24
Examination of witness
Dr David Cleevely.
Q181 The Chair: Welcome to this morning’s meeting of the Select Committee on Science and Technology. I am very pleased to welcome our witness, Dr David Cleevely, who is a former Enterprise Hub chairman at the Royal Academy of Engineering, an engineer, and a highly successful entrepreneur and businessman. You are very welcome, Dr Cleevely.
As you know, this inquiry is about commercialising the UK’s science and technology. You also know a great deal about the challenges that science and technology companies face when they are trying to scale. When you introduce yourself shortly, perhaps you could set out what you think the major challenges are. We are going to ask you a lot more questions about your written evidence, which has been very helpful and useful, but are you optimistic that the problem we are facing is being tackled with sufficient urgency?
Of course, yesterday, we saw the industrial strategy. Perhaps you would like to comment on that. Where do you see promising government policy action? Where are we still a long way behind other countries? With those questions, would you like to start by introducing yourself? We will move on to the more detailed questions in due course. Over to you.
Dr David Cleevely: Thank you. I will start by talking about the industrial strategy, since I have read it through. Of course, I have used AI to analyse it, to compare it with my paper, to do all the other various bits and pieces to save myself some time and, also, to get some insights. It is a good start; I am very pleased that we have an industrial strategy, after a bit of a hiatus. I recognise a lot of what comes into that strategy. As the committee may be aware, I was on Minister Vallance’s committee looking at start-ups and scale-ups in the transition to growth. However, I have some reservations—rather, some things that I would have liked to have seen in that strategy. The reason for that is to do with my background.
Let me give a quick refresh: I did cybernetics and instrument physics with mathematics at university. It sounds a bit weird, but it is basically about control systems and how systems behave. I then went and worked in the Long Range Studies Division, which was Post Office Telecommunications in those days, looking ahead 20 or 30 years; of course, all that is now in the past, but it taught me an awful lot about how to look into the future and how to assess technologies. I was thrown off a Delphi panel for being too radical about the path of costs for integrated circuits; of course, I would not be mentioning it unless I was right and the Delphi panel was wrong.
I then went and did a PhD at Cambridge on telecommunications and economic development. For those of us sitting in this room in 2025, it is difficult to recall that telecommunications was not seen as particularly important for economic development. It was much more important to do big projects on agriculture, woodland plants, hydroelectrics or factories—things like that.
That brings me to the industrial strategy. The knitting that is required to make all this work is very important. What I hope we will cover, and what my proposal paper covers, is that systems approach: the knitting that knits everything together to make things work.
Later on my career, I have done a whole series of things. I started a consultancy company. I then started a company called Abcam, which was sold last year for $6 billion. More importantly than those things, I set up the Centre for Science and Policy at the University of Cambridge. I also set up Cambridge Wireless—formerly Cambridge 3G—and Cambridge Angels, both of which were networking organisations. What they have done is provide Cambridge with an infrastructure and a social capital. I am going to do a shameless plug for my book, Serendipity: It Doesn’t Happen by Accident, which is being published tomorrow; you will find much more about those things in there.
The Chair: That is brilliant timing; we can have a book signing afterwards.
Dr David Cleevely: I have four copies with me. The point here is that all of this experience has taught me that it is those networks of people that make this stuff work. It is all very well having management consultants give you nice PowerPoint presentations about big blocs, but all of you sitting around this table know that, fundamentally, it is the networks of people that make it work. I was in Glasgow—stop me, please, Chair. You know me very well and know that I will ramble on for a long time. I will talk about Glasgow in a second; that is where I will leave it.
The Chair: That is a great introduction. We look forward to seeing your book very soon.
Q182 Viscount Stansgate: Good morning, Dr Cleevely. In your written evidence to the committee, you suggested setting up a national concierge service—that is such a lovely, friendly, cuddly suggestion, if I may say so—which would be set up for high-profile potential companies and would help them scale up. Can you explain your vision for this in a little more detail? Why is it needed, and are there any models for it that are working anywhere overseas? I will then ask a follow-up question.
Dr David Cleevely: That is a very interesting question, not least because a version of that appears in the industrial strategy; however, it is not quite the version that I have proposed in my paper. I can see the roots of it because it was discussed in the committee that I referenced before, with Minister Vallance.
How it works is a bit like Uber. Uber is not centrally controlled, in the sense that the drivers are not told exactly where to go, but both drivers and passengers have a relationship and can sign up with each other. That is the idea behind this concierge service: the Uber drivers, or the people who are providing the concierge service, should be experts providing a service, and they should recruit their own customers because we provide a system by which they can do it.
In a sense, it is modelled on what goes on at Cambridge. In the Cambridge Angels, we have a group of 65 or so people, and people come to us—to me, Tim Parsonson, Pam Garside or whomever else—for advice. They talk to us about various ideas and gradually get pointed in the right direction; resources are brought for them, then they can pitch. That process is not a centralised process but it is enabled by having a framework within which people operate. My proposal is based on those kinds of principles. The proposal says, “Of course, a concierge can be booted out if they do not perform. The people who may be trouble-makers and who do not get very far can also be booted out”.
There is a reward system—you can think of it a bit like the way Uber works—but it is primarily a distributed system. It builds into it the ability for these concierges to talk to each other, to central government and to local government—regional government being very important—in order to share information and, in other words, build a network. In contrast to what is in the industrial strategy, where you go to a concierge service and ask, “Can I get some theatre tickets, please?”, this is a live system of interconnected people who know and trust each other. I might come back to this point about trust and social capital a bit later.
Are there other examples? Yes. If you go to Israel, there is a tech desk thing; there are various other ones in Singapore and in other places. They all have different forms, because everybody is different, but the principles behind them work better in the smaller countries. Take Ireland or Singapore: the networks are denser and the number of steps to get between people is fewer. That is something we may come back to.
