JOINT COMMITTEE ON EDUCATION AND SCIENCE debate -
Thursday, 18 Jun 2009

Business Innovation and Research: Presentation.

Chairman

I welcome Mr. Seán McNulty, Innovator; Dr. Frank Devitt, NUI Maynooth; and from Science Foundation Ireland, Professor Frank Gannon, director general; Dr. Graham Love, head of strategy and programme implementation; and Dr. Ruth Freeman, head of industry research development. I will ask Mr. McNulty to make a short presentation, followed by Dr. Devitt, on the role of education in business innovation and how we can improve the innovation performance of business in Ireland. Professor Gannon will then be invited to make a short presentation on the current levels of pure research versus applied research funded by SFI and the returns in terms of employment from all research, which is crucial. Members will then ask questions.

I draw attention to the fact that members of the committee have absolute privilege but this same privilege does not apply to witnesses appearing before the committee. Members are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses or an official by name or in such a way as to make him or her identifiable.

I invite Mr. McNulty to begin.

Mr. Seán McNulty

I thank the committee for giving me this opportunity. I am managing director of a company, Dolmen, an SME which develops new innovative products for industry in Ireland and Europe. In the last five years we have launched a spin-off sister company called Innovator to mentor companies on the practical aspects of innovating within an SME business environment. It is a practical approach and about doing the right things.

With regard to my background, I was among the first class of product designers on this island. I believe there were seven in the first year to graduate in 1980. Now there are approximately 3,000 students graduating from product design courses. I know about emerging skills and new approaches to the marketplace. My company is about constant change — identifying flexibility and changes that must be made. I live in this type of industry.

In this presentation I will discuss what is of relevance to Ireland Inc. and how to generate and drive innovation in Irish SMEs. There are approximately 260,000 SMEs in Ireland; they amount to 98% of all businesses and employ 50% of the labour force. Approximately 50% of the constituents of members of the committee are working in SMEs.

I will outline the four key points I wish to convey to the committee today. The first is that innovation is short-term, medium-term and long-term. Analysis shows that more than 50% of businesses innovate without performing research and development. These companies grow at the same rate as their research and development counterparts. I can offer an example. Axiom Enterprises in Limerick is the main support to Dell locally. Its situation is dire and the business has moved to Poland. The task Innovator carried out with Tony Treacy, the managing director of Axiom Enterprises, was to identify and find new work for the Limerick operation. We applied a business model innovation tool and technique to find and explore new business opportunities for the people based in Limerick. The result is that Axiom Enterprises has set up a joint venture in Poland and Holland to maintain the established contacts and business with Dell. What is more interesting for the Limerick operation is that we are test marketing a new product on hearing aids, applying the same technical capability that Axiom Enterprises has learned from Dell, the know-how to customise and custom manufacture individual products for customer needs, but focusing on hearing aids. Business model innovation works and sustains and grows jobs. What I wish to convey with my first point is the critical importance of balancing the need for long-term research and development focused innovation with short-term and medium-term innovation activities within businesses.

The second point deals with innovation vouchers. I do not know how much committee members know about them, but they are worth €5,000 each. They are available to any SME to use with any institute or educational body. In 2008 a total of 507 vouchers were issued, valued at €2.5 million, and 203 were redeemed. In 2009 a budget of €2.5 million is allocated for the voucher scheme and, as far as we are aware, 83 have been redeemed up to April. The current call has been suspended until September. The innovation vouchers are very good, but I am not particularly happy with the performance level. It is 50% which is good, but it could be better. The issue I have encountered when working with SMEs which have vouchers is that they do not know how to use them. The institutes of technology can deliver research — they are very good at this — but they cannot deliver the professional capability to define what needs to be researched. That is the element we must examine and, perhaps, give SMEs more flexibility and broader use of vouchers in supporting the growth and sustenance of their businesses.

The third point is that educational bodies must co-ordinate and up-scale innovation training. These are short-term innovation focused activities. It is about demand centred innovation, particular aspects of the business model such as new and more flexible revenue activities or revenue streams, new partnerships, new licensing and technology transfer. That training must happen immediately for graduates, industry and consultants in order that we can up-scale this activity. We are doing it in Innovator but not on the scale required to turn around the economy.

The final point I wish to make is that in my own business I have been obliged to make courageous decisions. I am convinced that we have the necessary resources in Ireland. It is not all about money. Innovation involves managing and empowering people and providing them with a process which informs them on how they need to change their businesses in order to sustain and grow the marketplace.

We have policies in place and I have no problem with them. We also have programmes to implement these policies. However, I work with SMEs and there is a mismatch between the needs of the SMEs and the programmes in the context of the former being enabled to innovate. The SMEs are part of the problem, but they are also part of the solution. They will only work if they take small steps and we teach them how to innovate. We must, therefore, encourage them to take small steps and ensure the right people are brought together. Dr. Devitt will comment on this matter.

The most important point is that we must stop waiting for things to happen. We must take action or nothing will change. I thank members for listening to my brief presentation.

Chairman

I thank Mr. McNulty for being so brief and call on Dr. Devitt to make his presentation.

Dr. Frank Devitt

It is a pleasure to be here. I am currently head of the department of electronic engineering at NUI Maynooth. From August I will be head of the new department of design and innovation. I have been at NUI Maynooth for six years. Prior to that I was in business for 23 years. I spent one half of that period as an engineer and the other as a manager. I worked for multinationals and also established my own indigenous companies. I have varied experience which I can bring to bear on the topic under discussion.

I wish to put forward one simple proposition which revolves around the fact that there is a serious bottleneck in the Irish national innovation system. Some 20 years ago we were quite deficient in how we could approach innovation. Science and technology was correctly identified as one of the major areas in which change could be brought about. The latter was achieved through the establishment of Science Foundation Ireland, SFI. The issue we are addressing attests to the success of SFI in bringing the level of science and technology in Ireland to a good international standard. This work needs to be continued and I would not say anything against this. Unfortunately, there is a great deal of disputation and discussion in the press about this matter. Articles have been published in which extreme views have been expressed. For me, it is simple: science and technology is necessary, but it is not sufficient. There is more to innovation than science and technology. I wish to provide an analogy. If it were to be the mission of the Government to improve the capabilities of League of Ireland football clubs, the conclusion might be reached that the standard of defending among such clubs was poor and an academy might be established to bring the relevant players up to an international standard by means of an appropriate training regime. After some time, there would be plenty of teams with good defenders, but the former would not go very far because they would not score many goals due to a dearth of forwards and good management.

Although I would not like to draw it too far, I believe this to be a reasonable analogy to give in respect of our system of innovation. We have defenders who have been well trained by the academy and a good supply of these individuals are coming on stream. However, we are not providing for the complementary functions of forwards and management. In the innovation system the forwards are our market-focused people and the management is provided by those in innovation management. In simple terms, there are two other functions which we require in our system of innovation. The first of these is innovation management, which does not come naturally to many people and for which most of those who operate SMEs have not been trained, and the second is a market or user focus, which has been identified by many commentators during the past 20 years. I provided many quotes in respect of the latter in the documentation circulated to members.

Much innovation happens without recourse to technology. Many innovating companies grow and dominate without having recourse to basic research because they use an existing stock of knowledge. Beyond this, many companies grow without any recourse to technology at all. There are good reasons more than half of the companies operating in Ireland are not based on any sort of proprietary technology. I provided a few examples such as amazon.com, Ryanair, Apple, Riverdance, Dell and O'Brien's Sandwich Bars, none of which has recourse to proprietary technology and some of which only use third-party or existing technology. These are internationally successful trading companies which achieved their success without recourse to basic science and technology.

My basic point is that it is possible to do what the companies to which I refer have done. If, therefore, we want to maximise the potential of the country's innovation capacity, we should focus more on promoting this aspect. Three actions are important in this regard. The first and most important of these relates to SFI which, as stated, has performed admirably. I am of the view that we need a complementary entity which might be described as an Irish business innovation foundation. The latter could deal with the complementary and non-technical innovation activities that could help to grow the use of science and technology among companies which require it and bring up to an international level those companies not involved in the area of science and technology. The business of Ryanair, one of the greatest success stories the country has ever seen, is not based on technology.

The second action I propose is that new postgraduate masters programmes in innovation management and design be established under the auspices of the new foundation to which I refer. The word "design" is interesting and, as Mr. McNulty stated, has been around for some time. In recent years it has developed a business-strategic focus that is extremely interesting. Design involves synthesising creative solutions for any problem; it does not merely relate to designing products. Design can be applied to services and business models and strategies. As a way of creatively synthesising solutions to business problems, design has, therefore, been recognised in much recent literature as an extremely valuable user and market-focused discipline. In the documents circulated to members I have provided quotes from EU interests which are actively investigating and promoting design as a driver of user-centred innovation.

