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Dr Bernd Reichert

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The head of the Directorate's T.4 unit talks about SME research opportunities in the world's largest research funding programme - FP7. A total of 1,336 million has been allocated specifically for SMEs who need to acquire new knowledge from research service providers. Offering choice over a much wider range of activities and scientific themes than did FP6, in principle every SME should find its own niche within the seven-year programme.

SMEs represent more than 99 per cent of European enterprises and employ 75 million people. Comprised of all types of firms, ranging from one-person businesses to cooperatives, they play a decisive role in Europe's economic growth and competitiveness.

While some SMEs offer very traditional services or craft products, many others are fast growing high-tech companies. Just like any other type of organisation, SMEs and SMEs' associations face increasing competition, both within the internal market and globally. In order to solve problems and grow, research must be a major component in their business strategy.

SME-friendly funding

A dynamic SME sector is obviously essential to a modern economy, and the European Commission is therefore working together with its Member States to improve the framework conditions under which SMEs operate. It has integrated the "Think Small First" principle into all policy-making and is reviewing all EU legislation to ensure it is SME-friendly.

The Commission is also playing a key role in making sure that SMEs receive appropriate assistance for their knowledge development and business growth. "We have increased considerably the opportunities for SMEs in FP7," says Dr Bernd Reichert, head of T.4, the Directorate's SME research unit. "It has become more attractive for SMEs to participate in the overall programme because we are providing more money now."

Funding can now cover up to 75 per cent of an SME's research costs and up to 100 per cent of some other types of expenditure, such as training. There is also emphasis on the involvement of enterprises, including SMEs, in Marie-Curie actions, such as the Industry-Academia Partnerships and Pathways (IAPP). This is a dedicated scheme which encourages knowledge sharing in partnerships between the public and private sector, including in particular, SMEs. "IAPP represents the longer term view of research for an SME, helping to develop a product further," says Reichert.

Previously known as 'Cooperative Research', Research for SMEs is for companies with little or no in-house research expertise, as well as high-tech organisations which need to outsource research. Research for SME Associations (formerly Collective Research) targets bodies which act on behalf of their SME members to address common technical problems and promote the results of successful projects. Both these 'bottom-up' schemes address any research topic across the entire field of science and technology, and are key to a new way of thinking.

Becoming more market-savvy

"With these two schemes, SMEs outsource their research to RTD performers, such as universities or other research-performing SMEs, which then carry out research for them under market conditions," says Reichert, who is keen to emphasise the customer-seller relationship between the two types of organisation. "We want to create a new market-driven thinking."

The idea is that SMEs buy the technological know-how they need to develop new, or improve existing products, systems, services or processes, from the RTD performers themselves. "In this way, if they are paying market prices for something, they expect proper results and can start to behave more pro-actively than they have done historically," adds Reichert.

Certainly taking part in FP7 opens the door for an SME to become involved in ambitious, leading-edge projects but, as Reichert points out, there is a series of fundamental steps to be taken, and questions to be asked, before proceeding.

"The National Contact Points (NCP) should be the SMEs' first point of call before they come to us, so they have a clearer idea of where their specialism lies, it has been thought through, and the commercial value has been clarified," he says.

The SME then has to decide whether it needs to go to Europe for funding, or whether it can get appropriate support at regional level. "First of all, the SME must know what it wants to achieve and how it can achieve it. NCP and Info Relay Center networks exist to help them to identify and develop their assets at the national level. However, they may ultimately decide that what they really want is to go multinational. If what they have is strong enough, they then have a chance to compete at the European level by coming to us," says Reichert.

But the initiative for this should come from the SME. "Historically, SMEs have been by their nature, very reactive, conservative. They had a technology they wanted to exploit, and that was it. But what we now see is a shift towards continuous innovation and striving to remain profitable in the market at all times," adds Reichert. "At this point, our new Research for SMEs scheme can kick in as well as the other existing programmes which are based more on collaboration between academia, large industry and SMEs."

Networking is the future

Indeed research networks are becoming increasingly important vehicles for FP7, helping the Commission spread the word about collaborative opportunities and funding on offer, as well as providing the SME with access to larger markets, shared risk, introducing new contacts, facilities and expertise. It's a move which Reichert hopes will encourage organisations to start helping themselves.

In the past, such networks have been mainly academia driven, or focused around one or two big players or industries. Financial and other worries by the network's more established players also made it difficult for SMEs to enter into their fold. "One of the problems we face is how we can reach a single SME in whichever country and tell them what we have to offer. We have to rely on the networks we are creating more and more. This is why we place a lot of emphasis on our Research for SME associations because they are the multipliers. It's much easier to finance a group of SMEs and spread the message among them. It's also important for SMEs to get into these networks and markets where they will become trusted partners," says Reichert.

It's often forgotten that SMEs can also be wary of entering such networks because they fear collaborating with what they see as big company competition capable of stealing their ideas. "It's not an easy ride. You have to be aware of what you are doing. It might be a dance with the devil but it can be very profitable for the SME to network and collaborate with its competitors because it helps them both move forward," says Reichert.

To help this process along, the Commission has relaxed its rules on collective financial responsibility which makes sure companies have sufficient funding for the duration of the project. Depending on the outcome of the financial check, a bank guarantee (or any other financial security) was often requested from a contractor.

"SMEs worried about the financial risk that joining up with a partner might bring. Now, this risk is covered by us via an in-house guarantee fund and we will not ask in general for bank guarantees anymore," says Reichert. "This is important. We are providing a cushion for SMEs so they can explore these high risk areas. This is also providing them with an opportunity to become known and trusted if they deserve it."

But Reichert maintains SMEs must still be careful about which knowledge they give away. Complications between competing industrial factions can blow up very quickly in an environment where the first on to the market wins.

"One solution is the vertical network where those which develop knowledge, or the raw product, work closely with the buyer, or end user of the product rather than other competitors. SMEs can feel they are operating in a much safer environment where trust operates very much more in their favour," Reichert concludes.