Q183 Viscount Stansgate: There are a number of questions that I would like to ask; my colleagues will, I am sure, come back to some of them. Can I just say something? When a committee makes recommendations to Government—we are a committee that will produce a report that will go to the Government—if it recommends the setting up of a new body, there is a sort of understandable groan, if you are the Minister to whom it is given, of, “Another body, another quango”. Most recent Governments have made a point of saying how much they want to reduce the number of quangos. Seen in that light, how would you argue your case for this national concierge service against the idea that another new body is not necessarily what we need?
Dr David Cleevely: I would characterise it not as a new body but as a new system and a new set of processes that would use the resources of existing bodies and—I say “and”; I do not want to use the word “but”— would supercharge them, because what it would be doing is connecting them so that they can make better use of their resources.
I mentioned Glasgow. I was up in Glasgow on Thursday and Friday. We were opening the world’s first Chemifarm. It is the world’s first robotic facility for making molecules, and we can make any molecule we want. It is a completely different technology and is absolutely ground-breaking. The reason why that is spinning out of Glasgow is because I happen to be in touch with a chap called Lee Cronin, and we happen to do various things together. I then got involved in Glasgow and gave advice about the spin-out and so on.
The process has as part of it blocs such as Scottish Enterprise, which has been massively supportive, as well as other elements—including the Royal Academy of Engineering, whose expertise I have drawn on—but the actual process by which that happened needed those networks of people. I am not suggesting anything extra other than, “Let’s think about this problem in a different way. Let’s allocate our resources in these bodies in a different way, and have rules and processes so that we can do it in a different way”.
Viscount Stansgate: Does that mean that this process would be a better means by which start-up companies can have access to the capital that is necessary to scale up? Is that a better process for giving them access to the money that is needed?
Dr David Cleevely: I believe so. We all, I hope, think that a free market is a good way of organising things, but it does not work all by itself. This is demonstrated in somewhere like Cambridge, which has generated nearly one-third of all the unicorns in the UK and is a town of only 130,000 people. You have to ask yourself why that happens. The unique thing about Cambridge is the degree to which it is networked and to which people trust each other. It has very high social capital. I know that it has lots of social deprivation and other bits and pieces—it is a very unequal city—but, if we are talking about scaling up and doing those kinds of things, when you talk to small and medium-sized enterprises or companies that want to scale up, their immediate problem is, “How do I get in touch with the right people?” It is staring us in the face: more money is very useful, but what we really need to do is connect things up.
I hesitate for a moment to say anything about my book, but there is a whole chapter on the Lunar Society in Birmingham, which I suggest you read. It is—
Viscount Stansgate: Have you read The Lunar Men?
Dr David Cleevely: Yes. I wanted to restate what she wrote in that book somewhat from a rather different perspective—from the perspective of this networking. I had better stop, otherwise I will go on for ever.
Q184 Lord Ranger of Northwood: Thank you, Dr Cleevely. I am already enthralled by your evidence, but I have some “buts” about concierges. It is a lovely concept. In the 2010s, when we were looking a tech city, I was at City Hall, with Shoreditch and all that stuff; I worked with government on that. Since then, I have been going around the country apologising because we had a view that it would be only London, whereas we have seen ecosystems pop up very successfully in the West Midlands, in the north and in other cities; you can see them emerging.
I was in Newcastle last week. This summer, we have a festival of tech going on: we have had South by Southwest London and TechNExt in Newcastle; we have Birmingham Tech Week coming up; and London Tech Week has happened. These sorts of events, which bring communities together—as you say, people need to find people—are happening. This is a hugely competitive environment, with the due diligence that people do. How would a concierge service do that when these things are happening organically?
Dr David Cleevely: It is part of that organic process—apology accepted, by the way, because I took part in some of that stuff under the coalition Government; it was very interesting to watch that London-centric thing come across. I do not know whether you recall MedCity. When you went to the website, it was not called MedCity: it was called London MedCity, and then it had Oxford and Cambridge as appendages. Given the size of what is going on in Oxford and Cambridge, it was one of those things where everybody went, “Oh dear”. That is important, because the networks of people who were involved in all of that needed to be brought onside. Tech City, or that initiative, did a great deal of good but, as you point out, it also ignored the regions.
If I may, I shall talk for a moment about some of the things that Cambridge has been doing, which I have been pushing and helping with. I originally suggested the Cambridge-Manchester link, which I see has been funded—I suggested that about five years ago and started off the process for working between Manchester and Cambridge—but I have also done some stuff with York and we have just kicked off a thing with Leeds. I mentioned my links with Glasgow. All of those things are building on those kinds of networks. That is precisely the kind of organic process I see this concierge service doing.
What is our problem here? It is how we construct a system that incentivises the behaviours we want to see then leaves people—because they are going to be on the ground—to sort out how to make this work. That is another principle behind this concierge service: you trust people. I have met, in Leeds or Bristol or Glasgow, people who are perfectly capable of performing these kinds of roles if only they are given a bit of kindling and the framework within which to work.
There is a lady in Bradford—her name escapes me; I am sorry—with whom I am connected on LinkedIn. She is supposed to be the person who is the centre of the network in Bradford making everything happen. These are the people you want to identify: the people who will stand out. They are the new versions of the civic leaders we saw in the 19th century who built the big cities. These are the people we want to identify, encourage and get together. You cannot rebuild the Lunar Society, Gladstone and all those kinds of things, but we can do something that is fit for the 21st century.
