1.  INTRODUCTION

  CEST is a charitable trust with the mission to identify new business opportunities for science and technology and to facilitate their realisation by bringing together decision makers from industry, academia and government to agree collaborative action. CEST is one third funded by Membership (its Members include: DTI, DoH, DETR, Environment Agency, WDA, IBM, Glaxo, BG, BNFL, Rolls-Royce, Pilkington as well as Leeds and De Montfort universities) and two thirds by collaborative programmes (with themes including: Managing the business risk of GMOs; New opportunities for science and technology based business in an ageing society; New aspects of supply chain efficiency built on distributed data; Promoting the markets for new sensor technology; and benchmarking needs and opportunities for knowledge management across industry). With a staff of 18 and a budget of approximately £1 million CEST acts as an "honest broker" at the interface between business and technology. It does not have vested interests (eg IPR or shareholders) and is a champion of "collaborative advantage" where organisations work together to realise business opportunities in the white space between traditional industries and business processes. From this perspective CEST actively seeks to stimulate new thinking and policies to promote the commercial uptake of research. Visit us on www.cest.org.uk.

2.  SUMMARY

  In its submission, CEST will touch on the following:

—  that in the portfolio of national research, from blue sky to near market, new groupings of stakeholders are needed to grasp and promote pre-competitive research—and bring it to market;

—  that communication of information which might affect investment decisions, between technology and market/financial communities, regarding innovation in the physical sciences is not very effective;

—  that Foresight needs to be expressed to target industry segments and their representative associations, particularly SMEs, in terms of everyday business benefits to which they can relate;

—  that many of the key themes highlighted by Foresight require a true multi-disciplinary approach, where, for example, the physical and engineering sciences operate alongside social sciences and medical research;

—  that as time pressures and speed of change increase and resources become scarcer the generation and dissemination of new knowledge needs to be explicitly recognised, valued, and optimised by beneficiaries; and

—  new processes of knowledge management will be needed to find and link research areas to improve the overall effectiveness and responsiveness of the research base.

3.  CLUSTERS AT THE BUSINESS/TECHNOLOGY INTERFACE SHOULD PROMOTE SECTORAL INNOVATION

  In CEST's view the part of the innovation gap which requires special attention now is that which potentially provides innovation to entire sectors of industry. Appendix 1 describes our view of the innovation landscape which leads to this opinion, emphasising the overwhelming importance of interaction in the generation of new ideas.

  4.  Mechanisms are in place to enable individual companies to access new ideas—however, the "winner takes all" effect of this means that overall impact on industries can often be detrimental.

  5.  In CEST's view clusters of companies—brought together by shared interest in issues or technologies and prepared to share the risks and opportunities associated with them—provide the best opportunity to stimulate sectoral innovation.

  6.  Even temporary clusters can support the interactions that lead to an important class of innovation (noting that innovation is the successful exploitation of a new idea). CEST strongly believes (and can draw on numerous examples) that by working together, companies which may well be considered to be competitors in the marketplace are potentially able to achieve benefits which would not be available to a single company in a "winner takes all" environment.

  7.  The research councils (and hence the Government) have typically focused their efforts on promoting generic research—directing almost all their resources at academia and assuming that an unseen but nonetheless present technology transfer process will result in cost effective transfer of benefit to industry.

  8.  CEST suggests that if the EPSRC (in concert with, for example, the DTI) were to stimulate and engage clusters of players closer to commercialisation it might be possible to promote the capture and exploitation of new ideas on a cross sectoral risk-sharing basis. It would be for the clusters themselves to decide where pre-competitive collaboration ended and competition began—and also to manage the IPR issues which emerge. From this emerges the idea of sectors becoming self-regulating—to avoid inefficient duplication of effort.

  9.  However, CEST also recognises that significant barriers need to be overcome to make this "collaborative advantage" real. The successful identification and assembly of clusters that are meaningful and useful is both difficult and infrequent. This is the market that intermediary bodies operate in—their skill in catalysing innovation creating clusters should be recognised and fostered.

  10.  These recommendations align with others made below.

11.  COMMUNICATION OF BUSINESS RISK

  With the exception of the pharmaceutical industry, CEST observes a general lack of value-adding communication between the financial and technology communities. Both sides vehemently deny their responsibility for this. In particular the financial community tends to argue that it does understand technology—but often chooses not to invest in it.