The third action I propose is that we should provide consulting and training courses on a national basis. These would be longitudinal courses, not just momentary or short-term interventions. Our SMEs need continuous mentoring and consultation, based on training and combining the benefits of continuous professional development, CPD, and networking.

I wish to share an insight which came to me during a discussion in which I was involved a couple of weeks ago. It appears Ireland is poor at CPD and does not engage much with the concepts behind it or lifelong learning. We are also poor at business networking. The latter is surprising, but it is accepted by many luminaries in the world of business and academia that we are poor at networking — in research and business — within the confines of the island. We are good at networking internationally but poor in doing so within the island. The insight to which I refer is the fact that the best way to network is for professionals to join together on training programmes. The people concerned go on a journey together and share their experiences. By combining CPD and networking, we would have a real opportunity to kill two birds with the one stone.

In summary, I am of the view that there is a deficiency. One of the documents circulated to members contains a simple diagram which outlines the three pillars on which our innovation economy should be based. These are a technology pillar, a user-focus pillar and a management pillar and they represent the defenders, forwards and management of our team. As regards the technology pillar, we are quite competent as a result of the efforts of SFI. However, these efforts are not being utilised to the maximum as a result of deficiencies in the other two pillars. In order to address this problem and, as stated, I propose the establishment of an Irish business innovation foundation. When it commenced operations, such a foundation could, in comparison to SFI, operate on a relatively small budget. In its first year, I would propose a figure of 5%, as it would grow and could focus on the co-ordination, policy and promotion of the areas to which I have referred, principally innovation management and user focus, which would include design and marketing.

Professor Frank Gannon

It is good to have the opportunity to address the committee. I made a rapid appearance before it once previously, but it is appropriate to come back. The construction of this combination might send a wrong message and I would like to ensure we do not get the wrong message. In other words, it is not basic versus applied research. It is a long way from this.

Chairman

That is more a function of the time constraints on the committee before the recess, although relevant points have been made, on which Professor Gannon will be able to comment during the question and answer session. The presentation is not an us versus them scenario.

Professor Frank Gannon

I appreciate that and that was the way I was reading it because a larger forum could be provided by the committee to include Enterprise Ireland, FÁS and so on. However, it is good to have the opportunity to clarify what SFI is about and see how we are going about our business. We have to go back to why we were set up — not 20 years ago as Dr. Devitt said — to know what we are about. SFI got going in 2003. It is formally part of the Department of Enterprise, Trade and Employment working under the Forfás umbrella together with IDA Ireland and Enterprise Ireland. It was set up, even though Enterprise Ireland was providing support for research, because the conclusion had been reached by different groups that in analysing the world and projecting the future Ireland needed to move up the skills chain. This was recommended by the OECD, businessmen, etc, and a convincing argument was made.

Every place in the world can absorb in, but we have to see whether that is sufficient to keep Ireland's economy at the level we want it to be. We are not Enterprise Ireland II because that would not have made sense, but a vision was needed to carry out our work. Our work is not in basic research and the media sometimes like to have clear juxtapositioning of activities. We support oriented basic research. The formal definition in the Frascati booklet states our work is not for knowledge; it is for knowledge that would be useful in the economic context. We are strong in understanding and applying the definition.

Our mission is to build and strengthen scientific and engineering research and its infrastructure in the areas of greatest strategic value to Ireland's long-term competitiveness and development. We have to be judged and considered on this and that is appreciated on the basis of earlier comments. The other reason SFI was set up was we did not have enough highly skilled researchers to ensure Ireland was well placed and at the forefront of the world economy and retain its position. An internationally applied standard is the number of researchers per 1,000 workers. The United States and other technologically advanced countries have approximately ten researchers per 1,000 workers, while Ireland has five per 1,000. Poland is moving from three and trying to get to five per 1,000. If a country does not have skilled individuals, it is not surprising it does not engage in highly skilled, high value activities. Reducing that deficit is a major task for us. We must increase the number of researchers per 1,000 workers.

According to Forfás figures which have not been released, Ireland has moved to six researchers per 1,000 workers and our projection is we will reach seven per 1,000 soon. However, the required growth will only happen if funding is maintained because there is a time lag between us starting a project and people becoming available to industry at the other end. Researchers are important because they are required by industry and the community in other areas to absorb and make this a knowledge economy. Technology cannot be taken off the shelf unless companies have the people who are able to do this. It will work in some restricted areas, but skilled people are needed. Even Ryanair employs top class computing experts to work out fares at the right time and at the right speed. It is not just neutral absorption. People must be there to absorb.

Our activities are constrained, which ties in with the oriented basic research idea, initially to the pharmaceutical and ICT areas, the two major industrial sectors in Ireland. Food is the third sector, but it is predominantly under the aegis of Teagasc and Enterprise Ireland. In recent times energy has been added to our portfolio. We expect there will be growth in this industry and that there will be opportunities because we are not coming from too far back.

We have increased the number and quality of scientists according to various measures. The foundation was analysed in a value for money exercise by Indecon Consultants in 2007-08 and they showed we were moving up the ranks. One external measure is the ranking of Irish quality, which is important in this area. Companies need quality and Ireland has moved from 24th to 17th. Our goal is to reach tenth. That is not an abstract academic exercise. By doing this, we will have proved we have attracted the best people and that there is an opportunity for growth.

Some, however, will say, "So what?" Many are going through activities that are not close to SMEs. This is true in the short term. To absorb new technologies and distinguish the activities in Ireland from those in every other country in the context of absorptive technology and using open innovation, we need to have a plus, which is why we need people, numbers and qualities.

The second question in the committee's invitation related to employment. In 2008 there were 2,812 researchers employed directly with our funds. SFI funded researchers are good scientists and engineers and leverage money from other sources, with the European Union and Enterprise Ireland being important. This may surprise those who have categorised everything too tightly. SFI funded researchers took a commitment of between €20 million and €30 million in the past two years. It is important for industry to work with these researchers. Therefore, there is a direct link between those we employ and industry. The leveraged funding allows a further 3,000 to be employed, which means there are approximately 6,000 researchers in total at a cost of €50,000 per job. The figure is more generous if the leveraged funding is added, as it decreases to €20,000 per job. What we are doing on employment is effective. People are being trained at the same time who will be superbly important for the economy.

Industrial relevance is shown in different ways. The scientists we employ will not make jobs in the short term, but they are making a contribution. For instance, scientists and engineers are working with 300 companies. Approximately 40% of SFI funded scientists are working with companies on a frequent basis. Industry is interested in what we are supporting. That is a high figure, given growth has only been experienced relatively recently.

The IDA Ireland figures give another indication. It is experiencing growth in new jobs and job retention in the area of research and development, which is new. Coincidentally, when SFI did not exist, the commitment to research and development on the part of companies in Ireland was low, whereas now investment has increased to more than €400 million. In fact, companies' expenditure on research and development has grown to €1.6 billion in the past five years. In other words, it has doubled from the €800 million that was being spent. Most of it is spent in-house. That is how the IDA categorises what it is doing with its funding and, once again, that figure requires people to deliver it.

Some 42% of the IDA wins last year were in the area of research and development, but the invisible change is more significant. Almost 60% of the new contracts which were announced by the IDA last year were with companies already in Ireland. These are companies with which we are familiar but which we do not want to see move. We want them to change from manufacturing to something plus or to have more sophisticated manufacturing or the next layer of manufacturing. Almost 50% of these companies moved into research and developments. The number of companies we deal with, multiplied by the people, comes to between 55,000 and 60,000 jobs that are, therefore, increasingly dependent on the research capacity of Ireland. In other words, these jobs are dependent on the funding we provide. This funding goes to all of the companies we have been talking about.

I will finish by pointing out that the basic versus applied research distinction at the start of this question session is probably something of a fudge. I am not fudging the facts; it is just that it is not linear nor segmented and cannot be siloed. What is happening in the higher education institutes is of direct relevance to what is happening elsewhere. Many aspects of this were touched on by colleagues and I agree with them. I do not want to sound as if I am saying the opposite. What they are saying is right. What is needed is not only defenders. As I love football analogies, I would say we are, perhaps, the defenders' coach. However, we also need to have forwards. That happens not to be our job, but very often forwards must be bought — as Chelsea and other non league of Ireland clubs have shown. That may be what needs attention. We would also not be against but would favour the idea of an Irish business innovation foundation. In a recent presentation to our board we sought to set aside 10% of our budget for an activities proposal. That may be a slightly different area, but we are very aware of that bridge being required. It is largely filled by Enterprise Ireland, but there may be a gap we need to look at.

Chairman

Professor Gannon may be interested to know that Enterprise Ireland will come before this committee in two weeks and will answer questions and elucidate its position following on the debate of this meeting. I expect committee members have a considerable number of questions to raise.

