Science and the Economy
Item 2 is on science and the economy. I welcome Sir Alan Langlands, the vice-chancellor and principal of the University of Dundee—my university—and Dr Kevin Cullen from the University of Glasgow. Thank you for your papers. Would you like to make a few introductory remarks?
Dr Kevin Cullen (University of Glasgow):
Like Janet Brown, I thank the committee for giving me the opportunity to make some comments. There has been a lot of debate recently—we have just heard some of it—about the role of universities in commercialising science and technology, particularly in relation to economic development.
In my paper, I cover the fact that universities exist to create and disseminate knowledge. Research creates new knowledge; that is what it is for. Traditionally, we have been expected to disseminate knowledge through teaching and publication and we have been rewarded for doing so. With the creation of the knowledge economy, we are looking for universities to do more stuff, different stuff, better stuff and stuff that we reckon the universities are well positioned to do. They are starting to perform extremely well at that.
There has been a lot of debate about what universities do, which has concentrated on activities such as working with SMEs, licensing and creating spin-out companies. In my submission, I focus on why universities do that, rather than on what they do. Understanding the motivation and the objectives is fundamental to getting the best out of the higher education sector.
We do lots of things that contribute to economic development. In my paper, I show the spectrum of objectives. In the middle, we have the creation of knowledge through research. As we move to the right, we begin to commercialise. We begin to act like companies; we begin to act like venturers. As we move to the left of the spectrum, away from research, we begin to act very much like Scottish Enterprise and we become agents of economic development.
Many of the problems tend to lie in the confusion between the two roles. I think that universities should be encouraged to fulfil both their outreach and outcome roles. Both those modes lead to benefits for the economy, although they should not be confused. Simply put, outreach helps other people to make money—we help SMEs and larger companies to make money. Under the outcome mode, the universities set out to make money themselves, although it is important to stress that that money is reinvested in research and teaching.
We argue that the two modes of outreach and outcome are entirely complementary in the same framework and relate to the intention behind individual projects. We would not expect Scottish Enterprise—as an economic development agency—to make money; that is not what it is there for. Nor would we expect Scottish companies to have economic development as their primary objective. We believe that universities should be encouraged to undertake both outreach and outcome modes, while being clear about what they are doing at any given time.
Whenever a university tries to do public good and to make money at the same time, it will face a conflict of interests. If we have valuable technology that could be used by a Scottish SME but a French company is willing to pay us more money for it, what do we do? We have to choose and that choice is between outreach and outcome. If we were SE, the choice would be easy; if we were a Scottish company, the choice would be easy. As we are a university, it is not easy.
We think that such decisions could be made easier if the distinction between outreach and outcome was recognised under the funding and measurement systems. If universities choose to go down the outreach path, that should be recognised and rewarded through public funding, as is the case with SE. I should acknowledge at this point that the knowledge transfer grant—KTG—from the Scottish Higher Education Funding Council is a significant first step in that direction. However, if the university chooses to go down the outcome path, that should be recognised and applauded in the same way as successful Scottish companies are.
There should be more focus on the why than on the what in relation to universities and economic development and it should be clear why universities are doing the important stuff that they are doing. Success requires to be measured in terms of objectives and it needs to be supported. In that way, we will stop confusing the universities—we often find ourselves confused—and we will bring about more of the economic impacts that we all want.
Thank you. Were those remarks made on behalf of both our witnesses?
Sir Alan Langlands (Scottish Institute for Enterprise):
No.
My apologies, Alan. Please go ahead.
I will add a few comments. There is an obvious overlap and my note is just a different take—from the point of view of a different university—on the process that Dr Cullen described. It was suggested to me before the meeting that I might also say a word about the Scottish Institute for Enterprise, whose board I chair.
I wish first to make three simple points based on my note about the commercialisation of the university research base. First, I underline the importance of investing in basic research and in high-quality research infrastructure as a means of attracting and retaining top scientists in Scotland. We cannot underestimate the importance of that when we are dealing with this complex policy area.