  12.  CEST suggests that other sectors of R&D terrain might learn important lessons from the level of understanding that the pharmaceutical industry and the financial community manage to share. This should cover the structured communication and sharing of information—for example "controlled release" of information regarding progress towards, and achievement of, research milestones the implications of which are understood by both parties.

  13.  We suggest that, whatever the financial arguments about non-technology investments being more understandable and therefore more attractive, it must be beneficial to the physical sciences and engineering community to communicate, in a more effective manner, with investment analysts and business in general, about the nature of the benefits and risks of novel applications.

  14.  CEST would like to see EPSRC liaise with appropriate professional bodies, financial institutions and trade associations to identify areas of research which would benefit most from such an enhanced communications approach. We believe that both software and electronics may be suitable candidates. The objective should be to increase the appetite for investment in technology ventures to a level experienced in the USA.

  15.  A simple embodiment of such a system might be the use of agreed terminology in company reports and press releases to describe the status of a specific project or to describe the mix in a company's R&D portfolio. In CEST's view such standardisation should be seen as a sectoral or national issue that can deliver benefit to both financial and technology communities.

16.  FORWARD WITH FORESIGHT

  The Foresight programme, which is now being promoted actively to industry, has delivered significant and well publicised benefits to large corporates—in particular regarding alignment of their research efforts with national and cross sectoral priorities. However, the challenge has been to deliver the programme and the process to SMEs, and there is little evidence to date that real progress has been achieved here. Typically these smaller companies have very short time frames for thinking strategically, if they do it at all. They also tend to look hard for immediate and tangible business benefits, before they involve themselves in planning for any future, that involves exploitation of Innovation and Transfer of Technology within the Engineering sector.

  17.  CEST suggests that it is vital to work with intermediary organisations such as Trade Associations and industrial bodies like the IOD (which represents many SME proprietors), and that the message about Foresight, which will be promoted now, during and after the next round of Foresight, must be founded firmly on tangible and near-term business benefits such as identification of future markets and products which such companies can grasp profitably.

  18.  This may require a different process for defining and developing the Foresight deliverables during the Foresight programme planned to start in 1999. Having worked extensively with smaller players CEST is aware of some of the factors which catch their attention (such as insight into significant industry players views of the future) and how to weave these into the Foresight process.

19.  A MULTI-DISCIPLINARY APPROACH TO RESEARCH FUNDING

  In addition to focusing Foresight, as an industry oriented programme of research using the above approach, CEST is of the view that the EPSRC could use such an inclusive multi-disciplinary methodology for guiding many of its own thematic research programmes.

  20.  CEST is of the opinion that several of the "big picture" issues highlighted by the Foresight process are most likely to be successfully tackled by a combination of disciplines across the social, physical and life sciences. The relative novelty of these issues results in the specific roles for individual disciplines and the nature of their successful interplay being as yet unclear.

  21.  Furthermore, CEST suggests that factors such as the social, environmental and political impact of scientific and technology innovation are inadequately considered when priorities for such innovation are being set. While remaining fundamentally supportive of curiosity-driven research, we feel that an improved understanding of how new areas of research might impact on society should develop in parallel with the enabling science.

  22.  Although some themes like EQUAL (promoting a fuller role in society for the elderly and disabled) are being promoted by central government, across all research councils, at present we observe little more than lip service being applied to the multi-disciplinary approach. In EPSRC's call last year for EQUAL projects in the Built Environment there was the specific requirement for a sponsor or proponent from the social/third age communities for physical sciences projects—however, the call was not able to accommodate projects where players from the social and physical sciences worked together to home in on appropriate solutions.

  23.  We would like to see a subset of EPSRC resources being focused on a better understanding of the likely uptake of its mainstream research projects and on the development of new themes in combination with other disciplines.

24.  THE ROLE OF KNOWLEDGE

25.  Valuing New Knowledge

  In recent years much effort has been expended in making organisations highly focused and cost-effective ("lean and mean"!). Processes that have not in the past been measured and valued (such as the generation of innovative ideas) have been rendered increasingly difficult as "thinking time" has been shaved.

  26.  The erosion of the ability to react innovatively to the emergence of opportunities and threats has the potential to adversely affect the UK's economic position. The process of innovation and the inspirations for innovation need to be explicitly recognised by UK companies, and sufficient space and time dedicated to them. An organisation should perhaps not pride itself on spending 10 per cent of its turnover on R&D, but rather aim for 15 per cent on processes which in general lead to innovation (including R&D, but also networking, forming partnerships and other joint ventures, participating in collaborative clubs and other clusters).