Senator Fidelma Healy Eames

I welcome the delegation and thank our visitors for attending and for their interesting presentations. The overall point as I see it is that it is not about either-or but about both basic and applied research being essential. This committee is concerned with education and science. Therefore, what we should be concerned about today is how we can till or prepare the ground at education level in order to embed the appropriate knowledge skills needed for innovation and design as well as technology. Technology is now embedded through Science Foundation Ireland, SFI, and Professor Gannon has shown how we are moving up the value chain.

I have several questions and would appreciate a response to them from each of those who made presentations. Is there adequate awareness and knowledge of the value of innovation courses and where are these courses offered? What is wrong with current innovation programmes? What are the barriers to the take-up of training in innovation management by SMEs and why has this not happened yet? I was interested to hear about the innovation vouchers. Who issues them and where can they be cashed in? Do companies know about them? The take-up is so low it seems not. How do we compare across Europe in terms of innovation management and design, which seems to be the critical missing component?

Professor Gannon touched on the issue of outcomes. What is the overall budget of Science Foundation Ireland since it started in 2003? He said its focus was on knowledge which would be useful in the economic context and spoke about jobs in terms of the people working for the organisation — the researchers, scientists and the leverage jobs created. However, has SFI a measure of the number of jobs it has provided in the real economy as a result of the investment in researchers and scientists? I am keen to see what the outcome of that investment is. I would like to direct that question also to Mr. McNulty and Dr. Devitt. Have they, based on the use of the innovation and design model, a measure of the number of jobs created in the real economy as a result?

Chairman

As there were a number of questions put, we will deal with the responses now.

Professor Frank Gannon

Some of the questions relate to the area of innovation and it would be more appropriate for our friends here to respond to them. I will begin at the end and address the question of our budget. Since we started in 2003 we have invested €1.2 billion. Not all of that has been spent, but approximately €900 million has gone out so far and approximately €400 million is committed in the wings. That may seem a big figure and it is, but I will put it in context. Our spend on an annual basis is less than 20% of the public spend on research and development and about 50% of it goes through the Higher Education Authority, HEA. We are the major competitive funding, which is a particular advantage. We provide funding by competitive funding of 50% and spend the amount I said.

Senator Fidelma Healy Eames

To clarify, has SFI received the €1.2 billion from the Government since 2003?

Professor Frank Gannon

Not quite yet, because €400 million of it is still committed but not spent.

Senator Fidelma Healy Eames

How much has SFI received from the European Union?

Professor Frank Gannon

We do not receive any money from the European Union. We are a Government agency funded 100%. We are a Government agency, like Enterprise Ireland.

Senator Fidelma Healy Eames

I understood SFI competed for research moneys from the European Union.

Professor Frank Gannon

We do not do that. That is done by the researchers we fund in the higher education institutes. It would be inappropriate for us to do it. We do not have laboratories and do not employ people. We provide funds for the higher education institutes to do it.

These are big figures and I will put them in some context. A number of tables address expenditure as a percentage as a percentage of GDP or, in the Irish case, of GNP. Ireland's expenditure is just under the European 27 average, at 1.6% approximately. The EU average is 1.8%. Therefore, we do not spend more in that sense. The Government spend is about 0.6% or 0.7% and that is less, for example, than Portugal's which is 1%. Therefore, the Government spend is not, in absolute terms, risked. A third point is the growth in our expenditure has been very good and has grown rapidly and has had the effect we have seen here so far.

We compare ourselves to the OECD figures rather than the European 27. The OECD figures for spend are 2.4%. We are 1.6%. Therefore, we are approximately 50% off. An interesting analysis was carried out by EUROSTAT. It analysed the current growth of expenditure in Europe generally. It will be 2047 before Europe will spend the same amount or percentage of funding as the United States does today.

Senator Fidelma Healy Eames

This is not absolute. I asked how SFI translates the moneys it receives from the Government into jobs in the real economy. We have the figures for researchers and scientists. There is no point just not being up there until 2047 unless we are making a practical achievement for people today.

Professor Frank Gannon

I absolutely agree. I just wanted to put it in context and point out that the sum, although big, is only getting up towards where it should be.

On the outcomes, we must distinguish between what we contribute to and what can be attributed to us. To use another sports analogy, we are the scrum getting the ball in a position such that the backs can score. We pass opportunities that are created by the melee of research that is going on back to the agencies and the companies which then have the victories. It would be completely inappropriate for us to say we are the ones who created the research and development jobs.

Senator Fidelma Healy Eames

I agree. Has Science Foundation Ireland carried out any research with the 300 companies in question to find our how much the foundation has contributed to the creation of jobs in the real economy?

Professor Frank Gannon

We have not asked them and, quite honestly, the answer would be a little spurious. They would say we were a component of what was required but that there were other elements in the making of jobs, the obvious ones being the supports available, the relevance of their areas, the skills base required, etc.

Senator Fidelma Healy Eames

However, they have not been asked. They could rate SFI on a scale of one to ten.

Professor Frank Gannon

On what they think we are doing?

Senator Fidelma Healy Eames

Yes.

Professor Frank Gannon

We have used other ways. They are answering the question by their actions. They are working with our scientists. They are contributing actively, physically and financially, to certain programmes in which we are involved, the CSETs and SRCs. In the CSETs, centres for science and engineering technology, 25% of the funding has to come from industry and they are the named industries which one would wish to have involved. The SRCs did not have to but have already done so. Collectively, there are almost 100 companies actively putting money into our programmes. That is more real——

Senator Fidelma Healy Eames

Has there been any fall-off?

Professor Frank Gannon

It is increasing.

Senator Fidelma Healy Eames

Good. That is a measure, but it is important that SFI also asks them for the more qualitative information they could provide.

Professor Frank Gannon

I would be quite happy to do that, but I am distrustful because if we asked a company which was not working with us, it would state SFI was important. Such an analysis was carried out under the advisory science council. The document is at an early stage, but it would point to the gap emerging subsequently. When we were putting together our multi-annual strategy, we contacted at random a number of companies, big names which carry weight, and all of them wrote exactly what we ourselves might have written but did not do so. Going back to the Senator's point, to get a figure for what we are doing is difficult. There is another measure that is more than an opinion or a scoring scale and which might be difficult to interpret — BERD, business expenditure on research and development, which has increased and doubled to €1.6 billion. This indicates that the environment, the context, the infrastructure — of which we are all components — is working such that it is of interest to those companies which invest in research and development.

Dr. Frank Devitt

I will address some of the questions together. I must correct what Professor Gannon said. I did not say in my presentation that SFI started 20 years ago; I said 20 years ago the country was in a difficult state. I am aware that SFI was founded in this century.

With regard to courses and training, the barriers are those of misunderstanding Government support and the paucity of provision. It was against this background that I proposed a foundation to bring coherence to the offering from a State point of view, as SFI has done for science. Such offerings are sparsely distributed. Second, companies are not encouraged significantly to participate in the sparse offerings of innovation management and design or user-centred innovation. They are not encouraged by general promotion by the State because there is a very heavy and substantial promotion machine in favour of science and technology in SFI because that is its remit, and in Enterprise Ireland, the Government and the press. A small business manager will think the advice is correct, that they should concentrate on science and technology only; they are disinclined to engage with something else, even though they may instinctively believe they should do so. For instance, the Higher Education Authority, HEA, has a graduate skills conversion programme which applies to ICT courses only. It subvents masters programmes in engineering or science which would normally carry a postgraduate fee of €7,000 or €8,000. The subvention from the HEA allows the programme to be delivered for a fee of €2,000. This is a direct subvention and a direct message that it is good for people to convert to ICT. Such a programme is not available in terms of innovation management or user-centred innovation. If it were, it would help financially and in terms of promotion. Many of the Enterprise Ireland supports are focused on science and technology only, which means Enterprise Ireland companies can obtain support for science and technology-related activities but not for non-technical courses in a coherent way.

I wish to make another point which may address some of the Senator's questions. I wholeheartedly agree that the role of SFI is to produce human capital and that this needs to be diffused into the economy in order to provide absorptive capacity. This is the way science works. Well trained scientists can absorb the existing stock of knowledge from anywhere in the world; one needs to be at a certain level before one can absorb technology at an equivalent level. The other elements of innovation are available mostly in multinational companies. Most of the benefit has been achieved by IDA clients, multinational clients, not by the small and medium business sector.

I refer to a paper produced for the ESRI by Professor Frank Barry, an economist at Trinity College. He refers to the era of the Celtic tiger, but I am not sure exactly to which years he is referring in this instance. The paper was produced last year or early this year. He states that in the Celtic tiger era, as a share of EU 15 exports, indigenous exports declined in most sectors. This is shocking and the point we are addressing. We should be developing the SME sector by promoting science and technology to enable those SMEs involved in science and technology to grow and by developing other areas of innovation. I apologise if I have strayed off the point.

