WEDNESDAY 6 DECEMBER 2006

DR TREVOR CROSS, MR JOHN ROOTES AND MR NATHAN HILL

  Q59  Chairman: Good morning to our second panel this morning: Mr Trevor Cross, the Technology Director of e2v, to Nathan Hill, the Managing Director of Qi3 and John Rootes, the Director of JRA Aerospace. Welcome to you all. Could I remind you that we are being televised this morning and, rather like Big Brother, or whatever else, we have to be very careful? Could I start by asking a question to you all as to how effective are the current structures for encouraging technology and knowledge transfer in the space sector?

  Mr Hill: They are working, so knowledge transfer is happening. There is a need to keep pushing, shoving, encouraging and enthusing people to actually engage in knowledge transfer—it does not happen on its own. But in the seven or eight years that I have been involved with it from the practitioner side it has really gone ahead in leaps and bounds. It is not a predictive process, it all comes from a fount of technology, so the technology capability is the quantum of knowledge transfer, and the outcomes come by pushing and shoving, encouraging people, holding workshops and getting people to meet in dark corridors and talk about the ideas they have, and for every success you get there will be six failures, four sort of zombies that go nowhere, which creates the investment risk, of course.

  Q60  Chairman: It sounds a very haphazard process.

  Mr Hill: No, it is managed haphazardness. If you encourage people, you keep positive, you enthuse youngsters, particularly, bash the heads of departments sometimes to encourage them to keep going on the technology as well as the science motives it happens. In terms of the government action both BNSC partners, research councils and industry, I think have woken up a lot to knowledge transfer in the last few years—the environment has certainly improved.

  Q61  Chairman: Trevor, would you concur with that?

  Dr Cross: Good morning. Yes. It is patchy; it is extremely successful in some areas. I would say in those areas where the technology is very, very closely linked to the science objectives of the research council it works rather better. I would say that in those areas where the technology and the market opportunities are more to do with the general building blocks of space infrastructure that there is not such a successful mechanism. I would agree with Nathan, I think that a lot of organisations, the research councils particularly, have woken up a lot in the last few years to finding better ways of stimulating knowledge transfer, but I do think there is still opportunity that is there and there are opportunities on the table that we are not yet getting the most out of.

  Q62  Chairman: Let me ask you, Trevor, in terms of knowledge transfer, that is what we normally think of in terms of that pull or push through from Blue Skies research through into wealth creation, but the other area which was mentioned by our earlier panel is also about government departments and their use of that knowledge. Are we advanced in that or is there still a problem there?

  Dr Cross: Could I answer it slightly differently? As much as knowledge transfer I prefer to think about economic impact. Where I sit in the food chain with my business we make electronic components and sub-systems—and perhaps in contrast to the previous panel—there are more opportunities for bigger economic impact, from taking that kernel of knowledge and technology in the space domain and moving that into other application fields, other industrial markets. I think that whilst that is working quite effectively greater engagement by the user base, for example the Ministry of Defence could help with that.

  Q63  Chairman: John, is knowledge transfer successful?

  Mr Rootes: Yes. I think one of the things over the last 15 years which has been a bit of a plus has been the existence of the European Space Agency's technology transfer programme, in which the UK has participated. When it was set up—which is a long time ago now—it was quite a brainwave; it has really established a network of brokers to facilitate knowledge and technology transfer across industry, across nations through the mechanism of holding events, inter-industry collaboration, sessions with the offshore industry and what have you, and supporting focused searches of universities and research establishments for potentially transferable technologies. So what the programme has done in its own little way over the last 15 years has put some of this out amongst the researchers and small companies and universities of our countries, to perhaps capitalise to a small extent the identification of potentially transferable technology.

  Q64  Chairman: So in terms of the DTI, PPARC and ESA in knowledge transfer activities, are they well coordinated?

  Mr Rootes: I think so, yes indeed. ESA has been, certainly as far as I am concerned, one of the primary funding sources for this sort of activity over the last 15 years, but certainly along the way PPARC have supported events; we did one a few years ago, Bio-Imaging, Can Space Help? A lot of the space X-ray, gamma-ray detectors have application in life sciences and medical engineering and PPARC and BNSC occasionally have put the money in, if not in a coordinated programme, over the last few years to help this along.

