Inventing products can help Welsh companies and Wales itself to power ahead. The country is blessed with great ideas and people, but Douglas Friedli finds there are a few glitches to be ironed out.
Wales is a hugely innovative country – if you don’t believe that take a look at the inventive companies we have detailed on the following pages. But they aren’t just innovating for the sake of it; they want to make money, employ more people and will help the Welsh economy.
The problem for policymakers is that you can’t just order more innovation the way you can commission a road or hospital. So where do the ideas come from?
The answer depends on the sector. Wales has a strong automotive parts industry, supplying the Midlands and beyond. Paul Nieuwenhuis, director of the Centre for Automotive Industry Research at Cardiff University, believes the big car manufacturers are getting the suppliers to provide more of the innovation.
“The moment you say something like ‘Let’s have fewer CO2 emissions’, you move outside the manufacturers’ comfort zones,” he says.
Nieuwenhuis cites the example of catalytic converters, which were developed by the metals specialist Johnson Matthey rather by than the big automotive groups.
“Demand is shifting to smaller, more fuel-efficient cars, which will require innovation,” he adds. “If you look at how many of the motor industry bailout plans are framed, the manufacturers will have to incorporate greener technology. When innovation comes from a supplier it is usually through people working in an area adjacent to the areas they know.
“I will not be popular for saying this, but the best way to promote innovation is through regulation – there are so many examples in environmental and safety regulations. If you don’t innovate, cars just become commodities.”
His logic is not lost on Enfis, the lighting technology company based in Swansea. Its light emitting diode (LED) systems are brighter and use less energy than traditional bulbs or even standard LEDs. That gives Enfis a cost advantage, but it is about to become a regulatory one, too.
Incandescent bulbs are being banned in Australia, and likely to be banned in Europe by 2012 and the US by 2014. Chief executive Shaun Oxenham believes this wave of regulation should make Enfis recession-proof.
His company developed as a spin-out from Swansea University. Using academic ideas to create companies has been the Holy Grail of development for years, and there are great examples from Bangor and Aberystwyth to Swansea and Cardiff.
But Oxenham is not convinced the system for creating fully-fledged companies works yet. “Most universities are not incentivised to spin out companies such as Enfis,” he says. “There are funding mechanisms, perhaps a carrot and stick, which could get universities to look at their intellectual property.”
So there are high hopes for the Welsh Assembly Government’s £70m Academic Expertise for Business programme. This six-year project aims to support at least 60 new products and processes onto the market using ideas generated in Welsh institutions.
The programme promises to find projects with potential for commercialisation and fill the perceived funding gap between early research and the start of the market exploitation process.
One positive sign is the creation of academic centres that will hopefully pull in investment and create commercial technology. An example is the new Food Industry Centre set up by the University of Wales Institute, Cardiff. As well as training nutritionists and dieticians, it will provide a research and development laboratory for new and improved foods. Food economists predict that food buying and eating habits will change over the next five to ten years, creating a great opportunity for the centre.
Another is Swansea University’s Centre for NanoHealth, which will look at how nanotechnology (tiny devices and materials) could be used to find cures and improve lives. It will include a business incubation space for start-ups and a clean room for testing and manufacturing new devices.
The raw ingredient for all this is academic research. But there are concerns that Wales may be underfunded compared with its neighbours.
Speaking at an Institute of Welsh Affairs conference, Richard Davies, vice chancellor of Swansea University, said: “We still lag behind England significantly and we lag behind Scotland massively. If we are serious about creating a knowledge economy, we have a quality issue and a quantity issue.”
On the positive side, said Davies, Wales had narrowed the gap with England in attracting world-leading academic staff. But there is also a problem with the private sector, he told the IWA: “In Wales we do not have a huge number of large companies.
“Wales gets just 1.6 per cent of industrial research and development spending. That is a concern because the most effective form of technology transfer is to do it with industry right from the beginning.
We have to find some way of exploiting our links with large companies to bring knowledge into Wales.”
The Assembly Government says the picture is improving, with the private sector investing £227m in research and development spending in Wales in 2007, and has grown 7 per cent a year since 1997.
But the total is tiny compared with UK research investment of £16bn in 2007.
For every problem, though, it seems there is a Welsh Assembly project – in this case the £35m Business Innovation Support programme.
This will create a specialist team to provide advice on product development, design, manufacturing and marketing. And intellectual property advisory centres will be set up, one each in North and South Wales.
IQE, the computer chip technology company based in Cardiff, has worked out its own way around the funding gap. IQE is listed on the Alternative Investment Market, so it’s under pressure not to splash too much shareholders’ cash on research.
But IQE is the market leader in its particular area, so its customers pay the company to do their research and development – giving the business a budget of £10m a year to work with.
Chief executive Drew Nelson says: “The proportion of our own money we spend on research and development is small. We are getting our customers to help establish us even further ahead of the competition.”
The company went through a tough time after the technology crash earlier this decade when the optoelectronis sector, which it had targeted, virtually collapsed. Nelson’s strategy was to diversify, whch has paid off well as many of the world’s bestselling mobile phones now contain several IQE Gallium Arsenide chips. Now the company has the solar power industry in its sights as Gallium Arsenide can capture much more of the sun’s energy than silicon panels.
Thirty miles north of IQE in Tredegar, Penn Pharma is a big investor in research and development. But chief executive Peter George is concerned the term “innovation” is so widely used that it is in danger of losing its meaning.
He says the idea needs to be applied more deeply: “It isn’t just a product or service that needs to remain innovative. All aspects of a business need to be thinking ahead and identifying key innovative techniques to help improve efficiency and effectiveness, from human resources tools and techniques to the sales and marketing functions.”
Another requirement for innovative companies is space to expand. Our list of the most innovative companies in Wales is not strictly scientific, but many of the firms listed have a location in common – the Technium network of incubators. There are now nine of these incubator buildings across Wales and another centre in Cwmbran is about to join the network. As well as proving space for Welsh university spin-outs, the centres have helped to draw in investment from the likes of IBM in Pembrokeshire and Sony near Bridgend.
Connaught Engineering, an automotive technology company, was attracted to Technium Performance Engineering from the Midlands a couple of years ago. Operations director Geoff Matthews says the directors were impressed by the Welsh Assembly Government’s “pro-active” approach as well as the space available at Technium.
The company is developing hybrid vehicle technology that can reduce the fuel consumption of cars and vans. “We started developing a hybrid vehicle five years ago,” says Matthews. “There was one of those eureka moments when someone said: ‘Look, you could fit that in a Transit van.’”
It was not easy at first: “When we first started talking about the hybrid car, people would yawn and look the other way. But since then, political and social awareness of CO2 emissions has developed quickly. We had a vision of what had to be done for the future.”
Connaught’s next step will be to build its own sports car, but the path of innovation seldom run smoothly. In February the Assembly Government issued an order banning any development at a nearby site where Connaught had hoped to build a factory for the car. The Assembly said it was forced to act because of a complaint.
“It came as an overnight shock to us,” says Matthews. “We were due to open in August, now we are in the dark as to what the delay could be.”
The problem is thought to relate to water quality in a nearby estuary. Now there’s a project for a truly innovative company to get its teeth into.
Also in: April 2009
-
Unlock the universities
How do you turn ideas into money? That is a question Wales has been asking for years, but we are not the only ones. In Scotland, Singapore and South Africa the same debate is being held.
-
Get it together
In the digital age, companies still need to meet and exchange ideas. In this year’s Network Wales report, Glyn Mon Hughes looks at what networking means now, and Insider lists some of the country’s top venues.