Q185 Lord Berkeley: This is very interesting. From what you have been saying, it is as if you do not need a structure for this networking; you just need people to do the right thing at the right time. I do not know whether that is the case or not, but how does that fit in with the comment you made in your introductory remarks about system failure? You said quite a lot about that. System failure for big projects is a real problem at the moment, as we all know. How does the networking link connect with the problem of system failure and making sure that it does not happen again, or am I being too naive on this?
Dr David Cleevely: You are not being naive at all. It is an extremely important question and one that gets right to the heart of the problem of thinking about how we tackle this problem.
The point is that, under a communist regime—I cannot remember the exact anecdote—somebody coming from Moscow asked how the bread supply in Paris was organised. Well, the bread supply is not organised in Paris. There are bakers, rules about the bread, price controls and various other things, but the bakers get on with it and deliver it. There are rules for how that works so that the market can deliver. In that sense, I am talking about the rules that are set up. In cultivating my garden, I have ponds in my garden that I rather like, but they do not look after themselves. They are complex systems: they need tending and sorting out, so there is organisation in that sense, but then they produce spectacular results.
The point about systems failure is an interesting one. I chaired a session on big projects at the Royal Academy of Engineering with Permanent Secretaries and some DGs; we dealt with Crossrail, Terminal 5 and various other things. The fundamental principle here is that you need to get the vision correct. I say in my paper, “Do not try to specify all the various details”. The industrial strategy tends to get into some of that, for understandable reasons, but you want to set up the principles by which you are doing things and have them be consistent with the vision of what you want to achieve. When you are dealing with procurement, do not try to specify the exact technical details of what it is that you want: talk about the outcome that you want to achieve. That is a high-level process; it is very difficult to keep to it because there is a tendency for the marble to roll down the hill and for people to want to get into the details.
Systems failure happens when people start to do local optimisation. They focus on one little bit—you can see it in the health service and the social services—and they solve that bit but, more often than not, that one intervention causes problems elsewhere. It is the law of unintended consequences.
Lord Berkeley: Can I come back with one quick thing? That is fine—I accept all that—but how does government, with its particular financial arrangements in paying for this, that and the other, fit in with what you have just been telling us, which sounds much more reasonable but is quite difficult to get control of?
Dr David Cleevely: The operative word there is “control”. The problem is that you cannot control these things in the sense that you might wish to if you were sitting in a ministerial position or sitting in the Civil Service. That system is predicated on control. Without wishing to plug my book too often, chapter 8 is entitled, “The ministry of predictable outcomes”.
I will give you a weird anecdote. I started keeping bees at the age of 16. When the bees come back to signal and do the honey dance to identify a source of pollen, around 80% of the bees who follow the honey dance will go off to that source of pollen. The other 20% are like teenagers; they will go off and do what they like. That randomisation is the thing that enables bees to be resilient to futures. We have to get away a bit from wishing to control every single aspect of outcomes. That is what I mean by systems failure: a system that is too controlled is prone to failure.
Q186 The Chair: In your national concierge service proposal, you talk about 50 to 100 carefully selected high-potential firms. How would they be selected?
Dr David Cleevely: I would go to the local angel groups in Leeds, Bristol, Cambridge, Oxford or wherever and ask for nominations. I would go to the Royal Academy of Engineering. I chaired the Enterprise Hub at the Royal Academy of Engineering and was followed by Sir John Lazar; I understand that he gave you some rather interesting evidence, which I read, and echoed a number of the things that I was saying about networks. I would go to those people and ask for nominations. I would also put out something that was a bit more open and competitive because something that you do not know about may come out of the woodwork. You would have to have a proposer and seconder for an organisation that was coming through, but these are details about how you would get it from a trusted provenance.
Baroness Walmsley: Thank you, Dr Cleevely. It is good to meet another beekeeper.
Dr David Cleevely: Oh, excellent.
Q187 Baroness Walmsley: You have just reminded me of something. I understand that this is a network of people who know a network of people who know a network of people, and that it is people-based, but you just mentioned the word “rules”. It struck me that there may be a bit of a parallel with those agencies that offer their services to people to find their way through the planning system. They are successful because they understand the rules. How important is it that your network of people understands the rules in the system and how the whole system operates?
Dr David Cleevely: That is an extremely important question. It is essential. The proposal is relatively short but it does hint at these concierges being linked to each other, as well as learning themselves, so that they can become experts. Your parallel is very apposite. The way that works, or I hope will work, is that, over time—of course, there will be churn in the base—that cumulative tacit knowledge will be there. I contrast that with the industrial strategy, which talks about a website. How can I put this kindly? Are we not all a bit fed up with websites as a solution to something? I do get some stuff off websites but, mostly, I am getting stuff from varied sources. I am trying to operationalise that.
The Chair: Going back to the 50 to 100 selected high-potential firms, what happens if they fail to achieve the goals? What happens if their technologies are not progressing? Would there be some kind of process of review? Is that what you have in mind?
Dr David Cleevely: Yes. It would have to be a Darwinian process. You would have to get rid of the companies and the concierges. You would have to have churn. This is not a sinecure. I would rather hope that there were some failures because it would mean that the thing was working.
Q188 Lord Lucas: How do the Government interface with this system? Certainly, in my party, we have a long-term difficulty with the idea of picking winners. What we are aiming for here is a system that will last decades, will be consistent, will be seen as consistent from outside and will evolve. It is very difficult to see how the Government will manage that interface.
Dr David Cleevely: That is a fabulous question. It is not about picking winners; it is providing the environment so that the winners emerge. How do the Government manage that? They manage the system.
