The Strategic Centres for Science, Technology and Innovation (SHOKs) CLEEN, FIMECC, Forestcluster and TIVIT from the Company Perspective Executive
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1 The Strategic Centres for Science, Technology and Innovation (SHOKs) CLEEN, FIMECC, Forestcluster and TIVIT from the Company Perspective Executive Summary
2 Publisher: The Federation of Finnish Technology Industries ISBN The Federation of Finnish Technology Indutries Graphic Design: Julkaisumonistamo Eteläranta Oy Cover photo: Colourbox.com Printed by: Julkaisumonistamo Eteläranta Oy
3 Strategy, Excellence, Centres? The Strategic Centres for Science, Technology and Innovation (SHOKs) CLEEN, FIMECC, Forestcluster and TIVIT from the Company Perspective Executive Summary 2011 Kaisu Annala and Juha Ylä-Jääski 1
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5 Executive Summary 1 BACKGROUND The Strategic Centres for Science, Technology and Innovation (SHOKs) require development based on business needs. To succeed in this, a continuous critical evaluation of the Centres operations is necessary. In 2011, the Federation of Finnish Technology Industries will assess SHOKs operations from the company perspective in key sectoral clusters, stated the Working Group for the Innovation Policy in Technology Industries on 13th of December, This report includes an evaluation of the following SHOKs: CLEEN Ltd, Energy and the environment FIMECC Ltd, Metal products and mechanical engineering Forestcluster Ltd TIVIT Ltd, Information and communication industry and services Because RYM Ltd (Built Environment Innovations) and SalWe Ltd (Health and Wellbeing) began operating after the other SHOKs, they were not included in the current evaluation. The evaluation was carried out by interviewing the ten largest investors in each SHOK, and five other companies with a strategic position vis-à-vis SHOK operations. Interviewees, mainly CEOs and CTOs, were designated by the senior management of the companies in question. A series of questions were sent to the interviewees in advance, discussions being held on the questions deemed most important or challenging by the company. In addition, an electronic questionnaire was sent to over 100 companies, resulting in 33 replies. The companies had invested around M 50 per year in SHOKs, while receiving financing of around M 59 from Tekes (the Finnish Funding Agency for Technology and Innovation) for their own company projects in In sections 2, 3 and 4, the evaluation results are presented from three perspectives: strategy, excellence and centres i.e. networking. In section 5, SHOK administration is discussed and in section 6 key recommendations are made. 2 STRATEGIC BY NATURE? The SHOK programmes are successfully company driven. The SHOK concept s greatest strengths lie in the programmes strategic nature and the fact that the companies determine the research agenda. Research agendas have been jointly created by the companies, universities and research institutes involved. In areas where research co-operation was previously uncommon, SHOKs have provided the opportunity for a brand new type of information exchange. The positioning of SHOK research in relation to the company strategy varies significantly. For some companies, SHOK inputs clearly form part of their own objects of strategic research. Such companies participate in SHOK programmes based on the firm s highest-priority research areas. On the other hand, some companies consider research on strategic subjects impossible within the SHOK environment. In such cases, the company participates in programmes in peripheral research areas only. 3
6 The companies consider the following as challenges in coordinating SHOK research with their own strategies: the research consortia can have too broad a basis, objectives can be unclear and time-spans can be unsuitable generally overly long for enabling the utilisation of programme results. SHOK programmes need clearer objectives. The programmes should be focused and result oriented, with key performance indicators oriented towards business development. In order to achieve an effective focus, the programme volume, size of consortia and the time span must be allowed to vary. Consortium size is not a value in itself: the best results are often achieved in small and focused projects. Monetary volumes are already at least sufficient to achieve global excellence. SHOKs must take a more operative approach and lead activities. Contributions to the programmes constitute risk investments, whose business potential must be several tenfold the size of the investment. In addition to the research objectives, the business potential of the programmes must be realistically evaluated and high quality ensured. Visible results are required: quality not quantity must be the focus. To ensure quality, more programme proposals are needed in SHOKs. Sufficient competition is required in order to obtain high-quality programmes. Programme preparation must be open, with SHOK management teams creating the mechanisms for determining which programmes are implemented. Freedom to make changes in programmes during research is a prerequisite. There must be the capability to reorient research in line with the results achieved. Making changes in a flexible manner is currently not possible. Instead, changes are dependent on protracted negotiations between the partners. In the current SHOKs, this makes the process rigid and sluggish. Both public and private sector actors must understand the different ways in which companies utilise SHOK research. Company input into SHOK programmes can include contributions to precompetitive studies, to research resulting in projects on the own innovation process, to research contributing towards product development, to projects aimed at developing business processes, or all of the above. Development of the strategic nature of SHOK performance requires action from all SHOK actors. Public finance policy has a major influence on the size of consortia and the research time span. Through SHOK boards, programme managers and other resources, the companies should take responsibility for the SHOK strategy, programme targets and implementation, while ensuring that the programmes focus on the company strategy and business development. 3 CENTRES OF EXCELLENCE? SHOK is a brand-new way of operating. Genuine collaboration occurs, with business ecosystems being brought together. Such practices would never have been created without SHOKs SHOKs have provided the necessary framework for building the programmes. SHOKs represent an effective method of cooperating cost effectively. The envisaged practices have been achieved. SHOKs are permanent bodies, forums for companies. Discussions are held within SHOKs, opinions are sought and work can proceed without fear of a cartel and in sufficient volumes. Common knowledge and a common understanding are created. Collaboration is the key issue: using one s own resources in joint research. New kinds of consortia between industries have been born in SHOKs i.e. would have hardly been possible without the SHOK concept. New partners have appeared, with whom no co-work would otherwise have occurred. The opportunity has arisen to enhance competences. Cooperation has resulted, including with new partners in areas outside the programmes. 4