  27.  Government should act to encourage the explicit identification and measurement of and attribution of value to innovation processes. Possible steps could include:

—  publication of an innovation scoreboard which would be more useful than the current R&D scoreboard;

—  provision of grants to attend conferences (this would be a good way of indicating the perceived value of such activities);

—  promotion of virtual networking opportunities; and

—  tax breaks for spending on innovation fostering activities in general (this would send a powerful signal to the commercial world).

28.  Managing the Nation's Knowledge

  The research community is notorious for reinventing wheels. Poor communications have made it very difficult to ensure that initiatives are not unintentionally duplicated—either within a research sector or across sectoral boundaries.

  29.  Publications, databases, websites and information exchange exercises all help to act against this—however the complexity of rapidly developing subject matter and our difficulty in categorising it in universal terms makes the challenge significant.

  30.  CEST suggests that an (idealised) system where knowledge is input and drawn upon freely as it emerges would be in the interest of society as a whole. This, of course, argues in favour of a planned economy—rather than a free market where winner (with exclusive patent rights) takes all. One might argue that government through the organ of research councils is seeking to act more to the benefit of society and might think this way. There are, of course, risks that free market players might observe and benefit from such a position. We note with interest the "knowledge pool" concept being floated for Foresight 2000 and believe that similar underlying values could benefit the research community as a whole.

  31.  We suggest that the EPSRC might consider that an obligatory knowledge exchange for participants in its sponsored projects would improve its contribution to knowledge sharing at a national level. Such knowledge exchange plans should quickly be mirrored by other RCs in a manner which enables cross-referencing.

32.  CONCLUSION

  CEST believes that innovation has many origins—only one of which is new science—and that interaction between players of different outlook and discipline is an important element in the process. An area where this interaction is lacking is in research to benefit whole sectors of industry or markets—we believe that clusters of organisations are the most potent hosts for such innovation, but recognise that the management of this interaction presents challenges in itself. CEST would like to see the EPSRC becoming more involved with such clusters—including the financial community, trade associations and interest groups and participating in structured two-way communication to enhance the understanding of each others point of view, leading to improved flow and exploitation of ideas to the benefit of the UK as a whole.

33.  THE ORIGINS OF INNOVATION

  There is always a danger that debate about physics and engineering innovation in the UK is frustrated by outmoded views on its provenance and how it is best commercialised. This typically puts (British) academics at one end of the innovation channel and (foreign) companies at the other end generating profits. This view is summarised in the diagram below.

  34.  Of course, innovation and its subsequent exploitation do not work like this. Innovation is the successful application of new ideas, ideas which need not be academic in origin, and successful application which does not have to follow any pre-planned "hand-me-down" route.

  35.  In particular, CEST observes innovation frequently coming from interaction between players—for example between industry sectors, between different parts of a supply chain, between academics and scientists, and so on. This is illustrated below:

  36.  New ideas from engineering and physical sciences are important components of the web of interactions that underpin commercial innovation—but they are not "the whole story".

  37.  Innovation—defined as the generation of new ideas and their successful exploitation—depends on the quality and quantity of interactions—between nodes and within nodes on the network above.

  38.  Developing this theme further, CEST believes that there are a variety of attributes of environments which are particularly supportive of innovation. In general (although this is an area notoriously difficult to generalise), one can plot a graph of different types of innovation (as an idea moves towards successful exploitation in a specific company) against the type of organisation which is handling that innovation.

  39.  CEST has for many years suggested that in many cases an innovation gap exists—where innovation is stifled by lack of management interest or short termism before the benefits shine through. The diagram below tries to show in some more detail who is doing what and where the innovation gap is most relevant.

  40.  In CEST's view an important (and currently poorly covered in the UK—represented in the graph by the patchy shading in this sector) part of the "innovation landscape"—is that leading to sectoral innovations. By definition these involve a group of companies taking up an innovation to gain a shared benefit. In an age where such players are lean and mean the resources needed to seek and grasp opportunities which are beyond the horizons of individual companies are badly stretched. We believe that the most potent grouping to achieve progress in this situation is the use of clusters of organisations with a shared purpose. Such clusters might be already in place in trade associations or assembled to address a specific need—such as lobbying groups or groups to address specific issues. They may be temporary or permanent.

10 March 1998