Senator Fidelma Healy Eames

Where do SMEs acquire innovation knowledge? Mr. McNulty has said there are 260,000 SMEs in the country, employing 50% of the working population. They need to change to be able to compete in the marketplace. Where do they go to learn how to make that change? Where are the innovation and design courses available? Where can they cash in their vouchers?

Dr. Frank Devitt

The vouchers may be applicable to training. There are innovation management training programmes available under the growth fund, but it has been suspended.

Senator Fidelma Healy Eames

Who are the providers?

Dr. Frank Devitt

There are quite a few. The National Institute of Technology Management at UCD, as its name suggests, focuses on technology management as a core part of innovation. However, there are not many courses available; far fewer than are available for conversion to science and technology courses.

Senator Fidelma Healy Eames

These are small businesses which are struggling and they are scattered all over the country. What I am hearing is that they could be helped and improved to enable them to stay in business and move up the value chain, but where do they go? For example, in Galway——

Chairman

That is a rhetorical question; the point has been made.

Senator Fidelma Healy Eames

I am not hearing the answer.

Chairman

I must move on to Mr. McNulty, unless Dr. Devitt wishes to make a point.

Dr. Frank Devitt

In respect of education, there are not many courses available; therefore, they do not have many places to which they can go. Second, in respect of training, what they need is not sporadic intervention whereby they can go on a course for a day and wonder what to do with the knowledge gained; they need something much more long-term such as continuous mentoring. A small department within Enterprise Ireland — the applied innovation department — is providing a good service, but it has a small staff and is only a pilot programme. Such a programme could be developed on a much larger scale nationally. The answer is that such businesses do not have many places to which they can go.

Mr. Seán McNulty

I apologise if I do not remember all the questions, but I picked up on some of them that I can answer. The only facts and figures I know are what I need to achieve for the end of the month to pay the salaries for my micro enterprise. I will not be able to handle that also. However, I know from an education point of view what SMEs lack, which is why I wanted to be here today. Our SMEs are very good and sustain business. They have let people go but they are adapting to keep their existing customers. They know their customer needs but do not have the skill sets to identify what are their customers' unmet and undiscovered needs. I could outline all the tools and techniques, but that is for the educational people. However, it is like Henry Ford saying that if he asked people what they wanted before he developed the Model T, they would have told him they wanted a faster horse. Our SMEs are brilliant at understanding customer needs but they do not know the tools and techniques for unmet and undiscovered needs. Our educators need to educate consultants as well as graduates and the SMEs to understand there is a process. There is demand-centred innovation and a number of tools and techniques as part of that, of which design is one. There are also user-centric investigation scenarios. I could go into them, but it is not for today's discussion.

I will deal with innovation vouchers and the growth fund. The website states that the call for applications for innovation vouchers has been stopped until September. The Department of Finance has stopped the growth fund. Those are two initiatives that I would have accessed for my clients. The growth fund is great. It is big and export orientated. However, buried in the growth fund was a fantastic little offering called innovation management skills, which enabled a company to train the workforce and senior management to understand how to innovate and how to lead an organisation in innovation and increase the business. However, it was buried in a bigger programme, which is why I feel we are nearly there but we need to break out and make it comprehensible to SMEs as to how they can use this funding and how it will deliver value. Those steps could be done better. NESTA in the UK has a similar programme on innovation vouchers, which is the 5,000 level. It allows educational institutes to use them in combination with business-to-business activities. It is about having more flexibility on how SMEs will use these vouchers to drive their business.

I could take a week to discuss the barriers to SMEs, which are a major problem. As one who works with SMEs I will admit they are part of the problem, but are also part of the solution. While I am here as an innovative expert in management innovation and driving innovation, I am also here as an SME. We need to be part of every task force that is put together in order to get the mindset of an SME. The mindset of an SME is focused on sales and short-term innovation activities, but they do not know how to do it. Innovation is great. It is about leadership and vision. It is about getting SMEs to understand how they need to drive innovation. Off my own bat I wrote a book for managing directors of companies. It is a half-hour read. Its purpose is to get them to understand how innovation actually works. I did that off my own bat because I saw a need with my own clients to understand how it works.

I will take it one step further. When I leave at 2 p.m. I will go to a company in the northern part of the country. It is an SME that employs more than 200 people. It is getting some county enterprise board support — it gets nothing from Enterprise Ireland because it does not export. It wants to innovate and double its turnover and staff. The work I will end up doing for it will focus on innovating its business model because SMEs have operational excellence. They are very good. We have done some things extremely well. They need to consider new ways to communicate this and investigate export markets, new revenue models and new opportunities for their core skill areas. It is all doable. However, we are lacking the co-ordination between all the levels of innovation and targeting a bigger proportion of the SMEs because we concentrate on too small a niche.

Deputy Ruairí Quinn

I welcome the delegates. I have been reflecting on the language used and the reality for those of us on this side of the committee room considering the monster that is in Marlborough Street in Dublin 1. I suspect if we were to send a transcript of what has just been said, nobody in Marlborough Street could translate the words, language, jargon, terms of reference and the numbers. I know the witnesses are before the Department of Education and Science, but there is a dichotomy between the department for primary and secondary schools in Marlborough Street, the HEA which is a kind of semi-detached orphan or illegitimate child of the Department of Education and Science with a very queer almost schizophrenic role, and the bridge into enterprise and job creation. Is there considerable clash and counter-clash involving areas of simplification and streamlining through either reduction in expenditure because that is where the budgetary reality is or getting better value for that expenditure?

I have a problem with the concept of creating an entrepreneur. I know how to create a doctor provided he or she has a tolerance for blood and smells in a hospital, an architect, an engineer or a dentist.

Chairman

An entrepreneur has a penchant for risk.

Deputy Ruairí Quinn

Yes, but how does one create an entrepreneur? It seems to me that is something that one has. I have met very enterprising civil servants, for example, the civil servant who created the first duty free airport in the world was a quintessential entrepreneur. It is not necessarily the case that they are all in the private sector with none in the public sector. From what Dr. Devitt and Mr. McNulty have been saying, I can certainly understand how it is possible to make a good entrepreneur more effective and efficient. I presume that is one of the areas about which the delegates are talking. In Mr. McNulty's final few comments he referred to helping people to further improve doing the things they already do well. The company he will visit this afternoon clearly had a vision and a realisation or a desperation that it needed to be better to stay still. It realises that it know what it needs and it knows where to get it because it does not have it itself. That seems like a very clear rational marketplace response.

My question is on the linkage between education and enterprise. There is already a de facto recognition that if Science Foundation Ireland were to move into Marlborough Street — God love it — it would disappear very quickly. Is there a case to take all responsibility for the third level sector away from the Department of Education and Science as has been done in some other countries in order to formalise this bridge between the two? I address that comment to Dr. Devitt because he has clearly moved from the commercial business world to the third level academic world and he has technical training.

How do we train civil servants in all Departments to interpret European Union directives and apply them to the Irish economy, which is a miniature economy relative to those of the EU 15, in order that the application of the directives are enterprising and innovative, and are facilitators rather than barriers?

Chairman

I saw Professor Gannon smiling and he may also want to answer some of those questions. However, we will start with Dr. Devitt.

Dr. Frank Devitt

The Deputy asked me about moving responsibility for the higher education system into the Department of Enterprise, Trade and Employment. I believe that was his point. There is much to be said for that and yet I am sure there would be some difficulties. I believe all universities would accept that in the past ten years their role has changed to be relevant to the economy. That is a very substantial change and would have been argued about more ten years ago than it is today. It is more accepted today. From that point of view, it could be said that higher education institutions generally should be more aligned with the Department of Enterprise, Trade and Employment. However, I would not like to go too far with that point because they solidly should be educational institutions — the higher education institutions, universities and institutes of technology.

On a related point, perhaps there could be more differentiation between universities and the institutes of technology which I know is an ongoing discussion. Just as Science Foundation Ireland produces absorptive capacity from its research, as we have mentioned, it is important that universities perform their educational role in the same way to produce well-educated people. It is a slightly separate matter. If we were to concern ourselves with that at too early a stage, we might end up with mission confusion. Perhaps it might be something to think about at the fourth level — the postgraduate level — rather than at the other level. I would like to make another relevant point in that context. I mentioned continuing professional development earlier. It is almost a bit of a nonsense to talk about fourth level, because one could talk about fifth and sixth levels, etc., until it is time for one to retire.

Charles Handy has said that one should never stop learning. It is truly a question of lifelong learning. When does it all stop? We should really grasp the concept of continuing professional development. Perhaps I will fudge the question. The universities should certainly get much more involved in continuing professional development. As I said recently at a forum we occasionally bring together in Maynooth, it became clear to us a few weeks ago that continuing professional development will enable networking as a concomitant benefit. If one asks a manager of a small or medium-sized enterprise, or a busy multinational, whether he wishes to go to a course, he will say he does not have time. The only reason such people will agree to go is because they want to meet people. I am sure everyone knows people who go conferences and exhibitions not to see what is being presented, but to meet the people. Perhaps we can bring them to courses, etc., to encourage similar networking.

