Research engine

Published on Saturday 27 September 2008 17:09

AS CHIEF executive of Scottish Enterprise, Robert Crawford believed that building a knowledge-based economy would help put Scotland at the forefront of modern, global thinking and rid it of a reputation for declining industries.

He was drawn to the German Fraunhofer institutes and a similar model in Canada which were commercialising ideas developed in their universities. With Scotland's academia enjoying high ratings for innovation, Crawford and the then enterprise minister Wendy Alexander thought the initiative was what they had been looking for.

Neil Hood, the agency's late deputy chairman, had once said Scotland was "good at the D part of R&D but needed a lot more R" and Crawford was convinced his plan for three Intermediary Technology Institutes (ITIs) would "grab our intellectual and innovative abilities firmly by the scruff of the neck and push Scotland into the global market place".

Three ITIs were set up to work in the energy, communications and life sciences sectors, together with a holding company, funded by the taxpayers but operating at arm's length from the Government and Scottish Enterprise. They hired big hitters with blue-chip CVs, and with a 450m budget that prompted some gasps of disbelief, they were charged with turning science into money-making enterprises. Within a year, Gordon Smith, chairman of CBI Scotland, was calling for the budget to be increased fivefold.

The ITI initiative is now half way through its initial 10-year lifespan but with 134m so far spent, questions continue to be asked about what exactly they do, why they keep losing key staff and, crucially, whether they have been value for money.

Critics have regularly taken aim at the ITIs for failing to deliver results and for being far too opaque in their dealings. Scottish Enterprise has recently admitted it is reviewing the programme, though it is not thought to be at risk of anything other than mild modification and an even closer monitoring of its budget.

"My own view is that we have proved this model works," says Shonaig Macpherson, a former senior partner at Scottish law firm McGrigors. "What we do is complicated, but it is definitely making a difference," she says, rattling off a series of statistics to support her case: 25 programmes set up, 12 commercial deals signed, 132 patents launched – "we are the biggest filer of patents in Scotland" – and four companies launched.

This last point is the killer fact. Cynicism around the ITI project is based on how few new births there have been. But is four a sufficient return in four years of operation (year one was spent setting up and hiring people)?

"We are on track, meeting the targets laid down by Scottish Enterprise. These companies are employing people, taking us into new markets and are providing added value," she says, defending suggestions that if they were truly entrepreneurial they would find other means of achieving their ambitions.

"I'm not sure they would. We identify the opportunities, we do the groundwork. We effectively de-risk the research and development and we will get our money's worth," she says.

The coal miner's daughter from Ayrshire, who rose to head one of Scotland's biggest law firms, found the job offers pouring in when she surprisingly resigned from McGrigors at the age of 45. Since then she's held a number of non-executive roles, including the chairmanship of the National Trust for Scotland and the Scottish Council for Development and Industry, and her ambition is to build and improve Scotland's stock of companies.

She assumed the chairmanship of ITI Scotland, the umbrella body, three and a half years ago, replacing Gordon Campbell, one of a number of senior executives who left early in the project's development. It caused some embarrassment among its backers who defended the departures as a form of back-handed compliment as it meant its staff, drawn from companies such as Shell and Sony, were highly prized.

Among those who left was Tony Amor, chief executive of ITI Energy, who later joined the board of Applied Intellectual Capital, a US company whose Glenrothes subsidiary, Plurion, had received funding from ITI Energy. Macpherson says there was no suggestion of impropriety in the move and the funding was subject to rigorous auditing and diligence.

However, ITI is awaiting the return of 3.86m, a third of the total provided to Plurion, in exchange for the intellectual property (IP) rights. "If we don't see that money the good thing is that all the IP rights come back to us," she says.

The ITIs employ 80 staff, including a number with doctorates, but remain an enigma, even in business circles. Macpherson is sensitive to the charge that, despite the relatively high level of public spending it receives, the wider public is largely unaware of the ITI initiative, not least what it does.

"The universities thought we were a research council giving out grants. Other people think we're a venture capital outfit and some believe we're civil servants. I have nothing against civil servants but nothing could be further from the truth," she says, noting that staff have joined from multinationals such as Shell, AstraZeneca and Sony. She describes ITI Scotland as a "research institute", then corrects herself, saying that it should be an "applied research institute" because it puts deeds into action. "We are not full of boffins thinking big thoughts. We're about understanding the market."

The process begins with market analysts producing a "foresight" report which evolves into an R&D programme to meet potential market opportunities. Companies and universities are invited to tender for the R&D work and a programme manager is assigned to ensure that it is delivered.

ITI Scotland retains the IP and grants a licence to manufacture and market the products and services. Among those that have emerged are anti-hacking software, battery technology and a drug-testing kit that Macpherson is particularly excited about as it could turn into a big ticket earner.

She reveals that far from being a mere spender of other people's money, ITI Scotland has been earning royalties for at least a year. If the drug-testing kit, developed by CXR Biosciences in Dundee, kicks off it could produce substantial revenues for the taxpayer.

"I have a lot of respect for people working here and it was good to see the Government have the guts to do this," she says, adding that the model has impressed an international audience with visitors from China, Japan and Europe descending on its Glasgow headquarters to learn how it works. But impressing those closer to home is a more important task.

"Our biggest challenge is engaging with the Scottish business community to persuade more of them to take advantage of what we have got," she admits.

With that in mind the profile will be worked on over the coming months and a public event is due shortly at Dynamic Earth in Edinburgh, showcasing some of the work it has been doing.

In the meantime, she is interviewing for a new chief executive after David Creed became the latest big hitter to resign. A successor should be announced by mid-November.