Secondly, I stress the importance of partnership working, which is a particular strength at the University of Dundee. In our case, that involves Scottish Enterprise Tayside, Dundee City Council, the major charities in the medical and biomedical areas, the United Kingdom research councils and SHEFC. The national and local levels of engagement among all those institutions is strong. As someone who has returned to Scotland having been away for a while, I am struck by our ability to get things done simply through being able to engage people on a day-to-day basis. That needs to be acknowledged.
The third point that I want to stress is the importance of providing high-quality support to academic staff at each stage of the commercialisation process. For many of our scientists, that is not a natural way of doing things. My sense is that universities are now doing more in their technology transfer offices and are putting more into the management of academic staff in providing proper support at each stage of the commercialisation process.
My work with SIE, which is part time, has a different flavour. It focuses mainly, but not exclusively, on the 30,000-plus science, engineering and technology students in Scotland. SIE had £6 million funding from the office of science and technology, which is a Department of Trade and Industry project. Its objective is to support culture change in all 13 Scottish universities and a couple of associated institutions.
SIE's main aim is to embed enterprise education, particularly at an undergraduate level, although a lot of work is going on with postgraduate students as well. Increasingly, we aim to do that through credit-bearing courses. The second thing that we are doing with the student population is encouraging business creation. We have set up a student patent fund. We are now running for the second time a successful student business plan competition. More than 100 students in about 30 teams took part last year. Slightly more are taking part this year. There are 26 surviving student businesses as a result of the initiative.
The third thing that we are doing is supporting knowledge transfer. We feel that we have a contribution to make and an obligation to provide support and courses for SMEs. We feel that we need to invest more in the continuous professional development of university-based staff working in enterprise education. We work closely with the partnership between the University of Cambridge and the Massachusetts Institute of Technology in trying to promote such professional development. In relation to one of the questions that we have already considered today, we have held a series of meetings bringing together people in technology transfer offices in universities and people from the venture capital community. To put it bluntly, we have tried to make those two groups understand each other better. We think that that is beginning to show early signs of success. Those are some of the things that we are doing locally and nationally in SIE.
That is helpful. Thank you.
I should declare an interest as a member of the court of the University of Strathclyde, in case I am accused of nabbing ideas. I was struck by Dr Cullen's paper and, perhaps disappointingly, I want to ask questions about the whats rather than the whys. What have been the most effective commercialisation strategies at the University of Glasgow?
I always think about commercialisation in terms of both outreach and outcome, so I shall talk about both. On the outcome side, spin-out companies have been extremely high profile and successful for the University of Glasgow. Kymata did not go as high as everyone expected, but it was a success in terms of its economic impact and the high-quality jobs that were created. It was followed by Intense Photonics Ltd, which is still gaining massive funding rounds in a climate in which no one else is, and Essient Photonics Ltd. I love to quote those examples. To go back to what Janet Brown said, they are high quality under any measure that we can apply.
We have not been so active in the creation of what I would call outreach companies, whereby the university facilitates and encourages students to create companies, which is a good entrepreneurial thing to do. We are now working closely with SIE on that, because it is a fundamental part of its mission. At the outreach end of things, we are running a project called DIALOGUES. I will not go into the acronym, but it is about developing links between the university and existing SMEs, getting technology transfer in place and developing relationships so that the SMEs and the university understand each other. We are crystal clear that we are talking about a long-term game. Building a relationship with an SME that will lead to a project and a research contract takes three, four or five years and costs money.
We have put together a partnership involving the university, the local enterprise company, European regional development funding and the city council. Some £1.2 million has been put towards developing those relationships. The partnership is going extremely well and is an example of classic outreach. We do not expect to make a bean from it, but the Scottish economy will benefit.
That is helpful. Is it a challenge to get funding for early-stage development?
