17. March 2006 Helmholtz Head Office
Surviving in future markets – The role of science and technology
Six theses presented from the perspective of research by the President of the Helmholtz Association at the "German-Japanese Strategy Dialogue" in Tokyo, March 7th, 2006.
I. Introduction
Ladies and Gentlemen,
Knowledge is the only resource that grows. This realisation defines the rules of the knowl-edge society.
There can be no doubt that science and technology are absolutely essential to the economic and general social development of a country. How can we really tap into and maximise the potential which scientific research offers for growth and innovation? We do not yet have any cure-all answers to this question. This is why I would like to take the opportunity to present six theses on how we can indeed make the most of the available potential. In so doing, I will concentrate on Germany, since we are discussing exchange between Japan and Germany today.
First of all, I would like to briefly outline the situation in Germany: Germany's research system is built on three pillars which each, in their own specific way, contribute to the body of scien-tific research in Germany. The three pillars are: industry, the universities, and non-university research. Spending on research and development (i.e. on producing knowledge, but exclud-ing teaching, education and training) amounted to 54.3bn euros in 2003. Of this sum, one third was financed from public funds, with industry taking on the remaining two thirds. Some 500,000 people are employed in research and development: 64% of them working in indus-try, 21% at universities and 15% at non-university research organisations. These latter institutions are the publicly funded research institutes of the Helmholtz Association, the Max Planck Society, the Leibniz Society and the Fraunhofer Society, which to a greater or lesser extent concentrate on basic or applied research. International comparisons work best when the amount of R&D spending is considered as a proportion of GDP. Japan spends 3% on R&D, the United States 2.7%, and Germany only 2.5%. You will certainly have heard that there are plans to change this over the coming years, and the German government has an-nounced that it will invest an additional 6bn euros in science and research in order to reach the 3% mark as quickly as possible.
Cooperation between the three pillars - industry, universities and non-university research - is well-developed and is supported by numerous funding instruments, although it does need to be extended to make better use of synergies. I will return to this point at a later stage.
Germany's pronounced scientific strengths lie in the nanosciences, materials sciences, optics and electronics, and in the field of mobile communication. Indeed, Germany can claim the technological leadership in the field of production plants, optical systems, and telecommuni-cations. This is why Germany is the world's best exporter of microsystems engineering and technology, laser technology and mechanical engineering.
Germany also ranks well as far as the number of annual patent registrations is concerned. We come third in the world, behind Japan and the United States. Nevertheless, this is the area in which I see Germany as having the most obvious weaknesses. Because, as the computer pioneer Michael Dell once so succinctly said: Ideas are common property, their realisation unfortunately not. Yet there is enormous potential for research and development in Germany: the research done at universities, at non-university research institutions and in industry is extremely competitive, but Germany is still too weak in its ability to transfer knowl-edge and scientific findings into practice and application. Nor must we allow ourselves to be blinded to this fact by the patent statistics. Because it's not the patents that are the problem, rather it is their realisation in the form of products and applications. Or, as I like to say: How can we best get our horsepower through the wheels and down onto the road? So my ques-tion today is:
How can we really make the most of the potential that we have in research and devel-opment?
I would like to answer this question by presenting a number of possible solutions summarised in six theses.
II. Six theses
1. It's essential to invest in basic research
Although we have clear deficits in transferring knowledge and findings into products and ap-plications in Germany, I would like to begin with a thesis that does not relate to the applica-tion of research findings, but rather to basic research itself, namely that it is essential to in-vest in basic research. Because, as Max Planck once said: Application must be preceded by knowledge. In contrast to industrial research or even applied research, basic research in-volves very long time-scales. It takes 10 to 20 years to gain fundamentally new scientific in-sights. Basic research is about discovering unknown areas, of following paths that do not yet exist, which is why such research involves high risk. Einstein's research provides the best example of this. Many technical achievements, such as lasers or GPS, that are an everyday part of our life today would have been impossible without the work of Einstein. This may, at first sight, seem surprising, because Einstein did not write his key essays for practical benefit or personal gain. Without Einstein, many of the practical inventions of our day would have remained unattainable.
Patience is often called for. In Einstein's case, it took more than 40 years before his funda-mental discovery led to the first application. And even today, the time-scales from research to product development are still very long, albeit no longer involving quite such dimensions.
Due to the high financial risk involved, industry can hardly afford to engage in basic research today. The downfall of the world-famous Bell labs over the past 15 years provides impressive proof of this. Consequently, basic research is mostly a responsibility of the public sector, and this work-sharing between the private sector (industry) and the public sector (state) is well established in Germany. I will return to this aspect in my fourth thesis.
