A well-oiled R&D machine

In the 12 years since Science|Business began observing the interface between industry and academia there have been many changes in how companies monitor the frontiers of research and in how they manage their R&D.

During that period businesses have widely adopted such concepts as “corporate venturing”, taking a stake in businesses with promising technology, and “open innovation”, throwing challenges out to the wider world. The European Union’s Joint Research Centre described the benefits of open innovation in a report last year, pointing out that “licensing and R&D contracts help to avoid the often lengthy and tedious in-house R&D process, while collaboration strategies allow for sharing the R&D costs among different partners”.

But another, more subtle change has gone on: For the biggest corporate R&D funders, the business of managing their research collaborations has become more disciplined. Whereas the likes of US industrial gases giant Air Products once maintained links with scores of universities, today many big companies try to focus their effort on a smaller number of key R&D relationships. These include IBM, Procter & Gamble, Siemens and BP – and they often work with the world’s top-ranked universities, such as Imperial College London, ETH-Zurich, MIT and Stanford. Whether this is a good or bad trend for the academic sector is often debated – but for the corporate world, it’s results that count.

The Rolls-Royce way

One company that pioneered this approach is Rolls-Royce, the British aerospace and engineering giant. Instead of running random collections of short-term projects with academic groups in numerous universities, Rolls-Royce now manages a more carefully planned, and professionally managed, array of larger long-term arrangements with specialist university groups that can, in effect, act as corporate R&D centres.

After a small start in the 1990s with eight University Technology Centres, mostly in the UK where the company started the scheme, Rolls-Royce has since developed a global network of academic talent with 31 such centres at latest count. While predominantly in the UK, these UTCs now cover the globe. They include in the US Georgia Institute of Technology, in Singapore Nanyang Technological University, in Korea Pusan National University, and on the European continent the Technical University of Dresden and the Norwegian University of Science and Technology in Trondheim. The UTCs cover materials research, aerodynamics, mechanical engineering, noise, vibration and nuclear engineering, to pick just a few.

The idea of the UTCs, says Mark Jefferies, chief of university research liaison at Rolls-Royce for the past eight years, was “to begin consolidating our research into a smaller number of centres of excellence, moving us away from rather piecemeal personal contacts to a more critical mass for what we do”. Jefferies won’t say how much of Rolls-Royce’s annual R&D budget of around £1.2 billion goes to the UTC network, beyond agreeing that it is in the “tens of millions”. As he points out, most of the company’s main R&D budget goes to product development, an area where UTCs play a relatively minor role.

Warren East, the CEO of Rolls-Royce, says that the key to making this approach to academic collaboration work is to devote enough corporate resources to maintain the relationships. “You put 10 people in and you get 100 people’s worth of activity out,” he told Science|Business. “The danger where perhaps people fail is that they think they are going to get a hundred people out for putting two people in.”

Long-term relationships

Jefferies makes a similar point. His role is to maintain good communications between the company’s engineers and the academic researchers. This involves an annual meeting of senior academics to brief them on where Rolls-Royce is going as a business as well as frequent subject-specific events for the thousand or so people within the UTC network. “We can set the challenges and the goals that we are trying to deal with over the five, 10, 20-year horizon and leave quite clever people to think about how they might address those challenges,” says Jefferies.

Unlike some ways of managing “offsite” R&D, arrangements like the UTCs deliver more than knowledge and intellectual property. (Jefferies says that, on average, the UTCs deliver about 8 per cent of the company’s patents.) The UTCs are equally important in training and recruitment.

About a quarter of the people who earn PhDs at a UTC join the company, while a third remain on the academic side. This means that something like half of the PhD graduates maintain links to Rolls-Royce. Even those who go elsewhere can end up as part of the company’s supply chain or with its customers. “It is an effective way of training people in the challenges that are relevant to our industry,” says Jefferies. “So it is not a surprise that they are coming out ready to make a contribution to this industry.”

As well as knowledge and people, the UTCs also give Rolls-Royce access to expensive scientific equipment and computer power that it cannot justify on its own R&D budget. The UTCs also have one unexpected side effect, says Jefferies. It prevents the company from constantly changing its R&D strategy, forcing it to think longer term.