UNCORRECTED TRANSCRIPT OF ORAL EVIDENCE
To be published as HC 1539-i

House of COMMONS

Oral EVIDENCE

TAKEN BEFORE the

SCIENCE AND TECHNOLOGY Committee

Pre-appointment hearing with the Government's preferred candidate for Chair of the Technology Strategy Board

Monday 24 October 2011

Phil Smith

Evidence heard in Public Questions 1 - 22

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Oral Evidence

Taken before the Science and Technology Committee

on Monday 24 October 2011

Members present:

Andrew Miller (Chair)

Stephen Mosley

Pamela Nash

Roger Williams

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Examination of Witness

Witness: Phil Smith, preferred candidate for Chair of the Technology Strategy Board, gave evidence.

Q1 Chair: Good afternoon, Mr Smith. Welcome. You are aware that this is part of the pre-appointment hearing process that Parliament agreed with the Government in relation to a wide range of senior external but, nevertheless, important posts. We are pleased you are able to join us. Could you start off by introducing yourself to the Committee and telling us about your professional background?

Phil Smith: Good afternoon, everybody. My name is Phil Smith. I am chief executive currently of Cisco in the UK and Ireland. I have been at Cisco for 17 years, so I am a long-timer in Cisco terms, though I have worked in a series of roles, as is common in some companies. I am the chief executive now but I started off in Cisco in an engineering role. I started off as an engineer designing large networks. I went through various aspects of business development, marketing, acquisition, large client relationships, starting new teams and building new areas for Cisco to engage in. I have, generally, been involved at the front end of some of the newer things we have done in Cisco over the years. That has peaked at the moment with the chief exec role, which I have been doing for just over three years.

Prior to that I was at IBM for nine years in an engineering role, mainly involved in building the early generation of internet, then building large corporate environments, and then, subsequently, through to running a team which spanned across Europe, prior to moving to Cisco. Prior to that, I was at Philips Electronics for six years in a design and engineering role. I started off as a graduate and worked my way through. That is the highlight of it. I am clearly happy to explain if there is any other detail.

Q2 Chair: You came from a microbiology background originally.

Phil Smith: Yes, I did. I graduated as a microbiologist, which was quite an interesting and potentially engaging degree. Part of the challenge, after studying it for four years at university, was that I was looking for some other challenges. The time was relatively embryonic. I was an IT user in statistical areas in microbiology and found that to be quite an interesting area to get involved in. Although microbiology offered some interesting opportunities in the food, drinks and other industries, I decided to move on from that and took up a job in technology, the interesting thing being that technology has been an opportunity for me to touch some of those areas and many other scientific areas over the years.

Q3 Chair: What do you think is the most important quality that you are going to bring to the role?

Phil Smith: Hopefully, one of the key qualities will be experience. I have been in business for 30 years. In my current role, I am clearly running a very significant organisation, and that is part of a much larger global organisation. As a result of that, my ability to make judgment calls, to convene and deal with a series of complex issues and to move those on through to some sort of successful completion is part of a normal senior business role. Also, I have a broad technological background, and I would still see myself as a technologist in many ways. I am very engaged in technology, and I speak often as a technology advocate, looking at the way that things are revolving in the marketplace. I have a capability to understand and engage with technology, but the key attributes I will bring into the post will be experience, probably communication-I spend a significant amount of my time communicating and connecting with people-and in this particular role there will be an interesting opportunity to do that.

Clearly, in terms of senior engagement, I spend a lot of my time with senior business people, senior political figures as well as civil servants, and I have a significant engagement with academia.

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Q4 Chair: The day job is a bit busy. How are you going to fit it all in?

Phil Smith: One of the key attributes of any leader is to try and find ways of managing time. I don’t think there is ever enough time to do everything. In my role, I manage my time as effectively as I can. I believe that the importance and significance of this role demands me-clearly, my company is supportive-managing my time appropriately to contribute as much to this job as I can possibly do. I would not be going for this role if I did not think I could contribute to it. I believe that I will manage the time effectively and use what is an excellent staff, as far as I can see, and a pretty compelling board.