Allow me at this point to explain how the relationship between basic research and industry works by taking the example of the Helmholtz Association. In its capacity as Germany's larg-est research organisation, the Helmholtz Association sees its mission as contributing to solv-ing the grand challenges which face society, science and industry by performing top-rate research. How will we secure our energy supply in 50 years' time? How can we protect our-selves from new diseases which spread at great speed in a globalised world? How can we ensure that future generations, too, remain mobile? How can we provide people everywhere around the world with earlier warnings of natural disasters, how can we protect them better, and, in the event of a disaster, how can we provide quicker help for the survivors?
These are questions that affect humankind as a whole. They are major questions that have to be addressed on a large scale. Here, too, the work-sharing model between publicly funded research and industry performs well. Working together with medical researchers from our Helmholtz Centre for Cancer Research in Heidelberg and other partners, scientists from our nuclear physics Helmholtz Centre in Darmstadt have developed a novel radiation therapy for cancer patients. This radiation uses a heavy-ion accelerator that is normally an instrument for applications in basic research. The treatment is particularly suitable for patients with deep-lying tumours, because it spares the tissue which the radiation beam passes through on its way to the tumour. Patients with such tumours are often serious cases and suffer from the massive side-effects of conventional radiotherapy. The new treatment will increase the re-covery chances of around 10,000 patients in Germany, with the treatment becoming shorter and causing fewer side-effects. A treatment facility for around 1,000 patients per year is cur-rently being built at the radiological University Hospital in Heidelberg. Siemens Medical Solu-tions, an industrial partner, has taken on the task of producing and marketing the radiation units. The units cost around 120m euros each and can certainly be expected to play a rele-vant role in the market when produced in sufficient numbers.
This example, too, shows how important it is to invest in basic research.
2. Strengthening the universities as partners
Universities are key partners for research and development, because they engage in re-search across a broad disciplinary range that neither non-university research institutes nor companies can afford. But universities also have another important role to play. They de-velop the human resources that are absolutely vital to excellent research. It is the universities that train the young scientists for research and industry. These young and early-stage re-searchers are, as it were, the actual product of university business.
This is why my second thesis is that we must ensure that universities are strong partners for non-university and industrial research, and that they become even stronger.
Universities must - just like companies, too - always ask themselves: "Are we doing the right things and are we doing the things right?" And this is exactly where Germany's universities are still too weak. I am allowed to make this point, because I myself headed one of Ger-many's best-known universities for five years.
Yet, if the universities want to be strong partners, then they have to act with an enterprising spirit. However, they need as much autonomy as possible for this, they need competitive salary structures, modern governance combined with good management, legally-sound IP rights, and a budget that corresponds to the work and services they perform. Of course, this cannot apply equally to all of Germany's 80 universities. Besides having many good universi-ties, we also need a number of internationally-visible top-class universities. This fact has been recognised in Germany over recent years. Indeed, a current political initiative is working to strengthen the universities, to advance the networking between universities and non-university research institutions, and to turn a number of universities into top-class institutions. An additional 1.9bn euros will be made available over the next five years to achieve this goal.
3. Integrating small and medium-sized enterprises into the innovation process
Small and medium-sized enterprises (SMEs) are often pioneers when it comes to turning research and development findings into products and applications, although they, in contrast to major companies and corporations, do not themselves have the capacities for maintaining their own research departments. In Germany, however, recent years have seen small and medium-sized enterprises participate to a lesser degree in the innovative process. This is also why R&D spending by SMEs has fallen accordingly over the past five years, while, by contrast, R&D spending by major companies has been growing over the same period.
Small and medium-sized companies are a vital pillar of the German economy and are a real driving force for innovation. A glance at the sectors "manufacturing " and "knowledge-intensive services" shows that 96% of the innovation-intensive companies in Germany are small and medium-sized enterprises, and only 4% of them major companies. We must make the most of this expertise within the SMEs. And so my third thesis is that we have to integrate small and medium-sized enterprises more strongly into the innovation process.
In their markets, many SMEs fail to reach the critical mass that would be needed to establish their own R&D departments, to engage in ongoing research, or to carry out risky R&D pro-jects under their own steam. Often, these companies can only engage in research and de-velopment in cooperation with external partners from industry and science. But SMEs often face the problem that the process of initiating a cooperative project in itself represents a ma-jor hurdle. Consequently, the constant exchange processes between research institutions and SMEs need to be much improved, and to achieve this we need to create opportunities for personal exchange.
The second structurally-important transfer factor involves spin-offs from research institutions and universities. We need clear legal frameworks for spin-offs and enough venture capital. A new high-tech start-up fund was recently launched in Germany, equipped with a budget of 262m euros provided by the public sector and by industrial partners. The project kick-off took place at the end of August. The industry side includes major players like BASF, Deutsche Telekom and Siemens. This fund sends out the right signal. Because it is the young compa-nies, in particular, that are working in risk-laden high-tech fields which, when successful, gen-erate returns from the knowledge lead.