Yes. I must be careful about saying how challenging it is at the moment. In the current venture capital markets, universities can find themselves having more money available than many of the capital markets have. Like most universities, we have an internal development fund, whereby we can put £5,000 to £10,000 against a project that we believe has a lot of potential. The proof-of-concept fund is a fabulous thing for us because it allows us to fund things that we would not have been able to fund in the past.
Has the University of Glasgow made extensive use of the proof-of-concept fund?
Yes. I am proud to say that the University of Glasgow has more proof-of-concept projects than any other university in Scotland. We will continue to use that fund to develop our technologies and to bring them to the market, as we have done in the past.
My final question for Dr Cullen concerns his submission's interesting distinction between outreach and outcome. Does the university have a strategic overall aim for its approach to commercialisation?
The overall aim is to ensure that we have a balanced portfolio, so that we can ensure that the university makes a financial return from highly valuable intellectual property. If we create something of huge value, we see it as a moral obligation to ensure that there is some return to the institution. Most of our intellectual property does not have sufficient commercial value for a commercialisation project, but it has significant value to Scottish SMEs. We see it as a moral obligation to get such intellectual property out into the companies to ensure that they can use it to their benefit.
I have a couple of questions for Sir Alan Langlands. His paper was very full, so I have fewer whats for him. I was struck by his reference to the student patent plan. Is that a recent innovation?
Yes. It was started during the past six or nine months. The patent lawyers Murgitroyd and Company have been appointed to run the student patent plan on behalf of SIE. There is a lot of student interest.
Are there possible conflicts of interest, in the sense that what might be good for the university in the longer term might be restrictive for the student? Clearly, the student has a future to plan.
The focus in all the discussions is on the well-being of the student. SIE and its 13 tentacles in the universities are not in the same sort of commercialisation game as might be pursued with established members of staff, from whom we would look for a contribution to the university. The focus is on helping and supporting the student. Clearly, where a university contributes something to a project, we might ultimately look for a return. However, the emphasis is always in favour of the student and the student's development.
Finally, I notice that the very end of Sir Alan's submission states:
"The overall aim of the University's approach to commercialisation is to develop a concentration of company activity that will help to sustain the University and its research activities into the future."
Does that imply that such activity is seen as critical to the general financial well-being of the university?
At the moment, commercialisation is not a huge factor in the general financial well-being of the university, but I think that it will increasingly become so. I believe that the commercialisation process has an inherent value in supporting economic development in the local community. In a city such as Dundee, that is something of a responsibility for the university. Therefore, we do that as a public good, as it were.
There is now a good critical mass of biotechnology companies in Dundee. Those companies will ultimately want to have further support from the university and to let research contracts to the university. That is not happening in a sustained way, but it is happening. In the life sciences sector, there is no single commercialisation strategy, but a combination of aspects makes us successful. For example, we have a consortium arrangement that led to a significant inward investment, which resulted in the company concerned letting further research contracts to the university. The trick that we are trying to pull is to create a virtuous cycle in which the industrial community feeds the university and vice versa.
I welcome to the meeting Tavish Scott, fresh from Shetland.
I apologise for being late.
I found Dr Cullen's analysis of the outreach-outcome spectrum useful. We must establish a balance between the different types on the spectrum. Can Dr Cullen highlight models—whether international or otherwise—that the University of Glasgow strives to emulate? He referred to the need for public support, both for public-good activities and for profit-making activities in universities. Where are the gaps in public support?
There are no models that we can just lift and apply in Glasgow. One reason why I developed the framework was because I had considered the situation of colleagues in institutions throughout the world. For example, MIT is famed for its commercialisation or money-making activity. The people in MIT's offices who do a job that is equivalent to mine regard promoting economic development as a core part of their role. When I speak to them about outreach and outcome, they nod in agreement. They sign up intuitively to that model, but no one else has articulated it in that way. I am working towards the time when others lift the Glasgow model and apply it elsewhere.
