisms which will create a demand market for knowledge transfer should be a consultative priority for government. AIRTO has presented a paper on this subject to the Minister for Science, Energy and Industry.

  4.  Foresight is an essential strategic tool for government and industry, in pursuit of enhanced technology transfer and innovation which leads to improved competitiveness. Increased resources should be allocated to Foresight in the OST. Foresight should be used as the accountability measure for all government departmental industry support programmes. The mechanisms for Foresight implementation require further investigation, support and development. Choosing Foresight priorities, through expert consensus and OST leadership, will be essential if critical mass is to be attained in initiatives which change UK culture in industry as it relates to innovation and SET.

MEMORANDUM

1.  Company decisions on developing new products and processes

  The methodology of decision making related to new products and processes will vary widely depending on the sector in which the company operates, its size and infrastructure, the maturity of the business and the company culture. Attitudes will be influenced by the approach to risk and cost cutting versus innovative investment.

  The ESRC Centre for Research on Innovation and Competition[2] has revealed important variation in attitudes towards innovation between British owned companies and foreign owned companies resident in the UK. Many other references in the literature confirm that attitudinal postures towards risk influence strongly the decision making process. Notable contributions on this subject have been made by Dr P Ranganath Nayak and Dr John M Ketteringham of Arthur D Little in their book entitled "Breakthroughs" and a more recent contribution by Peter L Bernstein in his book "Against the Gods".

  Research at Templeton College Oxford has described entrepreneurial enterprise in the UK, but little of that enterprise is related to engineering and physical sciences based innovation. This reflects the continuing paucity in the UK of engineers and scientists exercising leadership roles in national strategy for manufacturing, for harnessing technology in the pursuit of wealth creation and for changing the UK culture—including that of government departments. Prime Minister Thatcher's administration readjusted the balance of power between organised labour and management. What it—and all administrations—have failed to achieve is filling the vacuum in management for technology leadership.

  Attempts by government departments to take a "promotional" approach to solving this problem, eg the Department of Enterprise campaign and the SET Week programmes, are superficial and will not resolve a deep-seated cultural impediment to commitment to innovation and technology transfer in industry.

  The recent difficulties which Foresight has experienced in penetrating the Boardroom is indicative of the problem. The solution must be sought and found in the education system. By definition, that solution will be long-term. Even if started today, it will not yield results earlier than 15-20 years hence. It should head the agenda for all administrations and all Parliamentarians.

  Without such commitment to a change in industry culture the UK will continue its long-term decline in wealth creation.

2.  Government schemes designed to promote collaboration

  Take up of research partnership with industry has become more difficult with industrial decentralisation, (smaller business units, reduced central R&D/engineering to act as receptors/translators). Much recent government policy has focused on links between industry and academia, with scant regard for intermediaries. There is a stark difference between the DTI and the Research Councils in commitment to new or existing initiatives for innovation funding (eg Faraday, Postgraduate Training Programme). DTI schemes with the purpose of nurturing partnerships (between a recipient company, an academic institution and an intermediary) appear to have been poorly planned, are unrealistic in incentive or dogged by interminable delays (eg Carrier Programme). Both the Postgraduate Training Programme (PTP) and the Carrier Programme have been spectacularly successful. Both exceeded all success criteria set for them. In spite of this success and the obvious way forward which they illustrate, the DTI has abandoned the Carrier concept and appears unable to give adequate resource support to the continuation and extension of the PTP.

  Government innovation and technology transfer support schemes—as manifest by the DTI programmes—seem to have shifted towards the concept of "Challenge Funding" and support to Business Links.

  At the outset of Business Links, AIRTO predicted they would be unable to make significant contribution to innovation and technology transfer. Business Links do provide useful service in upgrading low level business competences in SMEs. However, their contribution to the key issue of stimulating innovation and technology transfer in UK industry is minimal.

  The concept of Challenge Funding is sound in increasing the influence of the demand-side. However, when Challenge Funding is spread thin and wide without any strategic purpose, it fails to make effective use of taxpayers' money. This has been the case with some Challenge Funding. It should be remedied by fewer projects of larger size and consistently linked to Foresight priorities. All programmes aimed at supporting innovation and technology transfer—including participation in European Commission programmes—need intermediaries to formulate projects and to provide knowledge translation expertise between the parties. In recent years the need for such facilitation has been ignored in much DTI policy. Progress in technology transfer for the purpose of innovation will not be achieved until that failure is remedied.

  Appendix 2[3] and Appendix 3[4] of this Memorandum are AIRTO reports on the success of the Carrier Programme and the Postgraduate Training Programme.

3.  Creating a market for innovation and technology transfer

  Well managed companies recognise the contribution of innovation and technology transfer to profitability. Of their own volition they will utilise primary knowledge sources for technology transfer. However, many companies (large and medium sized) do not have this characteristic. Yet it is in the interests of the economy that such companies be encouraged to upgrade their performance. It is a market failure. This requires what AIRTO has described as "mission-driven change". It requires intervention to overcome market failure and to make a short-term contribution to culture change which increases the demand for inputs to action technology transfer. AIRTO has provided a report on this subject to the Minister for Science, Energy and Industry. It is attached as Appendix 4[5] to this Memorandum.

  The business support infrastructure to innovation and technology transfer in the UK has developed randomly. Most of the schemes introduced by government have their origins in a valid objective. Few have real measures of success based on the achievement of measurable national objectives that relate to wealth creation and competitiveness. Some have been postulated on a false hypothesis, particularly as it relates to the innovation process. There is a lack of coherence between schemes, both across the departments of government and sometimes within a single department. The case for a comprehensive review is overwhelming.

4.  Foresight

  From the outset AIRTO has supported Foresight. Foresight is the essential strategic tool through which to set objectives agreed by industry, the intermediate agencies (RTOs), academia and government. Foresight is the means by which government may be informed in developing policy on innovation and technology transfer. Also it is a key tool for the development of synergy between UK initiatives and the Framework Programmes of the European Commission, thus ensuring leverage in the Member States. AIRTO applauds the work of Minister John Battle in this area and the support given to Foresight by the President of the Board of Trade to increase its influence in all departments of government. AIRTO concurs with the view of the Parliamentary Office for Science and Technology (POST) on the subject of Foresight.

  The UK has a world-class science, engineering and technology (SET) base. The issue is how to steer the work of that SET base towards priority topics formulated through Foresight. At the same time mechanisms to achieve transfer of knowledge to companies from HEIs, both in the UK and worldwide, must be put in place. AIRTO suggests that the Carrier Programme, the PTP Programme, Faraday Partnerships and some of the previous programmes, which stimulated enterprise and partnerships, should be examined from which to design better programmes for the future.

  In the past, the DTI and other departments' programmes for business support to innovation and technology transfer have failed through over-prescription. In pursuit of accountability, sometimes bureaucracy has become more important than the result. The worst example was the "away-from-the-market" prescriptiveness of DTI programmes for industry collaborative research. Foresight and future programmes must not become a victim of such bureaucracy.

  Implementing Foresight themes and embedding new ideas in industry needs management by technology transfer agents. It is critical that the commitment of industry be won to the ongoing use of Foresight. The AIRTO recommendations for the continued development of Foresight, after its initial successes, are contained in the attached Appendix 4[6] which is the AIRTO recommendation to Minister Battle.

9 March 1998

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