Q5 Stephen Mosley: In one of your answers to the Chairman, you touched upon the broad scope of the TSB, which ranges from manufacturing to energy, to healthcare, low carbon technologies and the digital economy, of course. You have an excellent background in ICT and technology. How do you think you will be able to convince the scientific community that you are not just an ICT man but that you have wider experience than that?

Phil Smith: Clearly, the senior role I perform at the moment is that I am dealing with many different aspects. My job is not sitting looking at code every day. I am dealing with pension issues, health issues, people issues and so on. In a job of any seniority you tend to have to juggle many different issues. However, the ICT industry, particularly, is more pervasive than most. I spend quite a significant amount of time talking to my teams about issues around healthcare, its evolution, and productivity within it. We are extremely involved with manufacturing and we are a manufacturing organisation ourselves, of course, as well as engaging in a number of other areas. These days the ICT industry is touching almost everything.

I am in a very fortunate position. I have a fairly large network of chief execs and others to whom I spend a lot of time talking. Most of what I talk to is not about my business but about their businesses and what they do. I engage in that front. I have had a significant amount of exposure in recent times to many other areas. I would not pretend to be an expert in all of them, but I have, I am sure, an excellent team in the TSB who have that capability. My ability will be to take that complexity and, hopefully, simplify it and add value back to the team.

Q6 Pamela Nash: Welcome this afternoon. The appointment term, as I understand it, is four years for this position. What is your vision for how the Technology Strategy Board will look at the end of that period?

Phil Smith: The Technology Strategy Board, from what I can see so far, is a demonstrably successful organisation. It has clearly managed to scale two administrations, which in itself is quite a feat. It has also done significant work in important areas and it seems to be gaining in its support both from a budgetary perspective as well as a delivery perspective. Over the next four years it is going to be extremely important, in our present climate, which at the very least you could describe as volatile, that we champion the cause of British industry specifically in the context of productivity and competitiveness. Unless we are delivering through the TSB and, of course, many other bodies, an innovation-led economy, which is significantly more competitive and productive in four years’ time, we will have a problem. We will have a problem as a nation and the TSB in its deliverables has to address that issue.

The TSB has to evolve. It has to evolve like any organisation does. It has to be able to adapt. The technology and innovation centres are going to play a significant part over the next short period as that comes into fruition. The reality is that it has to evolve into an organisation that will be delivering a much richer set of deliverables which are specifically focused around growth and that will allow the country to be successful over the longer period. That has to be multi-faceted but it is something on which the TSB has to focus. Further, it has to be an organisation that is passionate about what it does. It has to be able to innovate itself and not just provide innovation, and it has to be extremely courageous in the way that it delivers innovation in future years. We are going to have to make some fairly tough decisions about the priorities for growth in the UK in general.

Q7 Pamela Nash: There has been a perception in the past, not necessarily just in the TSB but in general, that investment has very much been focused on what we refer to as the "golden triangle", looking at south-east England. How are you planning on developing the work of the Technology Strategy Board outside that area and, in particular, in the other three nations of Scotland, Wales and Northern Ireland?

Phil Smith: The Technology Strategy Board’s job is to champion and invest in areas which will provide growth for the UK. Its prominent responsibility is to invest in and drive areas that will drive growth and advantage for the UK going forward. Some of the nature of the south-eastern density concerns the amount of research that is already going on in that area. With the formation of the local enterprise partnerships and other things that are starting to change subsequent to the RDA dissolution, there is going to be an opportunity to work in a more distributed fashion with those organisations.

From what I have seen of the TSB-I am not under the covers of the TSB yet, so I cannot really determine that-it is focused on providing investment into areas where it generally sees value. I do not think there is any geographical bias on that. As a chair, I will have to continue to focus the TSB in investing in areas that are the right areas for growth. Those areas can and do come from outside the south-east of England.

Probably, there is an argument to say that the collaboration involved not only with organisations in the south but in the north is where the real value comes. The broader the collaboration, the better. From what I have seen, there is some good collaboration with universities north and south of the border as well in the west.