Deputy Ruairí Quinn

I am familiar with and have participated in continuing professional development for professional institutions like architects, medics and the rest of it. These are competitors, in a sense. There is no provision for networking there. How could a model of continuing professional development be constructed from a university? How can people from different disciplines or activities be brought together in a way that offers potential for networking and achieves positive additional outcomes?

Dr. Frank Devitt

The model that should be constructed involves supporting research into the topics we are talking about, such as innovation and management. We need to work on their application to the local economy. Centres of expertise should be developed deriving from that research. That work needs to be transferred to individuals though ongoing professional training courses leading to certificates, diplomas and master's degrees — the sort of thing that constitutes the general activity of universities. This form of engagement should be ongoing and regular. There is no need for university-style continuing professional development. People should not have to attend in-class lectures, take notes and go away. The use of technology means it is often not done that way. While deliverable materials can be provided electronically over the Internet, quality time has to be provided for a discussion on them. That is how continuing professional development should work. There may be competition from the universities, which have much to offer along the route that goes from research to expertise to delivery of that expertise and finally to bringing people together.

Mr. Seán McNulty

I will give factual answers to the questions that have been asked. I agree with the point that was made about the focus on the market. That is where my life is. I wish to speak about entrepreneurs. We all know that innovation is all about dealing with people. When I go into companies, I sometimes walk out at the end of the day believing that nothing will ever change. It is a question of people's mindsets. There are different types of people. Entrepreneurs tend to be innovative people. When such people start a company or a business, they tend to put in 120% to get the business up and running. They employ people and learn how to make the business grow. When they come under pressure in the marketplace, they have to innovate again. That is where failure happens. Such people have to learn more about the processes involved. The education system should be working in a proactive manner with entrepreneurs who are involved in small and medium-sized enterprises. It should help them to develop their businesses to the next stage. That is the first thing. We have to realise that other types of characters are needed as part of the team structure. I refer to them as "implementers" and "bridgers". Those involved in small and medium-sized enterprises who operate in an intuitive and ad hoc manner need to understand certain processes. When they repeat such processes as they try to increase the scale of their businesses, they need to make sure they have the skills to do that. I recruited two graduates of product design courses last year. It will be two years before they are ready to earn money for me in the marketplace. They need to take on board the mindset and skill learning about which I have spoken.

The links with education need to be stronger and more proactive. There needs to be more co-operation. I love the word "simplicity", which has been used in this debate. We put too many complications into everything we do. This is a question of change. I really liked the comment that was made about procurement, which is a significant area. I could raise many issues in this respect. I accept that we need standards, regulations and forms of certification. We are not going to change them. Like anybody else who exports, sells and operates in Europe, I encounter such issues. We need a mindset change. Perhaps we need to publish a guidebook and arrange a workshop to educate people about procurement within Government and State bodies. The Aho report suggested we should define the outcomes we require from the application of regulations, standards and criteria by the senior Civil Service. It said that the Civil Service should define the outcome that is expected from each purchasing activity or communication activity, for example. It is not necessary to restrict the type of technology that is used to achieve an outcome, or the criteria that apply to such technology. We need to make sure that those who tender for an opportunity are in a position to propose new and innovative ways of delivering the end result.

Deputy Ruairí Quinn

It seems to me that there is a problem with start-up companies, particularly fourth level ventures that come out of the commercialisation of research in certain third level institutions. If that company goes from the incubator to the point at which it seeks to get contracts, one of its biggest potential customers will be the Government. It is not possible for a company to apply for many Government contracts if it has not been in existence for three years. It is an understandable condition, from the point of view of procurement personnel. One of the reasons the Government is afflicted with "consultantitis" is that the permanent Civil Service is frightened to make decisions in case they go wrong and it is then held to account by people like Opposition Deputies. That seems to be an inhibiting factor. How can Mr. McNulty and his colleagues reconcile the legitimate concern of those involved in public administration — politically or administratively — not to make mistakes with the need to use this country's massive procurement purchasing power to give start-up companies a chance to work for a public agency? When such companies try to sell their services abroad, the first question they will be asked is whether they have worked in this area for their own government or health service. That is the first question I would ask if an Estonian company came knocking on my door. If it did not have such experience, I would not be prepared to allow it to experiment on my doorstep. There seems to be a need to build a bridge with the public service, in its political, administrative, national and local totality, as it is potentially a major customer. The public service is a regulator in the sense that it decides how to apply directives and maintain standards. I have mentioned two of the barriers to facilitating the commercialisation of a skilled workforce.

Mr. Seán McNulty

I wish to respond to one of the Deputy's points. As someone who has been involved in this area, I can speak from my practical experience. We are working as part of a cluster of companies to overcome some of the issues that have been mentioned. The Deputy is right to say there is no track record. If one is awarding a contract to a company, one has to believe in its ability to deliver. This issue affects small and medium-sized enterprises. They have to work together to deal with it. As Dr. Devitt said, a little more networking might be necessary. Those involved in such enterprises tend to have a particular mindset. They focus on their own customers. They are not aware of these other opportunities. It is a question of education. While that might not be my role, perhaps in two weeks' time the committee will be able talk to people whose role it is. My first suggestion is that people involved in small and medium-sized enterprises should be smarter and should work together. I also suggest procurement criteria should focus to a greater extent on the desired outcome from what is being procured. Such a mindset change is needed to allow small and medium-sized enterprises with more innovative solutions to get the work, rather than the larger organisations that traditionally get it. A change of this nature would allow such enterprises to come up with new, innovative and more cost-effective ways of doing business, while continuing to meet the criteria at the end of the day. A combination of approaches is needed.

Professor Frank Gannon

I would like to respond to some of Deputy Quinn's interesting questions, starting with the question on procurement. I am very involved in EU policy in this area. I advise the Commissioner on it. The question of procurement is one of the recurring themes at EU meetings, including a meeting that took place earlier this week. We need to lower the barriers that tip over into state aid. As a result of the massive change that has taken place, research and development investment in pre-commercial procurement, as opposed to pre-competitive procurement, is now permitted. Therefore, if the Government were to decide to invest in the possibility of putting a system in place to recharge all the electric vehicles that will go up and down our motorways, for example, a process of procurement could take place to that end. The issue — this is precisely the point made by Deputy Quinn — is how quickly does that realisation enter the system and how aware are people of this. For my part, I spread the message through Forfás, which is the appropriate agency. We have a crucial opportunity because the use of state aid to provide a level playing field throughout the member states is being overcome by Switzerland, Singapore and other countries which can do what they like. We are, therefore, competing with our hands tied behind our backs.

The reason the Deputy's second point about entrepreneurship in the public service is important is that a mindset is required that is able to keep a fresh eye as opposed to taking a risk. As someone who has entered the public service from a relatively entrepreneurial life which involved setting up companies — scientists are entrepreneurial in the areas in which they work — I find I have to adjust my understanding of the system. The rules are king and the outcome, to take the point made by Mr. McNulty, is not what is considered. This needs to be refreshed. The OECD also asked in its reports for a change in mentality. It is by all of us constantly presenting opportunities and asking the question "Why not?" that things get changed. There is a carefulness in this regard.

While I do not have direct dealings with the Department, the Deputy raises an interesting point. As Mr. McNulty indicated, university education was established a long time ago for a purpose, namely, to provide graduates. It is now being asked to do much more. It must do third level education, fourth level training and PhDs, commercialisation, innovation, technology transfer, spin-outs and provide a reference point for every company which wants to come in. It must also be a deliverer of innovation vouchers, as required, and so forth.

It is appropriate that a strategic analysis of third level is under way. The analysis was established relatively recently and I do not know how it is proceeding. It is, however, a perfect time to examine the issue. To achieve the necessary linkages — there can be gaps otherwise — it is important to note that we work closely with the Higher Education Authority which has a member on our board. When the Higher Education Authority was putting together PRTLI 5, we had an input into where needs were likely to arise because one is providing infrastructure for the future. That works at that level.

The question which receives more attention is the large sum allocated to the universities as part of the bulk grant. Some of this is absolutely essential and could not be handled by enterprise-driven organisations such as Science Foundation Ireland. It is required for research in areas such as the humanities, social sciences and areas outside our remit, given that we are constrained. However, there must be good connectivity between these two aspects. This happens indirectly because the universities and institutes of technology must produce strategies to secure funding from PRTLI 5. This is reflected in the people who are coming into it. On the question of where the interplay takes place, it is not tightly directed.