7 Partner networks require active further development. It is important to find partners from other clusters. Participating companies should have genuine readiness for innovative growth and change. More interdisciplinary research is needed. SHOK programmes create new opportunities for SMEs. Public research funding is necessary for SMEs; without such funding less research will be done. Research investments are of a magnitude which SMEs cannot provide alone. SMEs are often invited into the programme by larger companies. Some SMEs have experienced difficulty in joining programmes and criticise SHOKs as being for insiders only. A way must be found of reaching the relevant SMEs during the programme planning stage. SMEs have many different roles in SHOKs. Some SMEs have participated in writing the research agenda for the programme, without being a member of the SHOK in question. SMEs appreciate being able to participate in value chains in which they have unique know-how. They often collaborate on only one work package, scarcely maintaining contacts with other programme participants. SME activities within SHOKs are often closer to product development than research. Low levels of funding and project bureaucracy are the chief bugbears of SMEs in this regard. 4 EXCELLENCE? SHOKs are creating better top research, for use by Finnish companies, than ever before. SHOK-based research has generated new solutions and technology. Subjects have been included which are top priority from companies points of view. Better results are reached in the close co-operation than those achieved by the competitors. In particular, companies that do not operate within SHOKs as part of their strategic core business exhibit most scepticism about the level of the programmes and cast doubts, from multiple perspectives, on whether spearheads can be created. Can excellence result from loose collaboration within a broad consortium? Is there a tendency to force independent projects under one and the same programme, in order to artificially grow the programme volume and the size of the consortium? Programmes must be further focused and more risk taken than today. Are all the programmes achieving excellence? Is it the SHOK concept s goal to finance a programme with the intention of raising Finland to match the rest of the world? Will all research themes be strategically important to Finland in the future? More competition is needed between the programmes, in order to ensure that the strategically most important, highest quality ones are selected. There is no such thing as national excellence. SHOKs must take a global view. Creating global contacts, increasing researcher mobility and participation in international institutes were considered major development targets. The best global actors must be engaged on collaboration; Finland simply has too few top experts. However, internationalisation is not a value in itself. It is essential that global knowledge and sufficient, high-level resources are available for research. SHOKs have improved co-operation between enterprises, universities and institutes. Universities and institutes have been challenged to generate good ideas about the future direction of the world and markets. Ability to visualise the future is required. The universities are expected to generate research which creates the basis for innovation. A response has also been mounted to this challenge: via SHOK programmes, university research is converging with companies strategic focuses. Creating excellence is hampered by competition between Finnish universities. The universities trust in their home advantage. However, large companies are already cooperating with universities throughout the world. Hopes directed at the academic world include greater speed and a business oriented mindset in research. 5
8 Excellence of this type does not only consist of technical and scientific knowledge, but also of the ability to convert technology into business. This still seems to be forgotten by both academic actors and public financiers. 5 SHOK ADMINISTRATION Funding Tekes funding has been the main instrument, in addition to companies own, internal funding. Tekes funding decisions and operations during funding processes were widely criticised. Tekes was also praised: After rigidity in the early stages, cooperation with Tekes began to proceed seamlessly. Several companies have found cooperation with Tekes to be mainly positive and flexible. Funding decisions have been reasonable and received on time. The dialogue during the funding process was considered useful. SMEs have found it easy to begin projects. Key subjects of criticism were as follows: In several cases, the companies did not concur with Tekes assessment of the strategic nature of the SHOK programmes. Tekes has aimed SHOK operations at overly large consortia, with an unrealistically long time-span before useful results emerge. SHOK and Tekes programmes partially compete, and Tekes has launched programmes of its own which overlap with those of SHOK. Tekes procedures and decisions vary by cluster and/or officer Tekes decisions are not transparent and its funding processes are often unreasonably slow. For many programmes, funding percentages are very low compared to those planned when developing the SHOK concept. Tekes funding is distributed slowly, which creates difficulties, particularly for SMEs and universities. Based on the interviews, funding processes shall be clarified and communication between Tekes and