The point of your question goes right to the heart of what I am trying to say here. In my experience in government, having done the Centre for Science and Policy and been on various committees—I also spent eight years on one of the boards of the MoD—my feeling is that government needs to be more porous. It needs more access to the information that I carry around in my head and that somebody in Glasgow, Edinburgh or Swansea carries around in their head. They need to know what that is and why it is relevant. No individual, however talented, has all the information they need, so I am in a sense advocating a recasting of how government might interact with the economy: by talking about creating a network where the Government can learn what is happening, rather than having to go through intermediate stages of reports.
There is an annual report proposed in the industrial strategy. That is far too slow a timescale; by the time you have read the annual report, it is going to be at least a year out of date. It does not live. It is the nearest thing to a website. What you need are those constant interactions. Civil servants are talented, hard-working people, but they are not exposed to this kind of stuff. What I am trying to do is provide a network. It may help if I explain how the Centre for Science and Policy works for the benefit of the committee.
The Chair: Please do.
Dr David Cleevely: Back in 2008, I was asked to set up a new institute in Cambridge. It was going to be called the Centre for Science and Policy. The original proposition to me was that I would take over the running of this institute and that we would fund researchers who would have enormous brains and would produce fabulous reports that were thick enough to beat a policymaker over the head with. The policymakers would be in awe of these researchers and would immediately see the error of their ways, then go off to implement the policies proposed by the researchers. You are all laughing because this is such a caricature, but it is not far off what happens or used to happen.
So I tried to think of a completely different way of organising this. The result is a system, in the same way as the concierge service system is a system. The system works like this: a civil servant from Whitehall has a problem, and we agree that they are worthy of going on the fellowship. They have passed all the various things; it is an interesting problem and they are going to benefit from it. We then arrange for them to see 30 experts in Cambridge—the majority of them academics, but not all—and they spend an hour with each of them. The civil servant goes back to Whitehall having built a network of people—not all 30, but maybe half a dozen or so—who will be useful to them for their career. They will have some fabulous conversations, judging by the reports that we get from the fellows, which are absolutely astonishing.
There have now been 14,000 of these meetings between Whitehall and the people in Cambridge. They have changed the way in which policy gets made and the way in which Cambridge thinks of the way it presents policy to policymakers. The system has learned; in a sense, I am trying to get to a similar kind of process.
Q189 Lord Drayson: Dr Cleevely, I would like now to take your focus to the end-stage, if you like. The problem that many of the witnesses who have come before this committee have identified is the way in which the UK has seen a large proportion of its most successful technology companies leave the UK, through either being acquired or making the decision to move—often to the United States. Is this a bad thing? Is this something where the Government can take action that will actually have an effect on it?
Dr David Cleevely: I am tempted to say that it is too early to tell whether it is a bad thing or not. I suspect that the rate at which it is happening now means that we are being denuded. It is important that you get recycling; companies might get to a natural point then need to recycle talent or get access to extra capital. Let us take DeepMind as an example. The decision to sell to Google looks like it was the right one for the people involved and for the technology to get that momentum going. However, that is not always the case; that is what you are alluding to, I think.
Lord Drayson: In the case of DeepMind, would you say that it was good for the UK?
Dr David Cleevely: That requires a long essay response because it is a lot of “on the one hand” and “on the other hand”. Was it good for the UK? In the end, we are now sitting with an AI strategy that is the result of us having been jolted and woken up by DeepMind moving into Google and the effects of that—as well as the fact that Demis is still here; he did not move to the United States. Other people, such as Mustafa Suleyman, are still around. Those kinds of things are important. It is a very difficult question to answer; it would require a long response.
Let us get back to the general point. I do not much like it. When Arm was first bought, the Treasury issued a statement where it said, “At last, Arm can become an international company”. Honestly, I could have wept. It is about the lack of ambition and the lack of confidence and trust in the talent we have in the UK to deliver all of this. Of course, it is self-fulfilling. The flywheel has spun right down, and we need to spin it up again; it will take 10 years or more to spin that flywheel up. In the United States, the flywheel has been spun up until it is nearly fragmenting. The enthusiasm and the amount of money that is thrown into some very wild ideas means that they can afford to throw a lot of spaghetti at this wall. Let me pause there.
Q190 Lord Drayson: We have had evidence from witnesses with experience in other countries that have a similar-sized market to the United Kingdom—as opposed to the United States, which is obviously a much bigger market—where there seems to be a cultural difference in the attitude towards investment and loss of ownership and control. Therefore, they have seen in these other countries the ability to build companies that keep going and do not have, as you have just described, this sense of, “That’s enough”, and selling out at that point. Do you have any comments on whether there is a fundamental cultural difference that we are battling here in the United Kingdom, not just in the Treasury, relating to the potential for building world-class companies in the UK and keeping them going?
Dr David Cleevely: In my darker moments, I would agree with you. We have quite a systemic problem in terms of the way people behave towards these things, but then my optimism takes over because I look at places such as Cambridge and Oxford—as well as some of these other centres that are now growing—and I see the basis for things that could provide us with the kind of growth and scale-up that we are talking about.
I said that it would take at least 10 years—it may be 20—to effect a change; behavioural change certainly takes a long time. Let me go back to a little anecdote about forming Cambridge Network. When Alec Broers, Hermann Hauser and I put together Cambridge Network, along with some other people, Hermann wanted to bring in people that he knew from the west coast of the United States. What happened was that, as those people came in and gave talks about what they had done, we were attracting 250 to 350 people at these events. It was transforming the vision at the ambition level that Cambridge had. There are many factors as to why Cambridge has been so successful, but one of them was that emphasis on how we change the expectations that people have.
