At a national Science and Innovation Conference yesterday there were many contributions from government and its agencies, the private sector and the European Commission, with the common thread that the UK has a world-leading research base that should be supported and encouraged to fuel economic and employment growth. In his keynote address, David Willetts, Minister for Science and Higher Education highlighted areas requiring further focus to achieve this, drawing on last December’s Innovation and Research Strategy for Growth, and reiterating Vince Cable’s recent call for a properly supported industrial strategy with both horizontal strands (eg skills, regulation issues) and vertical (sector) focus.
The areas he highlighted as requiring further focus, and some reflections of my own in the light of subsequent presentations and discussion during the day, follow:
- Better collaboration across Public Sector to enable clearer pathways for innovation to market with sustained public support to the point of sufficiently low risk for private investment – more akin to the US model. The Life Sciences Strategy aims to achieve this for one sector, but needs to be replicated elsewhere. Evidence from the rest of the day suggested that, whilst various government departments and agencies are working to broadly the same script, and are aware of where other’s schemes abut with theirs, it still felt a way from truly joined up thinking. There is indeed work to be done here to remove the carefully maintained territories of different departments and see this as common ground.
- Access to publicly funded research, as proposed by the recent Finch report, would immediately help large companies. To enable SMEs to benefit a user-friendly research portal to UK university research was in development. This would enable universities to provide ‘outsourced R&D’ for SME and to engage with large businesses on a more open innovation model. Later, however, HEFCE’s Director of Research, Innovation and Skills cautioned against universities being too driven by industry agendas and lose sight of the world-class fundamental research so attractive to business. David Willetts actually said Open Data and access to publicly funded research in one breath, but of course the former is a whole different issue, with a White Paper published today.
- Easier SME-University connections, by means such as vouchers. Later presentations also highlighted R&D tax credits and the range of TSB collaborative R&D support as incentives to innovate, some geared more to SMEs and others to larger companies. Whilst we were told the Growth Accelerator Programme (formerly Business Coaching for Growth) will signpost all of these, surely the range of separately branded schemes must still be bewildering for an SME.
- Management Skills to improve business performance, in terms of competitiveness and quality of life measures. Here he suggested stronger links to University Business Schools, who would have to be incentivised by their impact on real business performance counting in their assessment, rather than the current rather academic focus. The theme of universities’ assessment via the Research Excellence Framework (REF) came up several times throughout the day, and the balance between impact measures and yet maintaining the excellent fundamental research that underpins application and is so attractive to (large) business.
- Capital Investments into the research base need to continue to be made to maintain excellence, but are unlikely to come from large, purely government blocks of funding. The model is likely to involve a mix of public and private funds in future.
- Actively engage with big technology areas, though not necessarily expecting to lead on all. The Uk needs to position itself to enable it to, at minimum, adopt new technologies rapidly, through horizon scanning and flexibility. Awareness and influence on EU policies will be required to ensure these do not slow down engagement.
This very diverse list of areas of focus, each multifaceted in its own right as indicated, illustrates the complexity of the Innovation Landscape in the UK. Perhaps the message that stuck in my head the most from the day from one delegate was that we ‘should not try to emulate the Germans because our economy is different’. The UK must understand the barriers and incentives that will work here and take a consistent approach to creating an environment that will enable innovation for growth.
There is a simple message for wealthy individuals who are worried about their complex tax avoidance schemes. Do the economy a bit of good instead and put your money in high technology innovative early stage companies.
Innovative start- ups and small businesses are risky .
- Is there a market?
- Will the technology work?
- Can the technology be turned into a desirable product?
- Will the management team be knowledgeable, skilled, entrepreneurial and flexible?
So risky indeed, particularly before any sale has been made that it is virtually impossible to raise any money
- No equity because the chances of success are low and failure high.
- No loans because there is no security
Who can invest?
- Individuals who are using their own money: friends, family or angels, with an appetite for risk.
- Institutions which are using someone else’s money on an individual investment basis will find chances of failure high, and find the justification more difficult.
- Portfolio investors can balance the risk of some failing within an overall success package.
- Public money has a slightly different perspective. The country needs economic activity as whoever owns the shares, the one almost certain beneficiary of a successful company is the national economy from activity taxes, no unemployment pay, buying of other goods, and eventually maybe corporation tax. But it must come with private expertise.
Government gives tax allowances to individuals because the most likely winner from investment is society generally. They have recently, enhanced those in the last budget for three schemes:
- Enterprise Investment Schemes (EIS) enable Individuals to invest with income tax relief of 30% and capital gains tax relief.
- Venture Capital Trusts (VCTs) which provide vehicles for investment in groups of such companies will provide smaller but similar reliefs.