Q8 Roger Williams: You have already said that your overall assessment of the TSB is that it is performing satisfactorily. Can you tell us a little about what your previous involvement with the TSB has been and how that has informed you about any changes that you would like to make to the priority areas in which you will engage?

Phil Smith: My engagement with the TSB has been relatively light to this point. I have watched the TSB from a distance. I do not think that my industry is particularly strong in engaging with the TSB.

Q9 Chair: You and the two previous Chairmen are from the same sector.

Phil Smith: I agree. In terms of the amount it has done with the digital industry versus some of the bigger engineering industries, which are more experienced and sophisticated at engaging with granting bodies generally, my engagement has been somewhat from a distance. I regard that as, potentially, an opportunity. The TSB probably could be better known among a broader set of industries. That may address something you mentioned about north of the border. There is probably a bit of a sense of necessity for the TSB to be broader known, and it could be more effective as a result of that. That is something for me to understand when I get more into the organisation.

To answer your point, at the moment I have not got under the covers of the TSB. I have read lots about it, I have understood its strategy, and I can see the strategies as they are laid out and its delivery plan, such as has been engaged. At this point, I am looking forward, assuming I am successful in going through this process, to understanding more about what the TSB is doing on the ground and how I can contribute to it.

Q10 Roger Williams: I am sure you have lots of bright ideas. Do you have any bright ideas for different priorities that may be pursued by the TSB?

Phil Smith: If I was to recommend anything to anybody when they take on a new role, it is to listen and to understand what people are saying and doing. There are, clearly, areas which you are interested in within the programme, and the programme that the TSB has is quite extensive. At the moment, for me to set priorities or to suggest that my priorities are in one place versus another would probably be a little presumptuous at this point. I believe there is a sufficient breadth of areas. If you look at the agenda both for the broader investments that the TSB is making as well as the more specific stuff around the technology and innovation centres, those are covering quite a number of areas.

Q11 Roger Williams: As the TSB rolls out its programme, how are you going to judge its success and the value that the public are getting from their investment?

Phil Smith: That has been and continues to be an important area. I happened to drop into the TSB conference they ran last week and there was a lot of talk about the return on every pound invested being in the £6 to £7 range on average, and that value, potentially, being significantly higher if the level of collaboration to the point they were making before was higher. Particularly with universities, it was seen as a way of multiplying that figure, although probably not in all cases but in some specific cases. Measuring that is extremely important. Also, the level of engagement from industry into the TSB is a good measure of how much people want to get involved, particularly in the centres and the initiatives that are started by the TSB. Probably some good work can be done, and may well be in place, around key performance indicators that we would see as key success factors for the projects going forward. I am not party to those at this point, but it is important in any business to understand how we have set ourselves a success criterion and how we are going to measure that.

Q12 Stephen Mosley: What do you think will be the main challenges for the job over the next couple of years?

Phil Smith: The importance of this agenda continues to increase, as I don’t need to tell you in a Committee such as this. Unless the UK succeeds in the innovation and science area in the next few years, considering the statistics we all know about-we have 1% of the world’s population and 13% of the world’s science, and a huge heritage to build on-it is going to be a difficult position for the UK going forward. The challenge will be the amount of work that, potentially, has to be done, prioritising that work, clearly managing that in an environment where the country has a significant deficit to deal with, but doing that in a way that is sustainable is important. To do that in a way that is sustainable, we have to build a set of capabilities, whether it is in the TICs or in any of the other areas that are involved, in the long term. This is not just about short-term investment. If we switch it off, it has gone. It has to be sustainable. There is also going to be a challenge of continuing to get the funding that we need in science and technology to be successful. The funding is of a level that allows some things to happen but it is still dwarfed by many of our competitors around the world.

Q13 Stephen Mosley: I know that you mentioned in one of your answers that you have had previous experience of dealing with politicians. How would you deal with the politicians, Ministers and Committees like this one to push the work of the TSB forward?