Q191 Lord Drayson: Could you talk to the view in the minds of investors, particularly institutional investors, rather than venture capital? What we have seen over the last 10 years particularly is that, as companies have been acquired, the capital that the institutions have received has not been recycled into UK companies. It has gone offshore. We have seen a dramatic change in the proportion of pension investment, for example, in UK equities compared to the US. We have not seen a recycling of capital, and for the capital that is created by these breakout companies to get recycled into the next generation of breakout companies, there must be a change in the institutional investor mindset to believe that a UK team can grow a company from a £5 billion to a £50 billion market cap. How would you go about effecting that?
Dr David Cleevely: I would not pretend I have the complete answer to that. I can give you yet another example from Cambridge. Cambridge Angels, which started as a very small group of us, in terms of what we have invested and with the partners in Cambridge Angels’ companies now exceeds over £1 billion. We are regularly investing in the order of between £30 million and getting on for £80 million a year, including our partners. You can grow. It is not quite at the scale we are talking about of Series B, Series C levels. I think you can do it, but you need to take these tiny little sparks in the kindling and nurture them and spread that fire.
I have had exactly the experience you are talking about. I go back to my experience with a spinout company in Glasgow. The initial offers from British-based VCs were horrific. The way in which the initial round was configured was a VC based in Germany, who was largely American in heritage, then introduced us to various west coast investors. They did the big round and a number of Cambridge Angels came in, then all the subsequent money—apart from one honourable mention, who I will not name, but is a well-respected private equity investor who did it on his own personal account—is all west coast money.
The pressure now to take the world’s first Chemifarm and move it, or do the next opening in the United States so that it can then attract further funding, then move the entire centre of gravity of the company out of Glasgow and over to the United States, is immense.
The Chair: Lord Ranger, perhaps some of the questions you were going to ask have been covered but do you want to ask about the Mansion House reforms and pension funds?
Q192 Lord Ranger of Northwood: I was just going to follow up on that particular point, as Dr Cleevely was saying, about the pressure. How do we resist that or how do we structure that engagement with the venture capitalists and private equity? I am seeing this ecosystem. I do some investing myself—I have been involved in this area for a while in a very microscopic way. It is at that early stage that the die is cast, because you get the chain of investment, as you said. I think this is what Lord Drayson was getting at. What could we do to help to stop that, to make sure those incentives are here to stay in the long term?
Dr David Cleevely: I am a man with a hammer, so I can see nails everywhere. My particular thing is networks of people. I have another company in Cambridge, where the funding was done on the basis of the links that I and other people senior in the company had with provenance, with what I have referred to as social capital, as a technical term. If you look at Silicon Valley or what happens in Israel or Singapore or elsewhere, you will know that that is very important. It is, “Am I talking to somebody who has skin in the game, who will suffer reputational damage if they have done something that was not quite thorough and well based? Can I trust them?” Where is that kind of network of trust that we need to build?
There is the concierge service, and a number of other things. I proposed this innovation fellows idea, which is a scaled-up extension of what I did in Cambridge and with the Royal Academy of Engineering. They are all based on trying to create this social capital and this trust. The chief executive of Aviva made a statement a short while ago saying, “I do not want to be forced into investing in these risky ventures”. You can see it from their point of view. L&G and those people need to be exposed to what is going on to see the opportunities. The people who work for them need to understand how this stuff works, in the same way that I was saying that civil servants need to be exposed to this stuff.
You may think that I am an absolute hopeless optimist at this point, but I think that, given the right incentives, people are generally intelligent and they will find a way through. We just need to create the system by which that works.
Lord Ranger of Northwood: If I may—and it may be leading the witness somewhat—there are networks, yes, but we always seem to be looking back at Government, whether it is a concierge service or how government policy affects this area. But with the economic policies, around taxation and Mansion House and others, this environment seems to overwhelmingly be a deciding factor in whether people are willing to invest here in the long term. Do you agree?
Dr David Cleevely: Yes. Going back to this point, it is the system, and we have to work out where the root causes are and how things interact. What you are seeing is a symptom. If I am unwilling to invest, it is a symptom of something else in the system. With the paper, I am trying to get to those causes. There is a philosophical point here, which is that I think there are relatively small interventions that can tip a system from one state to another. We need to understand the system well enough so that we can identify where those points are. The proposals that I have are very modest. They are tiny amounts of money in the grand scheme of things, compared to the research budget of the UK. It is because those interventions will not change it overnight and will not change things in the next 18 months—but, for heaven’s sake, we have decades of problems, as you have highlighted, that we need to overcome.
The Chair: Let me go on to public procurement, which you have also written about.
Q193 Baroness Walmsley: We have frequently heard about the importance of public procurement as a way of stimulating innovation. Of course it produces a core customer and it produces revenue, which is very helpful for companies moving forward—but again, risk aversion is an issue. How do you think we can overcome this risk aversion and ensure that procurement is used effectively as a way of supporting innovation? Could you tell us about your ideas for mission-based procurement? For example, do you think we need to ring-fence a particular part of the procurement budget to support innovation?
Dr David Cleevely: I will deal with the last one first. Yes, we do need to ring-fence some stuff. We do not need to ring-fence a lot. We need to ring-fence some stuff, but then not throw it at any old innovation. My point about having a clear vision about what your requirements are and what you are trying to achieve is very important. In defence—I do not think they still have it—we used to have “customer 1” and “customer 2” as wonderful labels for dealing with these things, about who the intelligent customer was, and so on. What they were fumbling towards was, “This is the outcome I want. I do not know what you do not know, so I need to know, if I have given you this challenge—”. It is the same way that ARPA works. You have heard some very interesting evidence from the ARPA people, and I am strongly in favour of it because there is a lot to be said for the way in which that works. Part of it is saying, “This is what we are trying to achieve” then coming up with ways of doing it.