Science Foundation Ireland had a programme two years ago known as the Stokes professorships and lectureships programme. The colleges and institutes were asked to identify a strategic gap in their portfolio of staff. The common approach of replacing members of staff who leave an institution creates rigidity. As a result of this programme, we placed approximately 60 new professors and lecturers in the system. This has an impact. We selected the individuals in question based on their relevance. We would love to be able to continue to do this but that is where the dreaded budgetary constraints enter the equation. This is one way of creating linkages.

I forgot to mention two facts which came to mind earlier. The Deputy asked about Ireland's position in the European context. There is a European innovation score card. While I do not know the basis on which it is produced, Ireland does very well and is, I believe, ranked in the top ten, perhaps seventh.

In terms of the number of Irish as opposed to multinational companies with which we work, approximately 30%, or 100 of the 300 companies, are not multinationals. That is important.

Senator Fidelma Healy Eames

Are indigenous companies referred to Science Foundation Ireland?

Professor Frank Gannon

That is done on a person to person basis but they also come to us. Dr. Ruth Freeman is the head of our industry research connection. She will attend medical device meetings tomorrow morning and deals with IBEC's research and development and ICT. We constantly interact at that level. Companies ask where they will find someone of interest to them — this is of relevance to the other comments — and Science Foundation Ireland, as the major competitive funder, will be aware of who is doing something useful in the relevant area. That is a clearing house role.

To return to indigenous companies, 65% of Irish exports from indigenous companies are from the food sector. Many of the small and medium-sized enterprises we have in mind may be in the food sector which spends 2% of turnover on research and development. The slowing of growth highlighted in the study and also noted by Dan O'Brien is of concern because the growth in exports has been largely driven by multinationals. Enterprise Ireland is focused on opportunities for Irish companies to grow. This issue may be connected to the current structure. In the food sector, for instance, the issue may be explained by the fact that it deals more in commodities than anything else.

Dr. Frank Devitt

I will make three brief points. Professor Gannon referred to the European innovation score card. As it happens, I have a quote which supports the point he made. A European group, INNO-Metrics, in a comment entitled, Design Creativity and Innovation: A Scoreboard Approach produced in February 2009, stated: "Countries showing a higher performance in creativity and design also show, taking into account difference in per capita income, a higher innovation performance as measured by the EIS Summary Innovation Index”. Put simply, countries showing high performance in creativity and design do better.

Deputy Quinn has asked if one can create an entrepreneur. I teach entrepreneurship and tell people not to try to be an entrepreneur in the classical, popular sense because not everybody can do this. Instead, they should try to be entrepreneurial. It is part of the human condition to seek opportunity, accept some risk and try to evaluate it. This is being entrepreneurial in everything we do rather than being excessively conservative.

On procurement, we hold an innovation economy forum occasionally in Maynooth. Procurement was discussed at one of our recent meetings. While I am not an expert on the issue, three topics occurred to me under the procurement heading. First, training is required for procurers in the public service on how they can better facilitate local industry. On the size of contracts, for instance, a question arises as to whether one bundles smaller contracts into one large contract, which mandates that the contract must go to international tender, or has a series of smaller contracts. Second, one should also have a life-cycle approach. This relates to the outcomes to which Mr. McNulty referred. A life-cycle approach refers not only to the product but also its maintenance and full life-cycle costing. Third, the issue of pre-consultation is important. If procurement is about to take place on an important issue, it would be good practice — this applies also to areas we are not discussing today — to bring in experts, namely, industries involved in the area in question, for pre-consultation before proceeding to contract.

Deputy Beverley Flynn

I welcome the delegation and thank our guests for their interesting presentations. On Professor Gannon's point about how people get access to Science Foundation Ireland and whether the organisation reaches everybody, including in the regions, can it accommodate all the requests it is receiving?

Professor Gannon also noted a significant increase in research and development in Ireland in the past five years. While Science Foundation Ireland does not necessarily claim credit for additional jobs created in this area, I presume it is not an accident that the increase in research and development coincides with the establishment of SFI five years ago. I am sure Professor Gannon had a reason for informing the joint committee of the increase. What are the main reasons for the increase in research and development? I am interested in this issue in my own area in which large companies such as Baxter and Allergan have invested significant sums of money in research and development in recent years. What has been Science Foundation Ireland's input into this development?

To be honest, I am fascinated by Mr. McNulty's job. If I was involved in a small or medium-sized enterprise, SME, I would love to meet somebody like him because he is like a one-stop-shop for SMEs. Where can I go if I do not want to go to Mr. McNulty? Is there anywhere a small business can go to get all of the help it requires to get to the bottom of existing programmes? Mr. McNulty mentioned that there is a small innovation fund hidden within the growth fund. Who is helping SMEs to get access to that information? That is where I see the huge mismatch in what is happening for small industries. The timing of the involvement of somebody such as Mr. McNulty in a business is critical. If a person is not aware of the service provided by him, or someone who provides a similar service, then, unfortunately, it will probably be too late by the time anyone does get involved. That is a major problem for SMEs, especially in the regions.

It is good to note that we compare favourably within the European Union in terms of the number of researchers we have. Poland is impacting on a number of industries in my area. Poland is placing a great emphasis on research and development. I want to ensure this country is keeping pace with what is happening in other EU countries, especially economies such as Poland, that seem to be directly affecting industries in this country.

Dr. Devitt referred to networking and how we do a fantastic job internationally, yet while we have the necessary skills to do it we are not applying them domestically. What is the reason for this? I invite him to expand on it. I do not wish to duplicate questions that have been asked.

Senator Brendan Ryan

I welcome the delegates. One of the suggestions in Dr. Devitt's presentation was that there would be a master's degree in innovation. I would consider that to be too elitist and to be operating at too high a level. I say that as a person who has picked up a few qualifications along the way myself. We need to focus at a lower level. For example, the transition year module at second level should be compulsory. We must incorporate an innovation module into science and home economics courses. At third level the science and technology courses should have an innovation module. Commerce and arts degree level courses should have an innovation module. The kind of person who studies arts could be well disposed towards innovation. Innovators do not need to be technicians. We need to refocus and balance our approach to innovation in a different way.

There is considerable potential to pick up ideas at the shop floor level in industry. We do not do that well as a country. Irish industry does not do it well. People working in industry who have a low level of education can be full of ideas and we do not have a systematic approach to capturing those ideas. If we were to do that better and more successfully we would bring some small and medium-sized enterprises up the scale in terms of performance. In many cases people go to their line manager with ideas and the ideas get lost. Sometimes line managers steal the ideas and present them as their own, which can mean people stop making suggestions to them. A systematic approach needs to be taken. There is a wealth of knowledge available that we need to tap into.

Funding by Science Foundation Ireland has been addressed. On the question of whether entrepreneurship can be taught, at one level it can be developed in individuals. I am interested to hear how we, as a country, can develop entrepreneurship at the low levels I described, where there is a need. It is important that we do that successfully. The number of students choosing science subjects at second level and, correspondingly, at third level, has reduced. That will be a barrier to innovation development. I would like to hear suggestions on how we might address that issue.

Chairman

It was obviously going to be a natural consequence of the subject matter that some of the issues dealt with by the Oireachtas Joint Committee on Enterprise, Trade and Employment are being covered by us. They would not usually be directly relevant to our deliberations but they are pertinent. I thank everyone for their comments.

I have a question for Professor Gannon and his colleagues. Without going over old ground, I was interested to note the new move into energy research, which is fundamental to our economic survival and future prosperity. How quickly is that research being rolled out? Is it in indigenous companies only or is it being done in partnership with overseas companies. I accept it is not within Professor Gannon's remit, but does he believe it will result in indigenous companies leading the way in energy production by means of wind, wave, biomass, bio-fuel, hydrogen cell storage or other method? What areas are being covered currently in terms of research funding? Without commenting directly on Government performance, does Professor Gannon believe more needs to be done, or what are the barriers in that regard?

Dr. Devitt outlined that there are no complementary functions such as marketing or innovation management. Those areas are not within the remit of the Department of Education and Science. Which body or agency should be responsible for them? Reference was made to the Irish Business Innovation Foundation as an idea, similar to Science Foundation Ireland in its own area of competence. Would the foundation be suited to a strong subset within Enterprise Ireland or is it precisely because Enterprise Ireland has not performed in that area that a separate agency needs to be set up? For example, if the applied innovation department was expanded, could it fulfil the role of the Irish Business Innovation Foundation, or is Enterprise Ireland just too large and unwieldy? I am not asking Dr. Devitt to be an apologist or proponent of what is going on in Enterprise Ireland because representatives of Enterprise Ireland will attend the committee itself, but surely Enterprise Ireland is the body that should be facilitating the marketing and innovation side of things within SMEs? If not, what the hell is it doing? I will ask Enterprise Ireland that question because everyone has acknowledged Science Foundation Ireland is doing very well within its core competencies.

Mr. McNulty referred to the mismatch between the needs of SMEs and the programmes to enable them to innovate. We have had some discussion about the voucher system. For starters, how many SMEs know about the voucher system? Whose job is it to outline that they are available? What existing body's job is it to outline to companies where they can avail of the limited opportunities for further development? I invite Professor Gannon to reply.