SHOK companies intensified. This must be done regardless of whether funding for SHOK programmes or company projects is in question. As originally planned, SHOKs have begun applying for funding from sources outside Tekes. There was an understanding that research must be able to proceed also without any external funding. Most of the interviewed companies have participated in various EU projects. The programmes have helped them to develop international networks, and in many cases they have sought to join the projects for non-strategic reasons. SHOKs must take a more active role in applying for EU research funding. Because the funding base will grow, new SHOK programmes can and must be created on a freer basis than today. A proposal by Technology Industries, to apply for EU funding for ongoing SHOK programmes and to use the freed-up Tekes funding to resource new SHOK programmes, received support. Another suggestion was for a national EU project office to be run by industry federations. 6
9 IPR rights In SHOKs, the results are owned by the participant or group which has achieved them. A parallel and global licence, valid until further notice, must be granted to all partners in the research programme. This approach is akin to those adopted in EU projects. The IPR principle was not considered restrictive by most of the interviewed companies, because the research is performed far enough from the competition and cooperation is possible reasonably close to the company s own strategic spearheads. For some companies, the principle of parallel rights restricts their possibilities of participating in SHOKs on the basis of the company s strategic area of research. Broad-based consortia magnify this problem. In some SHOK programmes, the decision has been taken to apply the restricted publicity model, thereby decreasing the share of Tekes funding. 6 RECOMMENDATIONS FOR FURTHER ACTION 1. A clear owner is urgently required for the SHOK concept, whose main tasks are development of the SHOK concept and ensuring that the operating conditions especially funding are based on the original principles. The SHOK concept currently has no owner. Various actors interpret and implement the originally defined principles independently of one another and sometimes even in opposite directions. Communication between actors (SHOKs, financiers and the steering ministries) is insufficient, which has almost led to direct conflicts. The owner of the SHOK concept should include high-level representation of all key actors. In order to align activities and obtain the commitment of the participants, the following SHOK management team membership is proposed: - Top management representative of the Ministry of Employment and the Economy - Top management representative of the Ministry of Education and Culture - Director General of Tekes - President of the Academy of Finland - President of VTT - Top management representative of the universities - Two SHOK CEOs - Two high-level company representatives The industry could take responsibility for convening SHOK management team meetings, which should be chaired by the company representative. The management team could report to the Research and Innovation Council, for example. 2. Tekes and each SHOK should agree on a regular meeting intervals, on a quarterly basis at a minimum. The goal would be to exchange information on plans and experiences and to identify solutions in possible challenging situations. Almost all criticisms towards Tekes during the evaluation concerned a lack of communication between a SHOK and Tekes. This has led to misunderstandings, delays, escalating issues and complications in processes. Membership of these regular meetings must reflect the contents of the agenda. The SHOK strategy, funding and the general status of programmes must be reviewed once a year at a minimum. Both the Director General 7
10 of Tekes and the Chairman of the SHOK board must participate in this review. Each party is responsible for communicating the meetings and results to their own organisation and stakeholders. 3. In order to have members competencies match the main tasks of the boards, SHOK companies must renew their SHOK board membership. SHOK boards main tasks are to define the SHOK objectives and strategy, to ensure that operations are properly resourced and to manage risks. In addition, in line with the SHOK strategy, the SHOK board must select the programmes to be launched and get companies and other actors committed to implementing the programme. SHOK board members must act on behalf of the SHOK rather than in the exclusive interests of their own organisations. At the moment, the boards of SHOK companies are mainly formed around the principle of representation of interests. Board seats have quotas for different groups of actors and the seat is rotated between actors. The current procedure is unlikely to promote the achievement of SHOK objectives. Board members need a broad, visionary view of both the strategic themes of the SHOK itself and the related business areas. Members must be able to identify new business opportunities and analyse their potential. In addition, board members must be capable of boldly focusing SHOK programmes, of ensuring that the programme objectives are concrete and of managing the objectives themselves. 4. Companies must direct the strategic key themes of SHOK programmes, commit their best resources to SHOKs and ensure the programmes internationalisation. A company can achieve the best results by investing in SHOKs within its strategic development areas. SHOKs require the best strategic and technological resources, in order to sharpen up their programme targets Programme managers of SHOK programmes, the working groups preparing the programmes and programme management teams have key responsibility for implementing the strategic and programme objectives set by the board. The programmes require the leadership and participation of energetic and enthusiastic specialists from the companies involved. Sufficient responsibility, powers and commitment must be granted by the companies to these specialists. SHOKs require an international perspective and global knowledge as the basis for achieving global excellence. 8
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12 The Federation of Finnish Technology Industries Eteläranta 10, P.O. Box 10, FI Helsinki Tel , Fax
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