- A new seed EIS (SEIS) for companies with less than 25 employees will provide 50% income tax relief and capital gains tax relief.
Who provides the market access to these companies?
- Business angels groups are trying to help fledgling businesses they are always looking for new investors.
- Specialised small venture capital companies will do the due diligence and let angels invest alongside them.
- Science parks and universities are often looking for investors.
- There are official VCT and EIS funds publicised.
Why not accountants and IFAs?
You would expect to see accountants and IFAs acting as introducers but it is unusual. Possibly they are concerned about giving advice that leads to failure, and clearly these are risky otherwise why should there be a government subsidy. There is a mechanism that would absolve them of formal responsibility which they are loath to use. Maybe they should be recommending this rather than the tax avoidance schemes in which some of them specialise. Accountants, in particular, could form business angel groups in all localities. They know who has the money and who needs it, and government already gives tax encouragement to participate.
The message is : We could all, including professional advisers, utilise tax encouragement for national wealth generation in inovative start-ups, rather than tax avoidance for personal gain.
Norman Price 21.6.2012
Chair of Birmingham Science City
Chair of Regional Finance Forum
There’s been a distinct change recently in how we describe what a “Smarter City” is. Whereas in the past we’ve focused on the capabilities of technology to make city systems more intelligent, we’re now looking to marketplace economics to describe the defining characteristics of Smarter City behaviour.
The link between the two views is the ability of emerging technology platforms to enable the formation of new marketplaces which make possible new exchanges of resources, information and value. Historically, growth in Internet coverage and bandwidth led to the disintermediation of value chains in industries such as retail, publishing and music. Soon we will see technologies that connect information with the physical world in more intimate ways cause disruptions in industries such as food supply, manufacturing and healthcare.
There are two reasons we’ve switched focus from a technology to an economic perspective of Smarter Cities. The first is that these new marketplaces are the way to make both public service delivery and economic growth within cities sustainable. The second is that it’s only by examining the money flows within them that we can identify the revenue streams that will fund the construction and operation of their supporting technology platforms.
The importance of driving sustainable, equitably distributed recovery to economic growth from the current financial crisis was championed by Christine Lagarde, the Managing Director of the International Monetary Fund, in her speech ahead of the Rio +20 Summit. She emphasised the role of stability in enabling such a recovery. Instability is change, and managing change consumes resources. So stable systems – or stable cities – consume less resources than unstable ones. And they’re much more comfortable places to live.
This concept explains a shift in the economic strategy of some cities and nations. In recent decades cities have used Foreign Direct Investment (FDI) tools such as tax breaks to incent existing businesses to relocate to their economies. When cities such as Sunderland and Birmingham lost 10%-25% of their jobs in less than two decades in the 1980’s and 1990’s, FDI provided the emergency fix that brought in new jobs in call centres, financial services and manufacturing.
But businesses that find it possible and cost-effective to relocate for these reasons can and do relocate again when more attractive incentives are offered elsewhere. So they tend to integrate relatively shallowly in local economies – retaining their existing globalised supply chains, for example. When they move on, they cause expensive, socially damaging instabilities in the cities they leave behind.
The new focus is on sustainable, organic economic growth driven by SMEs in locally re-inforcing clusters. By building clusters of companies providing related products and services with strong input/output linkages, cities can create economies that are more deeply rooted in their locality. Examples include the cluster of wireless technology companies in Cambridge with strong ties to the local university; or Birmingham’s Jewellery Quarter, an incredibly dense cluster of designers, manufacturers and retailers who work with Birmingham City University’s School of Jewellery and Horology and their Jewellery Innovation Centre. Many cities I work with are focussing their economic development resources on clusters in the specific industry sectors where they can demonstrate unique strength.
In order to succeed, such clusters need access to transactional marketplaces for trading with each other; and for winning business in local, national and international markets. The disruptive, disintermediating capabilities of Smarter City technologies could help such marketplaces to work more quickly, at lower cost; to extend the market reach of their members; to find new innovations through discovering synergies across traditional industry sectors; or to support the formation of innovative business models that recognise and capitalise social and environmental value. These marketplaces are also exactly what’s needed to support the transformation to open public services.
Marketplaces need infrastructure. In traditional terms, that infrastructure might have consisted – in the case of my local cattle market in Kidderminster say – of a physical building; a hinterland connected by transport routes; a governing authority; a system of payments; and a means of determining the quality and value of goods and services to be exchanged. Smarter City markets are no different. They may be based on technology platforms rather than in buildings; but they need governance, identity and reputation management, payment systems and other supporting services. The implementation and operation of those infrastructure capabilities has a significant cost.