4. Promoting collaborative research
I would now like to turn to a German approach on how the networking of research and indus-try can be used to specifically promote innovation. We call this collaborative research. So my fourth thesis is that we have to support collaborative research more than we have been do-ing. In collaborative research, public funds serve as an incentive for uniting excellence in science with industry's determination to turn research into products and applications. Funds provided by the education and research ministry support cooperation between research insti-tutions and industry with the goal of helping research findings (and eventually products) suc-ceed in the market. I would like to explain how this strategy works by looking at the example of optical technologies. I am particularly pleased to do this, because I myself once worked as a scientist on developing laser technology in Germany.
Only 20 years ago, Germany was a net importer of laser technology. The continual and spe-cifically targeted promotion of cooperation between research and industry in the form of col-laborative research has played its part in contributing to the fact that today 110,000 people are working in the optical technologies sector, that 16% of the jobs in Germany are directly influenced by optical technologies, and that one in four laser systems used around the world are "Made in Germany". Today, Germany is the world market leader in laser technology, be-cause specifically targeted financial incentives served to bring research and industry together in collaborative research projects. This success story shows how the right kind of funding was able to unite strong partners in such a way that competencies in science and research and in business and industry were concentrated to form a powerful single unit capable of opening up and developing new markets.
5. Think global act local
Cooperation needs close personal contacts. This also and especially applies in times of globalisation. Intensive cooperation between research and industry works best when people know each other, when people work together in close proximity, and when the start of a co-operative relationship is a natural process. This is why my fifth thesis is that doing research in regional cooperative projects is absolutely vital.
I would like to give you an example from the field of information and communications tech-nology, since around 38% of the annual economic growth in Germany is associated with these technologies.
In and around the region of Dresden, in eastern Germany, recent years have seen a Euro-pean Silicon Valley develop - much smaller than its Californian model, but nevertheless very strong in the semiconductor industry sector. This makes Germany one of the world's most modern IT locations today. One in five microchips sold worldwide come from Dresden. The determined and selective funding of existing scientific research strengths, the expansion of the universities in Dresden and a specific industrial settlement policy made it possible to cre-ate 11,000 new jobs in the IT sector in Dresden. This in turn impacted the region's education structure. In order to meet the growing demand for specialists, numerous new degree pro-grammes were established at local and regional universities. This, too, is an example of how the spatial proximity of strong partners can positively influence the overall development of a region.
In this respect, "think global act local" means forming regional clusters to initiate research activities from which products emerge that are globally competitive.
6. Promoting a change of mentality
However, none of the structural measures that I have outlined today in my above theses will achieve their desired effect if we do not take fundamental action to bring about a change of mentality in Germany.
As I see it, the key factors in the innovation process are optimism rather than a sense of dis-aster, a willingness to change instead of paralysis, and pride in our work. To achieve this change of culture, we need to examine the whole process chain involved in innovation and begin anew, namely in education and training. This is why the Helmholtz Association, for example, has established School Labs at meanwhile 18 locations throughout Germany to interest children and young people in science and technology at an early stage. These labs enable young people to do their own experiments, to make discoveries, to ask questions, and to engage in discussions with scientists, and all of this in a real-life research setting.
This rethinking process then has to continue in the universities and research institutions. They must increase the number of spin-offs and the transfer of findings into products and applications. In particular, it is important that it also becomes worthwhile for younger people to decide to set up their own company, to become entrepreneurs. To achieve this, we need to promote and reward an enterprising spirit. We will achieve change when transferring find-ings also becomes worthwhile for scientists and research organisations, when their commit-ment and dedication raise their reputation and generate additional income.
We must support this knowledge and technology transfer by ensuring that research and in-dustry know more about each other. The shared understanding of patterns of thought, of communications and decision-making structures must improve. This will only succeed if the transfer of staff to and from companies and research institutions or universities becomes a natural part of a career path.
III. Conclusion
Ladies and Gentlemen,
I would now like to conclude by briefly summarising my six theses:
1. Investments in basic research are essential, because only then will it be possible to make groundbreaking findings.
2. Strengthening the universities as partners is essential, because they are the key players in delivering human resources.
3. Integrating small and medium-sized enterprises into the innovation process is essential, because they are particularly innovative.
4. Promoting collaborative research is essential, because the networking of universities, non-university research, and industry needs to be extended even further.
5. A policy of think global act local is essential, because it promotes the creation of competi-tive products by encouraging the formation of regional clusters.
6. Promoting a change of mentality is essential, because we cannot succeed in realising in-novations without a good deal of courage, personal initiative and motivation.