  Q65  Chairman: Is it done more effective elsewhere in Europe?

  Mr Rootes: I do not believe it is, to be quite honest, no. Perhaps the French have slightly more infrastructure and slightly more public investment in this area, but that is all.

  Chairman: Adam, did you want to come in here?

  Q66  Adam Afriye: Yes, I am interested in the role of industrial brokers, the kind of role perhaps in which you are involved. So could I just play devil's advocate here and ask Trevor and Nathan, clearly there are advantages in having brokers in this area, but what are the disadvantages—and then I will ask John what he thinks are the advantages.

  Mr Hill: I am a broker as well. The job of brokering knowledge transfer—at least to understand the technology—is to encourage and motivate the transfer because technology transfer is almost always executed through people. The downsides, of course, are that if technology transfer operatives like myself are not knowledgeable enough or become a gateway rather than a facilitator, then they can actually block the route. What you have to realise when you are doing it is that your job is to grow little snowballs and try and roll them downhill; some of them will roll and become big snowballs—and I can give you some examples of some very big snowballs—and some of them will melt on the way down. So the job really is to recognise the potential and to start little snowballs running downhill. If I can give a real practical example, though, getting away from the theory, of something which happened last month, PPARC through the European Space Agency and Direct Investments in Southampton University have been supporting gamma-ray detector development towards a mission that has now been launched, the Integral Programme, launched in 2002. I helped a couple of researchers down there get a couple of things called enterprise fellowships, which are supported by the Research Council and the Royal Society of Edinburgh, and these basically fund the students to go off and spend a year developing their business plan, getting business school training—it pays their salary for the year. They have toddled along, it is now an eight-person company called Symetrica, sitting down there in Southampton, giving them a few contracts—in the defence world doing gamma detection is obviously something quite specialist—and on 1 November this year Smiths Group PLC, a very large detection and instrumentation company, announced a $222 million order for dirty bomb detectors for the homeland security people in the states, where the heart of every single instrument that Smiths will sell has Symetrica gamma detectors and elecontrics and software in the middle. I cannot claim that $222 million order for myself—I wish I could, I wish I had shares in it—but the job that I did, together with others from ESA, from PPARC, from the people themselves in the university was to set the snowball rolling, encourage people and get them moving.

  Mr Rootes: Symmetrica also got money from the ESA technology transfer programme, from a BNSC study which we did for them a few years ago. So, occasionally the thing comes together and works—not occasionally, quite often.

  Q67  Adam Afriye: Trevor, are there any disadvantages that you see to the industrial broker system, any problems, any drawbacks?

  Dr Cross: I think if we focus only on brokering, which is extremely important and I am glad it is there and more would be better than less, I think we miss the critical importance of missions in fostering technology transfer. The brokering is useful because it opens the eyes of people in industries away from the narrow focus of the day-to-day activities they had to say, "Why do you not look over here, up there, or sideways?" Missions fulfil a different thing, which is taking embryonic technology and giving the opportunity for a technology demonstration mission in something like a Surrey Satellite or beyond, and then coming back again to the PPARC-driven science agenda for some of the space missions where to justify a big spend in the space mission you have to have the very best instrumentation that has ever been built, otherwise you are not discovering new science usually. That kind of investment would really help to push the technology forward, which then goes out into other applications widely.

  Q68  Dr Turner: Nathan, you have made it fairly clear that technology transfer between industry and academia and the space sector is a bit of a curate's egg—some examples of success and a certain amount unsuccessful. Can you expand on factors which may inhibit the process and suggest what you might do to reduce them?

