1.  The Economic and Social Research Council is the UK's leading research and training agency addressing economic and social concerns. Among its research portfolio are a series of major investments addressing the crucial role of innovation in sustaining the creation of wealth and the quality of life. One such is the £3.5 million "Innovation Programme" which is concerned with the role of innovative management in the achievement of sustained improvement in the performance of public and private sector organisations and businesses. In particular it focuses on the human and organisational conditions that contribute to this, and a feature of the programme is the close collaboration between academics and "practitioners", including engineering and physical sciences based companies. The academics involved also cover a range of disciplines including engineering.

  2.  This short memorandum wishes to draw the attention of the Committee to the experience of the programme which is demonstrating very clearly that some of the key business processes involved in the exploitation of science and technology by engineering and physics based companies are not peculiar to them but are common across all business sectors and size of company. These relate particularly to the institution of organisational structures and people management policies which stimulate and sustain a supportive climate for innovation. There is, therefore, much to be gained by taking a much broader view of innovation in engineering and physics based companies than is implicit in the Committee's terms of reference, and the Committee is recommended also to refer to the experience of other sectors in tackling these analogous and core processes.

  3.  As an illustration of the importance of cross-fertilisation, a few relevant examples from the experience thrown up by the Innovation Programme are now described.

  4.  A company falling very much within the Committee's interest is Pilkington Optronics, a leading high tech company in the defence sector which is making a major investment in new organisational processes to support an innovative, customer-oriented, production process. A multidisciplinary research team from Lancaster University undertook an analysis of the introduction of new approaches to manufacturing, a study of the problems of introducing and integrating new specialisms into the organisation, and on-line observation of the work of cross-disciplinary design teams. The study suggested that the management of the capture and flow of knowledge within project teams, between them, and in the context of overall company strategy and market positioning are key processes. Assumptions that organisations can be managed like machinery are unlikely to help in complex situations such as those of companies like Pilkington Optronics. It is important for employees in such organisations to be able to engage in learning cycles in which they can question, consider, communicate, model, improvise and reconstruct ideas, and that such learning is properly integrated into organisational activities. The design of the project and the testing of ideas emerging as it proceeded benefited considerably from the experience of a group of other interested companies including the utilities and chemistry based firms.

  5.  Also in the knowledge management area, researchers from UMIST looked at how this was done in R&D functions associated with a multi-sectoral grouping involving Hewlett Packard, ICI, Amersham International, British Aerospace and Ove Arup. The information obtained enabled the researchers to come up with a generic audit tool which will provide a much wider population of companies with a basic "health check" to identify where their knowledge management practices are falling below desirable performance levels, and how the shortfalls might be addressed.

  6.  The audit tool just described is the outcome of one of a number of projects are investigating techniques to assist in the management of the innovation process. Researchers in Plymouth are devising a scenario tool to help managers predict what might be the effects of major organisational discontinuities in companies such as restructuring, takeover, merger etc. While a project based at East Anglia University is looking at the implementation in the UK of the "Hoshin Kanri" management technique. This integrates long-term strategic objectives with daily operations by aligning people with a common focus, and by installing an organisational adaptability so that at any one time, employees at all levels can know where they stand with regard to top policy and what is happening in the external environment. Again both projects are working with engineering and physics based companies alongside companies from the chemical and life sciences and services sectors.

  7.  The philosophy of partnership between academia and business, catalysed by Government support, underpins the nature of the Innovation Programme and other similar ESRC investments. The Programme is also contributing to the development of policy to support such partnerships, through a series of consultations on how they may be encouraged and sustained. Networking between and among researchers and practitioners is also a strong feature of the Programme with most of the projects having multi-sectoral advisory groups associated with them, such as the Lancaster/Pilkington project described above, contributing to the cross-fertilisation of ideas.

  8.  The Innovation Programme therefore is a practical demonstration of how the previous Select Committee's thinking (as described in "The Routes through which the Science Base is translated into Innovative and Competitive Technology[21]) is being progressed, particularly those aspects of it relating to the need for a holistic view of innovation, the role of management, the value of networking, and of partnership between Government, business and academia. It is hoped that in its deliberations the Committee will take into account the need for comparisons with this wider experience of common problems.

30 April 1998