On the issue of gaps in support, my concern is about outreach and outcome becoming confused. For example, universities are asked to do public-good activities and to submit business plans that show how those activities will generate a profit after three years. Outreach and outcome are fundamentally incompatible. A university's outreach activity can be sustained only with continued public-funding support at a lower level; if a university acts like an agent of economic development, it should be treated and funded as such.
Can you give examples of that?
The best current example is that without SHEFC's knowledge transfer grant, I would not have had the match funding to combine with money from Scottish Enterprise Glasgow, Glasgow City Council and European regional development funding to make the DIALOGUES project happen. SHEFC's funding stream was critical to making the package fit together.
I am interested in Sir Alan Langlands's activities in embedding enterprise education. Can he develop that a bit for us? Is he trying to make scientists into entrepreneurs, or is it more a question of trying to make scientists business literate, so that they can engage with people such as marketeers?
The focus is not on scientists or staff but on students, particularly undergraduates. We do not expect or encourage every student to be interested in enterprise education. However, exposing every science, technology and engineering student to at least an element of enterprise education during their undergraduate years and giving them other opportunities throughout that period is potentially a good thing and would allow them to ascertain what is possible. For example, they could work with case-study material or link their studies to extra-curricular university activities.
The entrepreneurs club at the University of Dundee, has been going for only a short time but it is now one of our strongest student associations—mind you, the gothic society is the second most popular. The main idea is to expose as many people as possible to enterprise education and to fan the flames of good ideas. It is encouraging to see what has been happening in business plan competitions as well as the early reactions to the patent fund, but it is an upstream activity that will take a long time to work through the system.
The model that you have described is helpful for understanding the conflicting policy objectives that you face as an institution. Are the criteria developed or theoretical? Do you use the model in practice to differentiate between opportunities when it comes to funding them?
The answer is that the model is practical rather than theoretical. We apply it every day in practice. We have a decision tree on the wall of every office in our building. When a project is being considered, it goes through the decision tree, which is extremely unscientific but extremely practical. The first question is, "Will the project make money?" If the answer to that question is, "Yes," the next question is, "How much?" If the answer is, "Loads," it becomes an outcome project. If the answer is, "None," it becomes an outreach project. We have criteria within the office to decide which projects we will do and which we will not.
What is the balance? How much do you fund those that will make money, and how much funding is there for those that are just for public good?
Until now, more of the resources from the office have been deployed against outcome. However, since we put the DIALOGUES programme together, we have been able to balance things up. The office is split almost 50:50 between outreach and outcome, with everyone chipping in towards the research and technology development projects in the middle of the spectrum.
Do you find that other universities in Scotland share that approach to funding? I take it that they face the same difficulties when making decisions.
Yes, they do. I have been banging on about our approach for a while now, and we are getting some consensus within the sector that the framework is useful, even if everyone does not completely agree. Through Universities Scotland and under the auspices of SHEFC, we are developing a set of metrics, or measures, that is based on the framework. We will use that to examine outreach performance as distinct from outcome performance.
The convener asked earlier about the potential for an R and D mechanism in knowledge transfer. We are certain that that will come. It is only right that, if we are spending a lot of time, money and resource in this area, we should be able to demonstrate as a sector what we are doing and the value that we add.
Janet Brown said earlier that we should not count only spin-out companies. I absolutely agree: that is why it is so important to apply different objectives and measures against such different activities. We hope to have a signed-up survey by the end of the summer. That approach has already been endorsed by Universities Scotland's research and commercialisation committee.
My question is for Sir Alan. Do you find that universities and other institutions are pursuing an individualistic approach to the development of ideas and commercialisation generally, or do they want to work collaboratively through the Scottish Institute for Enterprise?
There is a will to work collaboratively. The interesting point about the institute is that when the project started, it was funded for only five universities in Scotland. Other universities took a very strong interest and, despite the fact that the other universities have not been allocated nearly as much money as the original five, they are working together constructively. Universities such as the University of Paisley, the Robert Gordon University and Napier University have a long tradition of teaching enterprise management and entrepreneurship and have brought a great deal to the party.