  Mr Hill: It is like any investment decision in life. It is all about people and it is all about technology in this case. So the argument made about developing the technology capacity of the UK in these space areas is absolutely key. I sat in Oxford Instruments PLC buying technologies for many years, and what do you do when you are in an international company, you take maybe the best in the world, maybe the second best in the world; you might just about consider the third and then that is it. So technology competence is the root of what is interesting to industry in terms of knowledge transfer, and each bit of technology comes along with a human being or few, some of whom are brilliant at working in partnership with you, some of whom are awful. So what we do is quite a lot of assessment of technology and assessment of the people who come with the package. That is one half of technology transfer, and so the academic industrial technology transfer starts with the competence in technology, move on to the people around it and then you can make a good evaluation. If you then move on to the other side of knowledge transfer, which I think you were looking at earlier, which is how good are companies at taking the development they do and turning that into other successes? I think we have to recognise that this linear view of knowledge transfer, marvellous ivory tower universities develop, a grateful industry accept, with a huge licence fee, of course, the bequest of technology and adopt it and turn it into a business, and that is not valid and it never really was valid; it certainly is not valid in these years. The engineering and technical capacity that exists within the UK space industry is much greater actually than that which exists in the UK academic and scientific community in the space area; they both need to work together and partner. So the sort of model we have developed is much more advanced, and it is about spinning in, quite often, capabilities from the defence and aerospace and security and transport sectors, stretching them with unique challenges that you get in the space science and earth observation missions, for example for the European Space Agency, and that creates the added value technology competence, but, more importantly, the engineering competence embedded within industry that allows you to have the spill-over benefits. Companies are extraordinarily good at doing their own knowledge transfer because once they have a technology competence they are going hunting to look for markets to reapply it in.

  Q69  Dr Turner: One of the problems that have frequently come to our notice is the holes in the venture capital industry in Britain, as compared to the sophisticated system in the United States. Is this a problem in space?

  Mr Hill: We go back to the long-term nature and always the need for seed funding, and there I would argue that Britain has genuinely improved phenomenally in the last 10 to 15 years. The European Space Agency is hopefully soon—very soon, I think—to establish a 40 million Euro venture finance fund and the contract for that is about to be awarded, I believe, where they are putting some seed money in and other funds will be raised to create a venture finance pot aimed at technologies in the space industry, and that very much complements the technology transfer network with which John is involved, and the ESA knowledge transfer programme that I am delivering. So I think there are gaps. I very much appreciated the comment that came from the earlier panel about looking to improve technology readiness level because whereas venture financiers are very bad at assessing technology gaps; they are very comfortable taking market risks. So I think there are gaps but they are narrowing.

  Mr Rootes: Another point on that is that talking about those gaps, some of the areas of technology we are talking about here, if we are talking about X-ray gamma ray equipment, which may have an application in the medical field or other technologies—even smart materials—the gestation period between them actually working in space and being an acceptable product is a hell of a long time, and therefore the finance needed is quite long and the timescales are quite a lot. VCs are still very unwilling to come in until they have a good idea that things will work. I know a case at the moment in Leicester where they are trying to get a piece of technology, which I think will be an absolute world beater in genetic assessment in that sort of role, and they are trying to scrape the money together to develop the prototype to get the thing further down the road, and all the large pharmaceutical companies and VCs are not yet willing to get involved. So there is that gap.

  Mr Hill: This really is in the league not of venture financiers generally because it is lower technology readiness levels. What you are really looking at is a continued DTI technology programme and Research Council type support that gets it to the stage where it is on the three to five year for market time horizon.

  Q70  Dr Turner: So the Valley of Death has not gone away?

  Mr Hill: No, it has just changed its name.

  Dr Cross: Could I add a point there? I have had a lot of experience of VCs. Our company came out of Marconi, it was backed by 3i in 2001 and 2002 and I had an extremely interesting conversation where we were trying to explain what I thought was a reasonably clear technical business proposition about our company, which is electronic components, and we got half way through the discussion, and after about 15 minutes and the individual from 3i, who eventually did back us, said, "Just hang on, you have to understand this technology is very complex. Yesterday I bought a company that puts orange juice in boxes; I understand that." And that is absolutely true. The point is that it is easy for people within the industry and with an interest to forget just how complicated this technology is; so there is an understanding issue as well as the venture capital short-term horizon on returns. So you have two things that make it difficult for conventional venture capitalist activities to make investments at the early stage.

  Q71  Dr Turner: To what extent are partnerships in your field between academia and industry operating at a national rather than an European level, or even wider?