This is where large and small organisations need to partner to deliver meaningful innovation in Smarter Cities. The resources of larger organisations – whether they are national governments, local councils, transport providers, employers or technology vendors – are required to underwrite infrastructure investments on the basis of future financial returns in the form of commercial revenues or tax receipts. But innovations in the delivery of value to local communities are likely to be created by small, agile organisations deeply embedded in those communities. An example where this is already happening is in Dublin, where entrepreneurial organisations are using the city’s open data portal to develop new business models that are winning venture capital backing.
In order to replicate at scale what’s happening in Dublin and Sunderland, we need to define the open standards through which agile “Apps” developed by local innovators can access the capabilities of new marketplace infrastructures. Those standards need to be associated with financial models that balance affordability for citizens, communities and entrepreneurial businesses with the cost of operating resilient infrastructures.
If we can get that balance right, then stakeholders across city systems everywhere could work more effectively together to deliver Smarter City solutions that really address the big survival challenges facing us: reliable systems that everyone can use across the rich diversity of our cities, communities and citizens.
I hope that I can help the Birmingham Science City Digital Working Group contribute to Birmingham’s Smarter City agenda by exploiting the ideas I’ve discussed in this post. One very concrete way we could do that is by holding co-creation events with local stakeholders to discuss how new technologies might disrupt industry sectors in which Birmingham has a strong capability already. I’d like to discuss how we might do that at the next Working Group meeting on Wednesday 19th September. Perhaps I’ll see you there.
What a week of Energy in and around Birmingham last week was!
On 13th June we had a Science Capital event on Power for the People which showcased and discussed the thriving research, demonstration and business in distributed and renewable energy we have going on locally. We heard about pyrolosis of waste to produce energy from Aston University’s EBRI, the value of distributed energy systems from Fine Energy, rare earth magnets in improving effieciency of wind and wave energy from Rex Harris of Birmingham University. (All presentation available by clicking on presenters name in the Science Capital meeting page.) This led to a well informed discussion, including participants from the renewable energy industry, universities, lawyers and more, ranging from relative efficiencies of renewable sources, the arguments for subsidies, plans for using waste to provide power for Birmingham and much more. As well as exciting R&D, the presentations and discussion highlighted real opportunities for local businesses.
Two days later the Board of Birmingham Science City was treated to more examples of excellent collaborative R&D and innovation around energy. We heard about the Science City Research Alliance between Birmingham and Warwick Universities, including the Energy Futures Programme, and its cutting edge research and engagement with businesses large and small. E.ON told us about the sustainable city partnerships they are building with cities across the UK, with Stoke-on-Trent leading the way and partnerships with Birmingham and Coventry developing apace, and we were updated on the West Middlands activities and opportunities within the EC Climate Knowledge and Innovation Centre. As well as being exciting in their own right, some potentially fruitful linkages between these initiatives were discussed and will be taken forward.
So what will this week bring? On Tuesday Birmingham Science City’s Low Carbon Working Group will meet. Amongst other things it will be discussing potential new collaborative projects and demonstrators involving the public, private and HE sectors. Perhaps this will lead to cutting-edge energy activity that we will be showcasing at events in the future…
We are an inventive nation and a nation that needs growth. So not surprisingly much is being made at the moment of the role of innovation and knowledge in fueling growth in the economy. There are many elements of this – some will doubtless be touched on in future blog posts- but it is the belief of the Intellectual Property Office (IPO) that one key is helping SMEs to be aware of why and how they should protect and exploit their ideas and intellectual property. The IPO has been consulting on the implementation of the Hargreaves review of IP and Growth, published last year. As part of this discussion, Birmingham Science City helped to organise a roundtable discussion in Birmingham yesterday with entrepreneurs, business support organisations, universities, IP experts etc. A very constructive and animated discussion gave the IPO some new insights and ideas to take away, and all of us with some new thoughts and resources for the management of knowledge for growth. Or put another way, and picking up on the IPO’s use of Wallace and Gromit to engage young people, how to make ‘Cracking Ideas’ into ‘Cracking Business’.
Three stand out messages for me from yesterday’s discussion were:
- SMEs need help to understand that their ideas, knowledge and know how are valuable assets that can be managed in a variety of ways to improve their business. The way this value will be realised will depend on the business sector, the nature of the knowledge and the goals of the business – it may or may not involve protection via patents or other means.
- Most SMEs never think about knowledge exploitation or IP – the Chief Executive of a large Business Support organisation told us none of his members has ever asked him about IP! They are unaware or put off by costs and complexities (perceived or real). To change this advise on knowledge (not just IP) management needs to be integrated with other forms of business support (eg included in the whole company assessment approach of MAS) and linked to incentives for innovation (eg R&D tax credits).