There is a sense that people are willing to work together and share good practice. Of course, there will always be an element of competition—that is how we are set up. However, I have been impressed by the collaboration. The staffing groups in each of the universities are very strong and come together regularly to share good practice and to share out what can sometimes be a demanding work load. The signs are good for collaboration.
If good ideas are coming through the University of Dundee, for example, and you want to support those ideas, would you do so as the University of Dundee or would you go through the institute?
We could do both. We have been pursuing a project in Dundee that involves working with two major, established companies in the city. We are working with their middle managers to help to support progress in SMEs and in some student projects. That collaboration has been working well and other members of the SIE have been considering it. I am sure that some of them will pick up elements of that project and run with them in their own setting.
Do you support the idea of a separate funding stream for universities, just for economic development?
The obvious and quick answer that any principal or vice-chancellor would give to a question about whether they wanted separate, and presumably more, money is yes. We have to be careful that we do not skew the activities of universities too far in one direction, either by a new incentive structure or through the allocation of funds. My paper is clear that universities have other purposes before commercialisation of the research base. There has to be a research base to commercialise, so I would be cautious.
A reasoned approach is being taken to the issue at the moment. Scottish universities, and the University of Dundee in particular, benefit enormously from the support that they get from Scottish Enterprise nationally and locally. I agree with Kevin Cullen that SHEFC has handled the knowledge transfer grant well. In our case, we have not received a lot of money—perhaps £500,000—but it is important money because we have discretion to use it to lever projects in a way that we have not been able to do in the past. SHEFC has been clever in striking the right balance between giving people local flexibility and holding them to account for what has been achieved. More of that approach could be extremely helpful, but we should go at a reasonable pace and not forget the real purpose of our universities.
I have a wider question for our guests about the number of young people taking science degrees. I am not clear as to what the latest evidence suggests. Are we doing enough to encourage young people to take science degrees and to specialise in particular disciplines?
I have two or three comments about that. There is a slight dip in the number of applications to Scottish universities and I have no doubt that there will be a dip in the number of applications for science subjects.
We happen to be swimming against that tide. There was a 20 per cent increase in applications to the University of Dundee last year, and a 6 per cent increase this year. We attract students by working hard to put on new courses that cross traditional boundaries and appeal to young people. We try to do that in a way that does not damage in any way the integrity of what we do. However, the market is very fickle, and there is undoubtedly a shortage of young people taking science subjects. Of course, that can be traced back to school; the physical sciences such as mathematics, physics and chemistry have become almost unpopular for those in my children's generation.
Can you discern trends as to why that is the case? This is the wrong way to describe it, but is it a fashion issue? Is it something to do with modern society, or are there deeper, long-term trends that we must address through policy?
It is a deeper issue. I am certainly no expert, but it goes very deep into the schooling system.
Do you have a perspective on young people and science, Dr Cullen?
I admit that it is not my area of expertise. However, as a scientist who came through the education system and as someone with kids who are reaching that age, I can say that science is not seen as exciting, although it was when I was a boy all those years ago.
Along with everyone else, universities have a responsibility to make the case that science is exciting and sexy as well as important to the economy. University outreach activities should be used to do that. The universities would not make much money out of that, but it would be good for the economy. Indeed, we apply some of our knowledge transfer grant money to support that work.
In this job, I get invited round the country to see different things—
You get invited all over the world.
I get invited all over the world, like Tavish.
Undoubtedly, a lot is going on in Scotland. One needs only to mention the University of Dundee as a classic example of an institution that is now world renowned for its work on cancer, for example. However, two weeks ago I had a meeting with the company that specialises in the commercialisation of university research. It claims to have identified about 60 potential projects in Scotland's universities; the same has been said by a number of venture capitalists whom I have met. Rightly or wrongly, a lot of those projects are being held up by issues such as the jam in universities' decision-making processes.