Lord Mair and I worked on the Cambridge Autonomous Metro scheme. One of the things that was proposed at the end of that was, instead of going out to tender for an autonomous metro, which would have been a disaster, because you could not specify something like that. It was going to use advanced technology, but we did not know which technologies were necessarily going to come forward, and so on. It started off with a competition between 20 different companies, each of which produced different ideas. The numbers winnowed down and winnowed down until it got to the last three.
Of course, it looks like it is expensive. That is the other problem—it is not just risk aversion. You go to the NAO, which says, “Why did you fund 20 companies, then 10, then three, when you could have simply had a procurement process that awarded the contract to somebody and you would not have had to pay them anything?” The point was that you had to expose lots of stuff that you did not know. You cannot write tenders for some of these advanced things, because nobody knows what will actually happen. You have to have in the process a way of funnelling that down so you can make a final decision, if that is what you want to do.
Given some of the stakes involved—as I said, when I was chair of the Royal Academy of Engineering Covid response committee—part of the stuff that I was trying to do was get alternative supplies and buy options and keep various vaccine production facilities working. The point is that, since you do not know, you have to spend money to deal with that uncertainty and buy your options. That is part of the procurement process.
Baroness Walmsley: It is about what questions you ask and the intelligent procurer; is that part of it?
Dr David Cleevely: Yes, it is—and having a clear vision of what you want to achieve. To go back to my example about Terminal 5 and Crossrail and those other things, on the big projects that worked, there has been a clear, non-technical vision about what you are aiming at. Then you draw in people who can give you the technical backgrounds, the pros and cons and other bits and pieces, and you co-create the solution. Lord Chairman, can I give one more of example of this from the distant past?
The Chair: Yes.
Dr David Cleevely: I was a telecoms engineer way back in the ancient days of the dinosaurs. BT decided that, instead of engaging, as it had as Post Office Telecommunications, in an intimate relationship with its suppliers, it would now have a formal process for procuring what was known as System X, which was the digital technology for telephone calls. The net result of that was a 60% increase in the cost of procuring the system. The reason was that BT engineers thought they knew what they wanted in a technical sense and these guys over here, who were the suppliers, knew about the technical risks and now knew that these guys were being very awkward as opposed to collaborating, and prices went up.
Lord Berkeley: Can I add one other question on procurement? On HS2, the contractors are all on the cost-plus, which seems to me the worst possible type of procurement you could possibly want—but the Government decided.
The Chair: I think that is the subject of a separate inquiry almost, Lord Berkeley.
Lord Berkeley: Thank you, Chair.
Q194 Lord Borwick: Before I get into my normal question, is there an overlap between your concierge system and the network of excellent non-executives that exists within business? The perfect non-executive for developing a company is somebody who knows a lot of other people, knows a lot of industries and has some wisdom. Does that overlap with your concierge system?
Dr David Cleevely: Yes, the concepts underpinning both are very similar. In fact, your suggestion is absolutely spot on. You could well find candidates for concierges among the NED community. In companies that I have been involved in, I have been actively encouraging, for example, the chief executive to take a NED position on another company. You want to select your NEDs so that you can get this cross-linking. No idea is completely new, is it? The bones of this are already present in the systems that we have. What we need to do now is not have this flood moving all over the landscape. Let us chat about it and do some productive work with it.
Lord Borwick: If we have that, do we need a new concierge system, when it already exists in the non-executive director system?
Dr David Cleevely: Not if the concierge system through the NEDs had already delivered the thing that we have been talking about; that would have solved our problem, and it has not. There are various reasons for it. Some of them are to do with the way in which NEDs see their roles and the way in which you need to give people a sense of vision and purpose about what they are doing. That is one of the other markers that differentiates the concierge approach from the NED approach. If I am an NED and I am working for the company or the three companies, I am doing that. If I am a concierge, I have a much bigger mission to achieve and my behaviour, my attitude and the things that I do to be able to achieve that are rather different.
Q195 The Chair: Can I ask about the role of universities? You have written about that in your evidence. What are your views? You talk about universities being execution partners. Can you elaborate on that?
Dr David Cleevely: Yes, and I do not mean it in the capital punishment sense. There is a chap called Dan Breznitz who has written a book about industrial strategy in places, which I thoroughly recommend. He wrote a passage in his book that initially caused me great offence, which was that if the great universities actually generated economic benefit, the UK, with Oxford and Cambridge and Imperial and various others, should be an extremely rich and wealthy country. He concludes that clearly they do not make any difference to economic growth.
The problem here is similar to the one that I hope I cracked by doing the Centre for Science and Policy. It is not about thinking of the universities as these monolithic entities but about how you can incentivise the right academics. Academics are academics because they want to be academics; it is not because they want to be entrepreneurs necessarily, but those who want to should be encouraged to do that. We need to find a way of keeping the universities with their central mission, which I believe is utterly important and fundamental to the good of society, and at the same time extending how they operate and giving the right incentives.
When I set up the Centre for Science and Policy, I went to see Andy Hopper, who was then head of the computer lab. I went and saw a whole load of people around Cambridge. I said, “Tell me about the psychology of the academic so I can understand how to set this thing up properly. What incentivises them? How do they react to challenges?” We talked about that, and that advice formed an important base. It still forms the base of my reaction to this question: how do you get universities as execution partners? They will be absolutely vital. A scheme at UCL called Conception X takes PhD students through training about how to be entrepreneurs and so on, particularly in computer science. It is a real model that we could scale up and do more of.
Q196 The Chair: You refer in your written evidence to the Fraunhofer in Germany, to A*STAR in Singapore and to the Innovation Authority in Israel. You say that our universities should replicate those. How would that work?