- The IPO offer some excellent free information, advise and services already, but even the relatively engaged audience at this event were unaware, for example of their mediation service. It was suggested that the IPO need to reach out to businesses where they are already having conversations and using language they can relate to. For example IPO could try engaging with business-led social media networks such as the West Midlands Business Networkwith over 3,500 members and using case studies to convey their message.
The IPO is very much in consultation mode – so do look at and comment on how it is adapting services in response to the Hargreaves review of IP and Growth. We would also welcome any thoughts on how we might collectively enable SMEs in Birmingham and the surrounding region to grow through knowledge.
Once in a while it’s good to do something a bit different. Doing innovation means that doing something a bit different should be the norm. This keeps us on our toes and ensures that life at Birmingham Science City is never boring.
Indeed. My latest challenge was to improve my understanding of science and technology innovation by decoupling science and tech from innovation for one day.
We were recently invited to a conference on ‘Open Innovation and Social Enterprise’ by Social Enterprise West Midlands( http://www.socialenterprisewm.org.uk), who were partnered by The Institute of Applied Entrepreneurship(http://wwwm.coventry.ac.uk/researchnet/enterprise/Pages/Home.aspx ) , Coventry University Enterprises (http://wwwm.coventry.ac.uk/business/Pages/CUELtd.aspx) , Innovista (http://innovista-network.co.uk) and Development Keys (http://developmentkeys.org.uk). The order of the day promised us a bit of technology and also a bit of innovation without reference to technology. I was happy to accept. In much of our work the triumvirate of science, technology and innovation is implicit. How would our hosts tackle innovation without the other two, I wondered.
Of course, we are not so closed-minded as to suggest that innovation is the preserve of science and technology- the last two are a medium of and for the first- but I wanted to see how much non-technological innovation ideas and practice could help bring fresh new perspectives to what we are looking closely at, every day, as Birmingham Science City. Also, as some of you will know, I have a number of passions in life- there’s the science and tech side and the regeneration side. Not often do they mix, so when they do I can’t help but turn up.
Arriving on the scene, it was great to see Bethan Bishop, Head of Research and Innovation, at Heart of England NHS Foundation Trust (HoEFT) ( http://www.heartofengland.nhs.uk). Bethan gave a powerful presentation on innovation for health. What was exciting was not the level of technology and design in health, but the importance that her Trust attach to staff and patient involvement in the innovation process. Innovation, she said, ‘was not just about gizmos’ but about the fundamentals of knowledge exchange. Scientists and technologists have certain types of knowledge, but this needs to be guided by those who encounter health challenges every day. Also, we talked about the speed and complexity of innovation. It doesn’t have to be this way. In short, most innovation can actually be time consuming, as we must define the nature of a problem properly before we plump for solutions. Problems are not always obvious- they need to be probed. Too often we skip this bit and concentrate too much on the solution, ending up with an inadequate answer. The complexity issue is not exactly a misnomer, because sometimes a good deal of detailed expertise is necessary, but then simple solutions should be explored before we scale-up.
Bethan speaking about the rapidly changing health innovation landscape.
Throughout the day, as we spoke to a diverse plethora of businesses and organisations, a few key the messages were becoming clear:
– Concentrate most on transforming a situation rather than on creating the next new thing. As Nick Sherwood of Vocaleyes community interaction enterprise (www.vocaleyes.org) noted: ‘Something is not innovative unless it is transformative. Innovating is about challenging assumptions and inserting the missing piece.’
-It’s good to venture out of your professional expertise zone once in a while to find answers to your challenge in other disciplines . I probably learned most from Mark Peters, a former footballer turned entrepreneur who has been turning his sports coaching and business skills and knowledge to helping young people through sport, health and motivational activities (check out http://www.start-again.co.uk/?page_id=2). I’ve never see anyone so convincingly apply concepts from a textbook and turn them into something so transformative in practical terms. Clearly, theory and practice needn’t be at odds.
–Where innovation requires us to do something new, collaboration is key. Having people from so many different backgrounds in one room at first made me wonder if there was actually very little in common and that any talk of innovation would be superficial. But the day brought profoundly useful insights. If we got these from sports people, caters and community activists and what we discussed makes serious sense to all parties regardless of sector, our message is must be this: take the plunge with businesses, sectors and organisations that you don’t know. As long as you’ve all got commitment to solving a common issue and understand one another’s similarities and differences in knowledge and skills, you probably won’t go far wrong.
We were very busy- eight A1 sheets covered with challenges and solutions, in half an hour- that’s with six sectors and a lot in common!
Keep innovating and keep collaborating!
All good wishes