Phil Smith: There is a significant advocate role. I have to be in a position both to articulate and champion, as the TSB Executive itself does, and hopefully the Board will continue, the facts and the deliverables of the TSB. From what I have seen, it has been demonstrably successful to this point in delivering some real value to the UK economy. I believe that the job of a chairman in this role, as a senior advocate of the TSB, is to engage, as I would do with any other business leader or other senior public sector figure, and to champion what is clearly an organisation and a cause that is extremely valid. I do not see that as a difficult task. I regard it as a task that will take a lot of effort. It is one that I welcome and probably the TSB will welcome a significant step up.

Q14 Stephen Mosley: You talked about politicians. Below you, you are going to have a vast array of scientists and researchers who are all going to have competing priorities and different ideas. How will you manage that and bring all these people together to come up with a single way forward?

Phil Smith: That is a continuous challenge of business. My life is one of spending time dealing with competing priorities, competing budgets and issues that one has to deal with. I spend a lot of time doing those kinds of things. I am sure that is going to be multiplied many fold, but, hopefully, with a very strong team, good data information and process, that is manageable. You cannot do everything, clearly. You do what needs to be done, and the things that need to be done will become visible with a reasonable process. That does not mean that things will necessarily be straightforward, but it is part of the life of anyone who runs a significant business.

Q15 Chair: You talked earlier on about British competitiveness. There are some areas of the British economy, whether through structural fault or lack of enthusiasm, where it has been very hard to get R&D investment in the British economy. In the current climate, what do you intend to do to change that? In particular, how are you going to persuade other businesses to become partners in the TSB’s joint programmes?

Phil Smith: Clearly, it is a shared responsibility. I hope I am not going to be personally responsible for getting the full R&D budget for the UK over the next few years, but it is something on which we need to be focusing. On your point, Andrew, it is extremely important that we get broad business support for this agenda. There is good business support for the agenda in general in the UK, but there are some things that we need to continue to focus on, such as effective tax environments. Those are clearly important for people who are investing. Technology investment these days is relatively mobile. We have to be producing not only the best science and the best environment but we really need to be championing it from the rooftops. A big communication job is needed. I genuinely think that I and my team will be able to get good support from industry. With the changes that are going on in the university world at the moment, there is clearly a focus for people who want to make more of their particular characteristics. If we can be demonstrably successful, as the TSB should be, then it will attract further funding, clearly with some persuasion, because it will be business-led innovation which is going to be the path out of the current recessionary times.

Q16 Chair: You said earlier on that the ICT sector had been poor in engaging with the TSB. Is there any single underlying reason for that or is it the way that the TSB works?

Phil Smith: No, I don’t think it is specifically the way the TSB works. The TSB has engaged from the digital perspective reasonably broadly. It is more to do with ICT’s evolution as an industry. I don’t think it is as sophisticated in the way that it engages in these joint co-operation and funding businesses as, maybe, engineering would be. That situation is changing. We are seeing now that it becomes more pervasive. It is not simply about a piece of technology. It might be about a "smart city", for example, which could be a much more deeply embedded ICT project which requires a much broader set of stakeholders. The ICT industry has been a little separate. It is less in the eye of the giver and more in the eye of the receiver. The ICT and digital industry is growing up and starting to realise that, if it wants to collaborate and co-operate, it needs to be much broader and more plural in the way it works. I would expect to see digital becoming a deeper part of many things that have happened but probably deeper in its own right.

Q17 Chair: Are there other sectors that have not engaged as well as they could have done?

Phil Smith: The facts show that some of the granting has been more on engineering industries which have been more adept and familiar with getting research and development funding through a broader set of bodies. I gather some of the others are a little lower, but it is a matter of record what has been invested by business and by the TSB and other granting bodies, for that matter. There is a great opportunity in the UK, given our leadership in things like low carbon, cell therapy and so on. I know that with low carbon vehicles and cell therapy, which the TSB is already looking at, we have some opportunity to be significantly more advanced than we are. Those industries, which include digital, have to step up to using the kind of capabilities that are available to them.