Professor Frank Gannon

That is an interesting range of topics. I will try to reply to them in sequence. On the question about companies in the regions, there are drivers for those that also have to be seen in a larger context. The drivers are that more people are available within those companies with skills in chemistry, optics or visuals. They are there because when Science Foundation Ireland was set up it brought in excellent people who are skilled in that area. In the area of photonics and light, a professor was brought to Galway because he is an expert in that area and one can see how those things intercalate. He interacts with a large range of companies. He knows what they are doing and he has moved from his narrow box into other areas.

In the pharmaceutical area, an expert came back to this country recently who was working in the area of Botox. He is now making the second, third and fourth generation products. We brought him in as a research professor. Such individuals inevitably have an impact. The point that was made about Poland was interesting. The companies in question have sister companies in manufacturing around the world such as Allergen in Puerto Rico, for example. The real competition is in where the next product is going to go. Having research and development embedded in a site means the company will look favourably on it. While research and development may not lead to many jobs in the short term, it is the retention of jobs and the transformation of Irish industry through this input that matter. Companies may move to Poland, as we saw with Dell. That is a predictable outcome because if the company is involved in routine and robust manufacturing, cost is a major question. For many years the Irish system has pitched it such that it is moving up the technological skills base. Company leaders in Ireland are really good at doing preliminary work to get engaged and get the attention of head bosses elsewhere.

I am not standing back from the successes of IDA Ireland. In the Indecon report it was quoted as stating Science Foundation Ireland was a reference cell for it. This is not just a vague idea of us conducting research but very active engagement. With Dr. Ruth Freeman and others, I have been working outside Ireland with IDA Ireland and recently visited the United States to explain our programmes to companies there. Dr. Freeman's predecessor is now in the Untied States for two years working mainly for IDA Ireland but also with us, acting as a conduit for us. With all the world chasing the same business, IDA Ireland needs an entry point into a company. Science is that entry point. Our linkages with the scientists we support is strongly forged.

The companies Dr. Freeman deals with often do not know about the innovation voucher system. Ireland's economic recovery will not be automatic and-or the same as before. Poland is putting its Structural Funds into job creation through research and development. The United States has seen a 50% increase in research and development. It is the wrong time for Ireland to state we have provided for some investment but no more. When people ask if we need another high profile research and development professor, it must be remembered they are the strategic changers.

Deputy Beverley Flynn

It is encouraging to hear that. A critical point in our economic recovery is to hold on to what we have. I am glad Science Foundation Ireland is bringing in the experts tailored to the industries we have.

Professor Frank Gannon

It really is a small variation of tailored. We do not look at what companies are doing in that area. Using a sports analogy, we know the timing is such that we cannot engage in man-to-man marking. The person we are bringing in with skills will be brought in at a later date. Mapping the two and having an overlap is wrong; we have to be involved in zonal defence. When something moves, we have people trained in it. We have to constantly ensure we are in the right zones. That is very difficult for the system to understand. The number of times we are asked why we do not do something useful and stop all the research shows the extent to which people are thinking of man-to-man marking. If Deputy O'Mahony were here, he would recognise that one engages in man-to-man marking when defending in the last few minutes of a game when one does not want anything to happen. Instead we must go out and score gaols.

The science pipeline is crucial to our future prospects. The CAO figures are not too bad, with a 6% increase in the number taking science as their first subject. There has been an increase in the overall number — the actual percentage increase is about 1%. The question is: why does it not happen more? One reason is we do not have enough good science role models. When I was growing up, I did not know what a scientist was. Most people today have not seen a real scientist, a person who is normal, interested in music, sport and craic.

Deputy Ruairí Quinn

One seldom hears past pupils talk about their science teachers as being the hero of the school staff.

Professor Frank Gannon

Yes. We carried out a survey of what the public thought about scientists. The public knows that science is necessary for the future of the economy. One of our strap lines is: "Research for Ireland's Future". However, among 16 to 18 year olds it is not cool to be a scientist. One respondent said that if he mentioned he was doing physics at a club, he would be dead. We do not have enough cool scientists as role models. We have 100 scientists signed up to be available to present in schools. The extent to which that is taken up is not part of our role. They can pitch at the right level for students with questions such as, "Why is blood red?"

There are successes such as Professor Luke O'Neill at Trinity College, Dublin who received funding from us for research on receptors in immunology and who created the company Opsona which this year received an investment of €20 million. We need more of these stories and hope the media will engage more with us.

Regarding research into energy sources, we have a broadly based research programme called Frontier Research. There are 40 projects in our system already funded in diverse areas of energy and it is not reserved for just wind or wave energy projects. We must make sure we have the necessary skills base.

Many members will have heard of the Spirit of Ireland initiative. It was started by a Science Foundation Ireland researcher, Igor Shvets from the Ukraine, who is a pure scientist and has since established his own company. We have inventive and entrepreneurial people who look at things afresh. It is a good example of where there can be fresh thinking. We want to have a strategic research cluster where four or five researchers are brought together to work with five companies, multinational and domestic. We would like to have four launched but do not have the funds. This is the consequence of a 10% cut in our budget. While people believed we could take it, a 10% cut is horrendous for Science Foundation Ireland. With alternative energy generation as the new idea, we cannot afford to fund the programmes we should. However, we will do as much as we can and will launch one of them this year.

Chairman

Is Senator Healy Eames's question directed at Professor Gannon?

Senator Fidelma Healy Eames

I am open to whoever can answer it.

Chairman

In that case I shall move on to the other speakers first. We shall start with Mr. McNulty.

Mr. Seán McNulty

As I thought the Chairman was going to call Dr. Devitt first, I have been caught on the hop. Let me come back on a couple of key issues. I hear a good deal of numbers and they sound great and I am sure that is going to happen when Enterprise Ireland is in here in two weeks time. We all have the same objective, which is about growing an innovative culture in Ireland. However, I really must emphasise that it is a partnership and 50% of business innovation occurs without performing research and development and these companies grow at the same rate. Therefore, it is about the short term, medium term and long term and that must be one of the key objectives coming out of what we are talking about today.

Enterprise Ireland has 4,000 companies on its database that it actively works with, and the committee can question its representatives on that. The county enterprise boards now fall under the remit of Enterprise Ireland, but to come back to my original statement, there are 260,000 SMEs in Ireland. Many of them will not be active, say 50%. However, if we can get the other 50% to grow by one job, I believe we should solve many of the problems. I do not want to lose sight of those short-term innovative activities which are about user or demand-centred innovation, user needs, designing and better adapting existing technologies and delivering them in a unique manner to the marketplace. It is about the types of innovation and the levels. That is important because many of these SMEs will not be able to cope with any type of innovation. Therefore, it is about educating them and that is really why I am here today. It is about getting that agenda of partnership under way, also partnership with education as part of how we do this systematically and deal with the different levels of SMEs and types of innovation and start to get them in a systemic mindset within the companies.

The question is: where was I three years ago on driving innovation and why this one-stop-shop approach? Three years ago I was working probably more in medical devices with Irish indigenous companies which are outperforming now relative to their scale and size on the global marketplace because they were already awake and using demand-centred innovation techniques — user issues, adaptability of technologies, making things more ergonomic, human factors and all of these types of very intangible things. However, what actually drives a sale, ultimately, is where somebody will pick this product over its competitor's on the global marketplace and do repeat buys. Combining that is really where I was, but where I am now is illustrated by the fact that I see a bigger need, namely, that there are many gaps in our processes and the implementation of our current programmes.

I do not do politics, but I find there is an absolute gap when I go into SMEs. They do not know enough about what is available. We are all agreed on that and there is no argument here. That is what I see as valuable for me here today, to be at a stage where I can identify that we need to work horizontally across our different disciplines and activities because ultimately our focus has to be on delivering value to the SMEs in our individual course skill areas. However, we need to work together, and that includes this committee also.

Dr. Frank Devitt

Deputy Flynn asked me about networking and why we do not network well at home. I really do not know the answer, except what I have heard from authoritative sources both on the research side and in the industrial arena of business. One suggestion is that it has to do with our immaturity as an industrial country as well as our small size, that we tend to be more competitive with ourselves and that it is both prestigious and a bigger pool to be collaborating with external people outside the country. However, I agree and certainly we have the natural ability to be more social and industrially networked. Anything that would encourage that – CPD was one suggestion that would release that capability – is to be promoted. However, I do not have a good answer and it is a question that is worthy of study.

As regards the masters programme in innovation management being too elitist, I wholly agree that there are actions to be taken at second level, at shop floor level, in businesses and everywhere. In the presentation documents I distributed I referred to second level as well, and I believe transition year is a fantastic opportunity to be availed of for that purpose.