Dr David Cleevely: “Replicate” might be a bit strong in this case. There are lessons to be learned and a synthesis needs to be made from what goes on. If you look at the Israeli case, how they have encouraged that networking in the universities has some huge upsides. The downsides were referred to before. A lot of the value created by Israeli companies goes to Nasdaq and leaves Israel. That does not happen quite so much with Singapore, largely because it has funds such as Temasek, and so on. Again, you have heard evidence about all this. In each case you need to think. Each case is unique; each case is local. You need to look at what works and what we need to learn, not to copy or replicate but to take the essential properties of their system and build them into ours.
Q197 Lord Lucas: If I can follow briefly that last question, it astonishes me that universities do not reach out to their alumni as sources of funds for the ventures that they are creating. Oxford has never once tried that with me. For the dons’ port fund, yes, but nothing for the companies that it is creating. It has really been slow to support Alumni UK, which is the British Council venture to link all British foreign alumni of British universities. What is their aversion to networks?
Dr David Cleevely: This is a lifelong problem for me. It is the old joke: there are two kinds of people, but there is just this problem. I am sorry, but I will wave this book again. The reason I wrote this book is precisely what you have asked the question about. People do not get it. They do not understand that it is the networks between people that work. I shall give you two examples. I worked with the Irish Government on Irish telecoms with 4,000 people in Telecom Éireann. I went to a meeting; I held a workshop. At a dinner afterwards, hosted by the Minister for telecoms at the time, she had brought into a room like this one—not quite as august as this—all the CEOs from the American cable and telecoms companies who claimed Irish heritage, which was quite a significant proportion of them, as you can imagine. It was brilliant for getting interest in Ireland and investment and so on.
I went once on a mission to Delhi with Patricia Hewitt, who was then Business Secretary. We turned up at this hotel and an old friend of mine, Sam Pitroda, who used to be a big adviser on technology to the Indian Government, was there at the hotel handing out prizes at this award ceremony. They had brought together the Indian diaspora from across the world. I had no idea I was going to bump into him. They had brought them together so that they would network. I do not understand why people do not do more of this stuff. Cambridge has more opportunities per head of population for doing that than, as far as I know, anywhere else in the United Kingdom. I advocate for having more receptions and parties and networking stuff.
The Chair: Lord Lucas, you were going to ask about cross-government co-ordination.
Q198 Lord Lucas: What we are trying to achieve here involves a lot of co-ordination across the government. This has traditionally been very difficult to achieve. DSIT thinks that it may be able to develop a horizontal role across the government using Cabinet subcommittees. Will that work? How do we incentivise the sort of collaboration across the government that we would like to see?
Dr David Cleevely: Do I think will work? Possibly. You then go on to talk about the incentives. Unless I know more about what incentives there are, I would not really be able to pass any judgment. In other situations like this, my mantra has been that everything is a project. The point is that, if you want to achieve something, it is a project. I do not care where you get your resources from, it is a project. It should not be sitting in silos.
The Chair: Does the Government have a convening power and a role in bringing together the private sector? Can the Government play a role there?
Dr David Cleevely: The short answer is yes. The long answer is to do with the architecture of how you do that, and the incentives. At one point, again with the Centre for Science and Policy, I stopped industry involvement because it became clear that what industry wanted to do was lobby. Literally, we stopped any further industrial partners or people coming in. I had to do it. I want to be friendly to everybody and I am optimistic, but you have to understand other people’s motivations as well, and you have to be careful about how you do that. There is a much longer response to that, which I would need notice of.
The Chair: Baroness Willis, who is coming in online, has a question.
Q199 Baroness Willis of Summertown: Thank you. Apologies for being online rather than in person. Can I ask a first question or make a comment? We have to be careful we do not overgeneralise and put all academics into a bucket that they are not interacting with alumni. In my own position in Oxford, I spend an awful lot of time—and I know many of my colleagues do—reaching out and working with the alumni.
One thing that I hear from younger colleagues is about the incentive for them to spend a lot of time trying to get their innovations through this very complex landscape. I would like to ask that question from the academics’ viewpoint, in the same way as how you would incentivise people across government to cross-cloud load. I am interested to hear your views on that.
Dr David Cleevely: It is an interesting question, and you are right to draw attention to the generalisation. Not everything is the same, and certainly I do not want to generalise from personal experiences. There are universities and people who think about the alumni point.
To go back to this point about the researchers, first they need to be shown that it is possible and that there is a level of ambition, which is why I cited the scheme at UCL for how that works. But I want to make another point about the time taken to get from A to B. When I was chair of the Enterprise Hub, I kicked off an annual report, which we called the spinout report, which documented how spinouts were funded and how the process worked in spinning out from universities. After the first one of these, I did not quite get hate mail, but it was fairly close, from the technology transfer officers, because they believed that the report had mischaracterised what was going on. It was interesting to see that once the data was about how the TTOs were framing and encouraging people out there, by the time you got to the second and third reports, a lot of universities had begun to converge on the ideal rates for equity holding, for example, which is down at the 10% to 20% mark rather than the higher percentage.
I want to get on to this point about timing. There are two things. First, if you are sitting as a researcher, you need to know what the possibilities are and you need to have your eyes lifted to the horizon. I have seen that at the Saïd in Oxford and it happens at the Judge in Cambridge. Researchers can get exposed to that thing and therefore see that it is possible. The expectation that they too could do something like that is important. The other one is speed—the time taken between having an idea and getting to the point where it can be realised. If that takes a year or 18 months to get through, it is a death knell for anybody. Particularly if you think about it from the point of view of the academic, it is baffling. Why does this take time? I have no idea, as an academic, why all these things—the articles of association, the shareholding structure, the licence agreements and all the other bits and pieces—are so complicated. This is all nonsense—they just want to get on with it. It is incumbent on the universities and those processes to make that as short as possible—I have seen the 90-day rule—and get it down to something like 90 days.