Q18 Chair: Stephen Mosley mentioned the political process which is driven by events. At the moment there are hundreds of mathematicians and synthetic chemists writing to research councils saying that they are getting a bad deal in terms of the available money. Campaign for Science and Engineering has just published a paper saying that the Government’s spending commitments are a bit of smoke and mirrors-I précis-and there is not enough money to go round. There is a serious political challenge on the horizon, isn’t there? How are you going to cope with it?

Phil Smith: There are two answers to that. With any business, you have to deal with your collateral. There are significant things that the TSB and others can do with the money that is available. The TSB has been given money to do a series of roles. However, on the point I made before, if we are going to be competitive, there is going to be a continual challenge to get more funding to the degree that those research scientists and so on might be a little more pleased. Also, you cannot diminish the quality of this. The TSB rejects a lot of the inputs it gets. There is a chance to keep focus, keep quality, and then grow volume as a result. It is extremely important that, if we are able to prove quality and we are focused on the right areas for the UK that, genuinely, will drive and be advantageous for the UK, my experience in business says that you can get investment for them. Like anywhere, there will be a limit to that investment, but that investment is important. You will have to prove a valid business case if you are going to do it, which may not be the same as a regular business case, but it certainly will be within the same parameter.

Q19 Chair: As an outsider looking in to the TSB, what would you see as its biggest weakness and what would you do about it?

Phil Smith: The only weakness that I would significantly identify at the moment is that I don’t think it is well enough known. It is clearly known by a large community, so I am not disputing that. It has clearly been demonstrably successful. I don’t think it is well enough known by every industry. I have an example. I was invited to a dinner at the Science Museum the other night and I was sitting next to a couple of folks, one from an investment organisation and someone else from an environment that was to do with museums. Both of them knew who the TSB were, broadly, but were not quite sure.

Q20 Chair: They thought it was the Trustee Savings Bank.

Phil Smith: In reality, with any organisation, you genuinely need to make sure that people understand well what an organisation does. That is not true just for the UK but for our global position. We, genuinely, should be shouting from the rooftops about our success because the TSB are doing some really good things to say, "This is an organisation that can genuinely make a difference." That broader communication capability is certainly something that is one of my strengths, and I would expect to use it significantly in the new organisation.

Q21 Stephen Mosley: You were talking about some exciting things that are happening. We were excited in the report that we produced earlier this year on the Technology Innovation Centres. They are in the early stages of development, a ren’t they? I know that you have had a lot of experience working within large organisations. How much experience have you had setting up new organisations like these Technology Innovation Centres?

Phil Smith: With regard to my general history-it is difficult to say within the remits of a large corporation-if you ask anybody inside Cisco and previously inside IBM or Philips, my propensity, generally, is for creation and development. I spent a significant part of my career in Cisco in what you would broadly call "business development", which is around acquisition, integration into the company, building new areas and recruiting parts of the organisation that were much broader than the organisation was in its traditional form as it arrived in the UK. I have set up new areas of development. I have had to set up significant organisations which are multi-million, if not multi-billion, dollar businesses inside organisations themselves. I do not think it is fair to say that I have not gone out and started my own organisation and run a multi-billion dollar company that I set up myself, but my natural propensity is for creation and generation of newer environments and then floating those off into the organisation. My role in business development, typically, radically changed every year. I could have 100 people reporting to me, and in the next year I could have five people reporting to me because, typically, I would build the organisation and then put it into the industrial side. Then I would go back and start looking at some of the newer areas that we needed to deal with.

Q22 Chair: Is there anything else you want to tell us, Mr Smith?

Phil Smith: No, other than thanking you for the privilege of doing this. I am very excited about the potential in doing this role. I see it as a very important organisation within the UK science, technology and innovation area. I genuinely think, as I have said a number of times, our opportunity to improve the competitiveness and productivity of the UK will rely on technology. I, genuinely, would like to be an important part of that.

Chair: We, incidentally, decided that the innovation centres ought to be called the Turing Centres. We think that is very appropriate. Thank you for coming to see us.

Prepared 26th October 2011