University contract researchers are not happy campers, to say the least. They are among the most talented people and, as has been rightly said, we need to retain them. However, one hears of SMEs that have approached the proof-of-concept fund but have been told that they cannot get funding because they are not in one of the seven cluster areas. Therefore, their projects are effectively lost.
What must we do to make a further step change towards commercialisation? I think that we all accept that heavy investment in basic science must be a prerequisite to a successful commercialisation strategy. Much more money than ever before is being allocated to the commercialisation process through a multitude of ways and means, including Scottish Enterprise, the new institutions that are being planned and yourselves. What step change do we require to make, given that we are still aiming for the same level as many of our competitors?
There is a danger of talking in caricatures. For example, our technology transfer offices in universities are bad but venture capitalists are good. From recent, personal experience, many of the delays that are built into some of the deal making that goes on between universities and other bodies have as much to do with the other bodies as they do with the universities.
Certainly, there might be a case for streamlining the decision-making process in some universities, although I do not think that that is a major problem for Dundee and I expect that it is not a major problem for many places. In general, the technology transfer offices are not saddled by the committee structures that apply to other aspects of universities' work.
We have referred to the SIE initiative of bringing together venture capitalists, people from technology transfer offices and others to talk about the issues. My sense is that a lot of the work that is being done is to do with gaining an understanding of the motivation of all parties involved and trying to create a win-win environment. On a simple level, some streamlining in relation to the amount of paper that has to be produced as the companies are established would be helpful.
It would be wrong to characterise the technology transfer offices in our universities as being sluggish and a barrier to progress. That is not my experience. Over the past few years, they have come on in leaps and bounds. They are smart, aggressive and keen to make progress.
Obviously, as I am one of the people who is criticised and caricatured all the time, I have a vested interest in this matter.
I am not taking sides, by the way; I am merely making observations.
Yes, but we hear those criticisms all the time.
Some consultants say that they have identified the technologies and that they would get on and do the work, if only the universities would let them. I spoke to two of them last week, both of whom wanted £15,000 each to get on and do the work—if they would do it for nothing, they would be welcome to do so. We encourage and involve anyone we can to get the technology out of the door. Venture capitalists say, "Give us the technology for nothing and we'll go away and make a fortune." They would not deal with other venture capitalists in that way and they must deal with us on level terms.
I have sympathy with SMEs and, in that regard, the interface between the university sector and the SMEs has not been optimal. That is why we have proactively put together £1.2 million to try to make that interface more effective by translating the technology into language that the SME can speak and by recruiting people who can make linkages and create the relationships that will lead to economic development.
From a personal and a professional point of view, I can say that we are not burdened by bureaucracy. The caricature of the university having to go through committee after committee to reach a decision on the colour of the crockery is not the case any more. We have devolved authority and it is seldom the case in our office that deals are held up because of bureaucratic delays at our end. We have a job to do in public relations because the claims that people like to make about universities cannot be substantiated.
Is there anything that the Scottish Executive or the Scottish Parliament should do to facilitate greater commercialisation in addition to what has already been done?
In the paper, I suggested that more should be done to support us to be both an agent of economic development and a venturer in different ways at different times. Sometimes, we are beaten up if we operate as international businesses when we are operating in the outcome mode.
We need more support and more encouragement. It would not take much more funding to make what is already happening lead to something quite special. From speaking to colleagues, I know that the rest of the world is looking at Scotland as something of a role model in this regard.
I suggest that the Scottish Executive should not set spurious targets. As you discussed with Janet Brown earlier, something should be done about the low level of research and development in Scottish companies. That idea of industry pull will be important to universities in the next stages of this process.
I certainly agree with the last point in respect of targets. The nation that achieved most of its targets on paper was the Soviet Union and we know what a raging success it was.
Your evidence was extremely helpful. Thank you very much indeed.
Thank you.