Baroness Willis of Summertown: Yes, I agree. Especially if you are a postdoc and you are on a three-year grant, you need to do it quickly, otherwise you have left and gone on to do something else.
Dr David Cleevely: On that point, when I set up Abcam with Jonathan Milner, he was a researcher. It was in January and he was going to run to the end of his contract in July. We had a dinner, and within four days I had met up, we had planned the company and then proceeded—agony—to get it spun out at the University of Cambridge, because it claimed some rights that, to be honest, it did not have—but it got some shareholding. That is all fine. Without that concierge service, we would not have formed Abcam.
Q200 Baroness Willis of Summertown: That is interesting. Can I ask the question that has been allocated to me, which is also important? We have heard that you talk quite a bit about Israel and other international comparisons. What specifically though do they do that is different to what we do? What does good look like? How are they are succeeding where we are not?
Dr David Cleevely: They are consistent, for a start. Government policy over the last 20 years has varied an awful lot. I have already referred to the fact that we have had a hiatus over an industrial strategy. That consistency is extremely important and is backed by a high-level vision that is shared by no matter what political parties. It is not influenced by particular points of view. Secondly, they have looked at it in general from a systems point of view. They have not put the management consultant blocks up on the screen and said, “We will invest in this silo and this silo and everything will be good”.
If you look back at the origins of the Israeli initiatives, they go back to a chap who was given the task by the Government to set up this fund for encouraging technology in Israel, and he was given a lot of free rein. That is another important point. You need to have people you trust to run this stuff, because they will encounter problems that you never anticipated when you wanted to get the thing kicked off in the first place. This comes back to this risk aversion issue. If their hands are tied behind their backs, they have no wriggle room to be able to weave and dodge in the face of things going wrong. When I set up the Centre for Science and Policy, I was given £1.6 million and told to get on with it. It was absolutely brilliant. I could do something completely novel. You will find that it is also the case, whether it is in Singapore or Israel or other places where these things have worked.
The Chair: Baroness Walmsley, did you want to come in before the last question from Baroness Neuberger?
Q201 Baroness Walmsley: I have an off-piste question. If it is about people who know people, there is always a danger of what you know rather than who you know. We have two examples of that. The Covid VIP lane, for example, may well have excluded people who did not know anybody but who had great solutions to offer. Here in the Lords, when we have interns, we are told, “Do not just bring your grandchildren. Please look out for people of talent and potential who might benefit from spending a little time in the heart of government”. What would your concierge concept do to make sure that people of talent and potential are not excluded?
Dr David Cleevely: The sources of recommendations for those concierges needs to be broad. The system of appointing people needs to be transparent. You also need to churn relentlessly the concierges, particularly the ones that do not necessarily perform.
Baroness Walmsley: I am talking about the companies that they guide.
Dr David Cleevely: You have to make it free to apply. You cannot put any restrictions on anybody applying. I am in danger of getting too much bogged down in the weeds. Let me think about how I can put this. It should be in every angel group’s interests and in every regional development office’s interests and in every actor in the United Kingdom’s interests to be looking out for companies that they could recommend. We need to think about how that system works so that the pool is big enough. This nepotism, which you talked about specifically with the root of the word, happens because it is a narrow pool. The bigger the pool, the less chance you have of that kind of corruption creeping in. Going back to my analogy about the way I maintained the ponds, you need to maintain it. You need to have the rules and you need to be refreshing and so on to stop the stuff slowing up the system.
Baroness Walmsley: Being proactive and looking out for people is absolutely core to the project.
Dr David Cleevely: The whole point of what I say in my paper is about being dynamic rather than static. If I may characterise how policy is produced in the United Kingdom, it is mostly static. It is a bit like the big book that you go and hit the policymaker over the head with. It is, “Here is the solution and now all you need to do is follow the recipe”. Real life is not like that. Real life is dynamic; it changes. You need to think about the systems and the principles and underpin them so that the system can adapt as it encounters problems.
Q202 Baroness Neuberger: To some extent you have made what you want to recommend to the Government entirely clear, but we have to write a report. The industrial strategy has come up with a version of your concierge service, not totally what you had in mind. If we are writing a report to the Government, which will say many things—and we have been writing about this issue for a long time—given the constraints that the Government are under, what would you say to them first about the concierge service, which they have accepted in part up to a point, and otherwise of things that they could do, accepting that they have to be dynamic and that the policy-making system is not what most of us would like?
Dr David Cleevely: It would be, not to quote Swift, a modest proposal. I would like to see a pilot or two and that is what I propose here. I should take my own medicine. I am not sure it will work. We need to experiment and see what we do not know. I do not know if I am telling tales out of school here, but the concierge service came up as a suggestion in the committee, and I listened to what was suggested and I thought, “I need to intercept this before it goes too far”. I put in various papers along the lines that you now see. But what you see in the industrial strategy is not quite what I was hoping for—I will not say what I was expecting, because perhaps it was what I was expecting.
What do I say to government? I would say, “Look, try this experiment. It will not cost much and it will not cost much compared to what else you do within the industrial strategy or even with what you propose for this concierge service”. For their proposal particularly, you will want to go off and invite foreign investors in, although it does come back to this point that we are inviting more people in to find out about our wonderful ecosystem and work out the best bits. That is all fine, but you need to animate it. It needs to be more than a website and more than a fancy trade delegation.
The Chair: David, thank you very much. You have been excellent and you have been answering so many of our questions. We are grateful to you for coming to give evidence. We are all full of new ideas as a result of your evidence, so thank you very much. We will conclude the public session now.