  Dr Cross: That is a good question. Increasingly those kinds of partnerships are becoming absolutely critical. My company was formally part of the GEC empire, and like many other medium-sized companies we have separated. Gone are the giant corporate research centres that used to fuel that innovation and new technology funnel, so increasingly we have to form alliances with universities to replace all of that. In general that is becoming more successful, universities are becoming more positively open to doing that. Today the majority of what happens in companies at our level, at our scale, is really nationally focused. Although we have had some attempts at becoming involved in EU-framework programmes, so far in our company that has not been successful. I think in the years as we go forward it is inevitable we will become involved at a European level.

  Q72  Dr Turner: What more could be done to get SMEs involved in knowledge transfer?

  Mr Hill: Having worked formerly at a PLC I now run my own SME, so I have sat on different side of the fence. I think SMEs will get involved in knowledge transfer and may just face a different set of issues from larger issues. Going back to my Symetrica gamma detectors example, that went through a small spinout formation that brought it to a technology readiness stage where a very large company would adopt it. That is one vector, that is one type of knowledge transfer. Some small companies can be extremely good at scouting out and adopting technologies. I chaired a conference a few weeks ago on detector technologies, not from the European Space Agency but which concerned the particle physics laboratories, I was able to sit there rather smugly looking at most of the detector companies in Great Britain and said, "If you had taken this gamma detector yourself five years ago you could have had the $222 million order now," and I think companies are realising that this type of technology development is too expensive to afford in your own research labs; you need to monitor what is going on in the universities. We pay 8% of the subscription to ESA but can get 100% essentially of the technology from it. That is the advantage of belonging to these international clubs. When we did a survey very recently of instrumentation companies in Britain—because we thought they would be getting bored with all these conferences and networking events—they said no, that is the thing that they rate highest; as long as we give them good access to new technologies coming out of labs they want to be there to pick it up. SMEs are exactly the same; they are often much more efficient at scouting.

  Q73  Dr Turner: What about government's role? Do you think that the government (a) has shown efficient understanding of these processes and (b) funds them adequately?

  Mr Hill: Knowledge transfer processes have improved very much. There is still some joining up to do. A number of the funds come from different pots and so we have joined them together. So, for example, I am currently delivering three programmes which relate to the European Space Agency—luckily because I am delivering them I can join them up. One of them is the Sensors Knowledge Transfer Network, which is part of the DTI knowledge transfer networks. We have joined space with all other research facilities and said that this market for supplying scientific research facilities is one market, now let us talk about it. There is a PPARC national programme which relates to the UK space groups, and there is also the ESA knowledge transfer programme, which is joined up between the BNSC partners. Fortunately those are joined up; people like John and I are talking to each other and so the various UK activities do join. Generally, I think that is an improved situation. The area I think there is further to go is on joint working on technology development. I keep going back to it—give me technology and we can transfer it and we will find the outlets for it.

  Q74  Dr Turner: Trevor, for 18 months you have been running the Centre for Electronic Imaging at Brunel. What have you learnt from the process of establishing this centre; what are its main achievements; and where has it fallen short of expectations; and what have been the difficulties?

  Dr Cross: I think we learnt a lot before we established the centre and one of the key lessons was that it is better and more effective—and you get a better return—if you focus your university links into a smaller number of larger collaborations. So we took the decision, based around individual people and projects where we knew that there was a good level of capability that fitted our organisation, to commit with Brunel. Why was it Brunel University? It was simple: we had our team of people and the university said, "If you are prepared to make this long-term commitment we will fund additional research associates, put some infrastructure money in to set up laboratory space and things," and I found that the research councils too—in this case PPARC mainly—were very, very keen if we came along and said, "With the university we are making this plan and we are very keen to participate in supporting that activity," in this case by underwriting a future role of case student-ships, all approved ultimately on a case by case basis but as a general framework. So the successes have been that there are a number of PhD level students in there, some of which—not all—we expect to recruit into our business and—and this is absolutely critical—people with the right skills set, that where those people know our organisation and our organisation knows the people—a kind of extended interview—and feed those into our business. Also, giving part of our R&D budget that we resource from our own company profits the wider horizon and today's business objectives and the ability to go out and say, "Let us think of something a little bit longer-term, off the track of the main business, to try and stretch what we are encompassing." I think that is absolutely critical and it is a model that we are likely to duplicate as we go forward.

