This article is part of our special report Innovation and entrepreneurship.
The European Institute of Technology has come under heavy criticism from EU auditors, who flagged a “lack of tangible results” in a recent report. But most issues have now largely been addressed, says Martin Kern, who promises a new focus on results.
Martin Kern has been the Interim Director of the European Institute of Technology (EIT) since 1 August 2014, where he is responsible for managing the Institute’s operations.
Kern spoke to euractiv.com’s Publisher and Editor, Frédéric Simon.
A recent report by the European Court of Auditors (ECA) flags a series of problems with the way the EIT has been managed until now. However, the report relates mainly to the first three KICs that were launched in 2009. So, problem solved?
The report, as you say, focused on the first three KICs and didn’t take into account the latest ones on health and raw materials. Things have moved on since the report and we now have an innovation community of 800 partners across Europe.
The audit, importantly, was carried out 18 months ago, so the problems it highlights we are fully aware of and have to a large extent solved.
For example, complexity increased as the KICs budgets grew. In July 2015, we started, in conjunction with the Commission, a process of simplification. The task force we set up to carry this out is already operational and has done a lot of work to address the recommendations made by the ECA.
Another recommendation was that we focus on results and impact, which we have done, by implementing a monitoring system and changing our indicators.
This has all been done since the audit was carried out, so we are happy with where we are, in terms of the portfolio we have and the awards we have been given. The level of external funding that has been raised is also very impressive.
How many start-ups have been created thanks to EIT funding? How do you measure success?
We’ve focused on measuring the number of students that have gone through our education system and the number of business ideas that have been incubated and the number of start-ups that have been set up ― some 200 in fact.
Now there is a new focus on measuring results, in the form of additional funding and growth. These are the objectives.
What is your objective for growth and jobs?
The EIT’s overall objective is very much in line with the Commission’s, contributing to growth and increasing competitiveness. We want more entrepreneurial students and new start-ups. Its impact can be seen by the awards that our people have gained and the success stories that have come out of our portfolio.
The report stated that the administrative burden of the KICs and the grants is quite high. How do you deal with this?
Firstly, the EIT has a rather decentralised approach, as the partners are managed by the Knowledge and Innovation Communities themselves.
We deal with them through coordinators, not individually. We are keen not to have too much inefficiency or complexity, hence our decision to simplify the process last year.
The auditor’s report says the way grants are being disbursed to KICs imposes too much bureaucracy on the participants and needs to be rethought. For example, it suggests extending the annual budgetary cycle and reporting period to cover more than a single calendar year. Do you agree?
Indeed, we agree with that recommendation and see the reasons behind suggesting them.
Can the EIT decide this on its own? Or do you need changes in legislation to do that?
Parts of the recommendations require changes to the EIT regulatory framework, which require the support of the institutions―commitment that we already have, I’m pleased to say.
For example, on complementary activities, those which are not financed directly by the EIT or EU funding. Changes to this would need regulatory change. We accept that and we hope it will progress smoothly, but ultimately it is out of our hands, so I can’t provide a timeframe.
On the other hand, we’ve already implemented a number of changes that didn’t need input from the legislature. For example, the new framework partnership agreement, which we have already signed. We’ve already implemented new monitoring strategies and clear rules for governing the KICSs as well.
Principles of financial sustainability were also something we could implement ourselves. We also expect to have a plan in place this year on how we can move towards a multi-annual cycle, with an aim of implementing it next year. We see that as an important area in which we can improve efficiency and allow a greater focus on innovation.
Over how many years would that be?
Our current system is already quite flexible, allowing us to react to new innovations in good time. We want to find a good balance between being able to plan in the long-term and maintain this ability to react quickly.
We need good reporting and accountability as well, of course. The analysis that is currently ongoing wants to find a way to preserve all these factors, only then can we say how long the cycle would be.
The report says the financial sustainability of the KICs is doubtful and that “businesses are not involved enough in the KIC activities”. How can that be improved?
On this issue, we are not in agreement with the court, one of the few actually. Financial sustainability of the KICs was meant to be a long-term goal. It was never meant to be achieved in the first few years, so we think the court’s opinion is quite premature.
I’m personally optimistic that they are on track to achieving it in the timeframe we predicted. It’s moving up the priority list as the KICs become more established. The idea is that our results continue and increase, even when the EIT funding starts to be phased out. It’s too early to take stock of it.
The chief executives of the five existing Knowledge and Innovation Communities (KICs) sent out a letter last September to the Commission. They complained essentially about two things: (1) Plans for shared accountability among participants in each of the five KICs; and (2) IP rights management, which the Commission wants streamlined whereas before it used to be managed independently by the KICs. What are your answers to this concern? Has it been addressed?
Again, this has a lot to do with the timeline and when the report was carried out. These issues have now been fully resolved. We already signed the new framework partnership agreement with the KICs, with these issues being discussed with the KICs.
The contractual relationship in regard to Horizon 2020 had to be adjusted, which was carried out. All parties accepted the changes that were needed and we now have a stable framework, allowing us to focus on innovation.
Has the matter of shared accountability been withdrawn or resolved some other way?
There is financial and operational liability. In terms of financial, it was merely a matter of clarifying the situation, so participants in the KIC would only be liable for the amount that they received. There was a degree of misunderstanding here, so just discussing it solved the problem.
Regarding operational liability, there is a need for the different partners to work together within a project. One of the standard rules of Horizon 2020. Again, we discussed this with the KICs and we were able to sign the new framework agreement. So there is shared accountability there.
On IP management rights, the KICs wanted to independently manage that. The Commission didn’t seem to want that, so how was it addressed?
Again, it is somewhat of a transition issue, as we move toward Horizon 2020. There are provisions on how the KICs’ framework should complement basic criteria governing IPR. Once we explained this, the KICs accepted that the Horizon 2020 framework provides a lot of flexibility, and the KICs have a degree of freedom to manage their IP rights. Again, this allowed us to sign the agreement without any problems.
The EIT has a budget of €2.35 billion for 2014-2020. How much of that money has already been spent? What happens if the money is not all spent?
That budget figure is correct. We expect all of the funds to be absorbed, which will allow us to produce even more results. We have a competitive funding mechanism, meaning the more a KIC produces, the more funding it is given.
That’s why these start-up and education figures are so important. We’re producing results that themselves produce more success stories. We’re rewarding success. The funding we receive is distributed along these principles. And our approach has been vindicated as we add more KICs and more communities are set up.
Another issue was the high turnover in staff, including at higher management level. Your own position is an interim one. Are you hoping to be confirmed full-time?
On your first point, this is another factor that has been dealt with simply over time. We are nearly fully-equipped and staffed as things stand, which is all important for the fulfilment of our mandate. The situation is much better than how it was when the audit was carried out. I’m very proud of what we have already achieved, as we have addressed and resolved nearly all the shortcomings that have been highlighted by the court.
The location of the agency is in Budapest. How does the relationship with the Commission look? Don’t you feel a little bit lonely there?
In fact, it’s a great location, as Hungary is so central. As you know, we are pursuing a pan-European network, so it’s great for that too. We also have a mandate to outreach to areas with lower innovation capacities.
Our progress so far has seen an increase in stakeholders from Central and Eastern Europe, meaning Budapest is an ideal location to manage that.