Design and communication graphics, a modern leaving certificate subject which is being examined this year for the first time, used to be technical drawing and now it has been remodelled fully. It replaces technical drawing as design and communication graphics. I have it on the authority of the Department of Education and Science, the T4 section which supports it, that it is very popular both with teachers and students and that is something we should be happy about. Of course, it is in its early days, but if we can propagate that from leaving certificate down to junior certificate and even beyond, it would certainly be very beneficial.

In regard to the shop floor level within businesses, one of the major points about innovation, alluded to earlier, is the need to emphasise the point that it is a process, and therefore amenable to management. It is not a sporadic set of "Eureka" moments and we all acknowledge this. It is a significant process that can be managed. Part of that management process is to enable and maximise the contributions of everybody in the organisation. That is what management should be about. That addresses the shop floor level.

I was wondering whether I should say something controversial — why not?

Deputy Beverley Flynn

We are hard to shock.

Dr. Frank Devitt

As regards the numbers doing science and maths in the leaving certificate, we used to have double points for maths, and we do not anymore. Should we do so again? That is something on which people tend to hold entrenched opinions. My view is that we should give double points to maths grades in the leaving certificate not for the reason that we want to draw the students in but rather in recognition that, generally, maths requires more work. To get a grade B in higher level maths in the leaving certificate is commonly acknowledged to require more time from the student than to get the same grade in other subjects. In recognition of that there should be rewards commensurate with the work, in my view. This is not the university's view, I would say, but it is my personal belief.

Chairman

That is controversial, actually.

Dr. Frank Devitt

That is excellent. I am delighted.

Chairman

It is more or less an example of what this committee has been saying for years; therefore, why does somebody not get on with it?

Dr. Frank Devitt

It is often promoted wrongly. It is controversial from where I come from, in some areas, but I believe it is a matter of promotion. Why should this be done? The general tenor of the argument, it is accepted, is in order to drag students into science. That is not very encouraging to the student, if he or she is getting it because of this horrible thing in front of him or her. It is much more emotionally satisfying for students if they simply get it as a reward for the extra work they do, so I believe it is a matter of promotion.

The third point was raised by the Chairman as regards the Irish business innovation foundation, if such were to be established – whether it should be a stand-alone body or within Enterprise Ireland. I do not know enough about Enterprise Ireland to be able to say whether it should be in there. One could envisage an organisation in which it might be located, but I could ask the same question in terms of why SFI is not in there. The reason is it is such an identifiably significant area. Its original conception was to do with education, but its current presentation – I do not wish to misrepresent it – is for it to be "relevant translational", as Professor Gannon said. One could argue that it should belong in Enterprise Ireland, but it is such a substantial area requiring significant focus that it is not. I would apply the same logic to innovation management processes and user centre innovation. This is such an important area, requiring focus, that it might get lost. I do not know, but I can say that there is a pilot department of applied innovation within Enterprise Ireland, which has three to five people, and I believe they are doing good work along these lines and addressing the types of points raised here. Should that develop or should it be moved outside?

On a final point, I have had these thoughts about a business innovation foundation for the past 12 months and discussed them with various people. I was very surprised to find in the Government's smart economy document, in a subtitle on page 30, a reference to the Brookings Institution, a US research institution. The smart economy document refers to this paper, the title of which is, Promoting the Establishment of a National Innovation Foundation, in the United States, alongside the National Science Foundation upon which SFI was modelled, it is fair to say. It is not unique to hear for different reasons in the United States, but that paper referencing the smart economy document proposes a national innovation foundation.

Senator Fidelma Healy Eames

If we look at the current education system in Ireland, we see that we have very creative children. The primary school curriculum is doing quite a good job at nurturing creativity which is a precursor to innovation and entrepreneurship. The second level curriculum is not doing a good job. It is very exam focused and it is very subject focused. Some of those subjects will move on to business, but not necessarily. By working with thousands of kids at second level across different schools on motivation for exams, life and performance, I find that they are turning out to be quite creative, but there is not much to develop in that regard. The one-off module in transition year may be the thing that bounces them forward, but it may not do it. How can we develop this? Is there any one good model at undergraduate level that can build on what is necessary such as technology, design, management and innovation? Some 50% of students who do their leaving certificate may end up in business, but that does not necessarily make them entrepreneurs. There are various levels of risks that entrepreneurs will take. Before they fail and go out of business early, can we point them to the right courses on offer if they have a good feel for the area?

What Science Foundation Ireland is doing is very valuable work, and it is building for the future. However, one thing I am picking up from Mr. McNulty is that the problem we face is urgent. We know that because of the number of people going out of business. To where can we channel our kids at an early stage, before they fail? We do not know how long people will stay in business. Financial needs are urgent today. Is there any forum in existence where each agency before us works together? Is there any business performance cluster?

Chairman

I will ask each member of the visiting delegations to be innovative and reply in one minute or less.

Dr. Frank Devitt

Transition year is an opportunity for developing creativity at second level. Transition year is currently optional. We could make it less optional and fill it with creativity related topics. Design and communication graphics should be regarded as a leader at second level. It seems to be a great subject and well liked by people. Design and user centred innovation is a topic that appeals to people who are interested in technology, but are creative in design as well. That brings many more people into the technology business space. I am not aware of any business performance cluster.

Mr. Seán McNulty

About five years ago, I got involved in transition year classes through some of the county enterprise boards in Limerick and we did an absolutely cracking activity where the students provided their own business model. They came up with the usual stuff such as Christmas cards, but we got a different mindset. It can be done, but it just requires the right scale. There are programmes available. It is about connecting with the people who have already done it. The answers are there, but we just do not co-ordinate.

I would love to see a one-year course at third level for every discipline on innovation creativity techniques. This should apply to accountants as much as to people like me in product design. It should be a one year module that every graduate must do, because we must work together in teams at the end of the day. I have to deal with financial people, so it is about working across disciplines as well. We are all doing things individually, but they are still about to increase the scale and get to a bigger market. I can see major opportunities with large organisations, where small SMEs could come in with solutions. Research also needs to be plugged in more effectively. It is about all of us networking together. Senator Healy Eames also made a very relevant point on that, as I do not have any forum in which to communicate with the people beside me.

Senator Fidelma Healy Eames

It is a huge gap.

Chairman

If cards are swapped at the end of the meeting, we might reap some fruit.

Professor Frank Gannon

The core message in the Senator's question is related to our intolerance of failure. Those who are excited about the Young Scientist Exhibition suddenly become dull when it comes to getting around to obtaining high points, because otherwise they might be considered a failure.

Senator Fidelma Healy Eames

That is the mindset.

Professor Frank Gannon

That is the Irish mindset. It also relates to Deputy Quinn's question about the public service. The public service may not take risks because if it does, it is lost. If those who go into industry have not had a failure, they probably have not been a success. Silicon Valley tells us that time and again. We must understand the positive aspects of failure. This goes back to the exam choices which are safe and are driven by all of the wrong reasons. It is not surprising that we get lost if this is the mindset. On the other hand, we are intuitively entrepreneurial. It goes back to farmers in markets, dealing in this and that, and the way we get around rules. We are able to think outside the box every time we have a problem. Therefore, we can capture it. We need to understand the core change in our values that must occur.

There are groups out there that try to get everybody working together. Technology Ireland has an enterprise focus group attached it, although SMEs would not be involved.

Senator Fidelma Healy Eames

That sounds like a bad social partnership model.

Professor Frank Gannon

No comment. It represents a good exchange of information between the people involved. There is need for fresh thought, but we should not start by saying that what people are doing is wrong and they need to do something differently. We are all contributing towards the same goal, and we need to put a template together that would allow us to work together. We will exchange cards.

Senator Fidelma Healy Eames

It would be wonderful if a template was put together following this meeting today. This committee would be delighted to see the outcome of such a template.

Chairman

Absolutely. Perhaps the meeting of minds may be serendipitous in one sense because of our time constraints. Perhaps something will come of it.

Professor Frank Gannon

We have enough people to handle the companies with which we are dealing. We do not have enough people to deal with the full range of services. Dr. Freeman is our only person for this. Science Foundation Ireland is a small organisation with 50 people. This is a new area and we would like to grow it, but it is something that is required to be fully effective.

Chairman

The message in this case is that the budget matters. If SFI had more money, it would make a big difference.

Before I conclude, Deputy Quinn indicated his apologies as he had to leave early because of other business. He would have liked to stay until the end, but he will be able to read the record of the meeting.

I thank Mr. McNulty, Dr. Devitt, Professor Gannon, Dr. Love and Dr. Freeman for coming. It has been an interesting and productive discussion on innovation and enterprise. I look forward to the appearance before the committee of officials from Enterprise Ireland, and the delegates today might like to keep an eye on it.

The joint committee adjourned at 12.20 p.m. until 10 a.m. on Thursday, 2 July 2009.