  Q75  Dr Iddon: PPARC, who are obviously a funder for this research and technology, have a very good view of what you guys are doing and the whole of the industry is doing. How well do you think that they cooperate with major state departments, such as MOD, the Department of Health and others in facilitating knowledge transfer, because those major state departments obviously have a lot of tentacles into other industries?

  Mr Hill: Within my team at Qi3 I have one full-time specialist who just works on aerospace, defence and security, and is our link to MOD; that is alongside people within the Swindon office of PPARC. Similarly, I have somebody who specialises on life sciences and healthcare technology and is our link to the Department of Health. PPARC has just launched a joint call through its PPARC industrial programme support scheme using funding from MOD and PPARC specifically to get further knowledge transfer cases in its general area, not just space science, but into the defence and security business. It could always be better, but there is a fair amount of joint working.

  Q76  Dr Iddon: Do our other two witnesses feel that that flow is working well through PPARC and the state departments out to the rest of industry?

  Dr Cross: I think it works to a certain extent, but I think probably equally as important, if not more so, in our field has been the fact that we have contractual relationships and long-term technology personal relationships with people in MOD, people in PPARC, so they kind of pull things together, and then PPARC is consciously trying to do that as well. So I think there is more to do but it is in people's minds that it should be something we are doing more of, and there are specific examples we could quote.

  Mr Rootes: Certainly, we do not have a direct relationship with PPARC in the way that Nathan does, but as far as the ESA programme is concerned there is a lot of cross-linkage, and certainly we put that into practice as well, defence, space.

  Mr Hill: The key area for improvement is to educate the customer. Knowledge transfer needs somebody who wants it, so when you talk about other government departments a lot of the relationship has to be about encouraging the customer to want it.

  Q77  Dr Iddon: So when these linkages have been made does the flow of knowledge go automatically or do you think that the government could do something more to facilitate it, perhaps a bit of seed core funding, or what could government be doing to make this flow a little faster?

  Dr Cross: I think there is still a significant gap in the funding of prototype technologies for potential major programmes in the future, where there is significant risk about the likely go ahead for major programmes, and an example would be the International Linear Collider, and where companies cannot afford to make speculative investments in the light of an uncertain future commercial opportunity, but the timescales of the project mean that you need to be doing technology prototyping now to position UK industries sufficiently.

  Q78  Chairman: You would support the original panel's comments that they made in the Case4Space for that seed core funding very early on in order to compress time?

  Mr Rootes: I would certainly support that as well. All the funding over the last five years that I can remember getting in that sort of area has come from ESA. We have been able to get £10,000 here, £15,000 here for prototypes etc and some of it has been extremely useful. The case of Thruvision, the company recently set up to commercialise terahertz synergy technology, JRA facilitated a very quick, no frills 20,000 Euro grant from ESA to bring up a demonstrator which enabled them to raise the funds to do more things.

  Mr Hill: This technology thing, there is a ladder here and we have to play the game more cleverly. Getting a national step with technology competence then allows you to leverage ESA or EU money in, which gets you to the next step of being able to supply ESA with the goods, which then gives you the technology capability that provides you with the opportunity to transfer the technology, and it is this leverage game that needs the initial steps. That is why everybody comes back to the early stage prototype.

  Q79  Adam Afriye: When the government invests money into these projects, whether it is seed finance or whatever, I think I am right in thinking that they do not get a return on that money. Should it not be the case that the government, if investing money, should get a return on that money just like other venture capitalists and other investors?

  Mr Hill: The funding that comes through the research councils—and I should say, by the way, that I am not an official of any of the research councils, I am giving you my view on how the legalities work—and when research councils give a grant to a university to engage in technology development the intellectual property flows through to the university and the university does manage the intellectual property and gets a return. Similarly, if the money has gone through to the European Space Agency the intellectual property may then end up with a company that has done the technology development or indeed with the university, and so the return will then flow through those mechanisms. So there is intellectual property ownership and management, and that is the set-up we have in the UK.

  Mr Rootes: Certainly ESA, which of course is spending UK money through the technology transfer programme, when it is giving a financial grant will sometimes negotiate an agreement with the university or start-up concerned to flow money back if and when profits are made. So there is that capability coming in from ESA.