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Hidden Innovation in the Creative Industries Research report: July 2008 Hidden innovation in the creative industries Ian Miles and Lawrence Green Hidden innovation in the creative industries Foreword Innovation has been a subject of serious academic and policy interest for several decades. The ‘creative industries’ have been studied for a shorter period of time, but perhaps more intensely. However, we do not understand well the process of innovation within the creative industries, nor how waves of innovation from elsewhere impact upon them. Since they represent a large and fast-growing part of our economy, this gap in our understanding needs to be remedied. Working with the Manchester Institute of Innovation Research, this research project uses the tools of ‘traditional’ innovation research to explore, analyse and compare innovation in four sectors that are critical to the UK’s creative future: videogames development, product design, advertising, and independent broadcast production. Technology is an important driver of innovation in all four sectors, but much innovation remains ‘hidden’ – uncounted by traditional innovation indicators. Moreover, the sectors studied display varied abilities to adapt to new technologies and increasing competition. NESTA seeks to pioneer new areas of innovation research but also to link these firmly to our areas of practical experimentation. The conclusions reached here will inform our future work on both the measurement of innovation in the UK and in the programme development of our Creative Economy Team. As with all emergent areas of research and analysis, we are aware that this is unlikely to be the final word. We welcome your comments and your views. Jonathan Kestenbaum CEO, NESTA July, 2008 NESTA is the National Endowment for Science, Technology and the Arts. Our aim is to transform the UK’s capacity for innovation. We invest in early-stage companies, inform innovation policy and encourage a culture that helps innovation to flourish. Executive Summary There have been surprisingly few firms in other industries to believe that their studies of innovation in the creative innovations impact more positively on their industries business performance. How innovative are the creative industries? But levels of innovation vary within the creative What new creative products are they sector. In particular, the so-called ‘creator’ producing? How are their methods of industries – which originate content – are production and product delivery different? more consistently innovative than content Are they more innovative in their back-office ‘distributors’. The CIS reports evidence for processes and their relationships with their distinctive approaches to intellectual property clients and consumers? and innovation management, though these findings are neither extensive nor intensive This study uses innovation research to examine enough to provide a comprehensive view of the creative industries. Innovation research the creative industries. (They do not extend has for many years been dominated by studies to cover all creative industries; they do not of traditional manufacturing and high-tech explore many forms of innovation in depth.) innovation. Recent innovation studies have We make some recommendations for future begun to grapple with service sector and surveys. organisational innovation; but there have been few studies of creative industries that use such Deeper insights can be gained from studying tools and perspectives. Our report reviews and individual firms. We have chosen cases from extends existing studies, combining a literature four industries – videogames, product design, review with some secondary survey analysis, advertising and independent broadcast and presents new case studies of four creative production. We examine the nature of their industries. innovation, how their innovation processes are managed, and their linkages to wider systems The Community Innovation Survey (CIS) is the of innovation. single best available source of quantitative information on business innovation in the UK. It is a valuable starting point for our study. The survey asks some revealing questions Technological innovation is rife in all about innovation, enabling us to examine how four case study sectors creative businesses perform on a range of indicators. For example, our chosen creative Each case study features many different industries include some highly innovative innovations. Technological innovation in enterprises. They are also more likely than products and processes is common in most 5 creative industries, with new information for new purposes. TV programmes are technology (IT) and the digitisation of repackaged for DVD, mobile phone or online content driving major changes. But the study downloads; music is repackaged in a new also uncovers less expected innovations in compilation or made available for MP3 new business models and product delivery. players. These findings reflect the ‘hidden innovation’ experienced across many other industries. • Finally, there are numerous innovations that take place on-the-job during the creation of new products and which fail to be recognised or replicated. The creative industries Of particular importance to the creative demand innovative problem-solving, but industries is innovation in the provision many of the new solutions are one-offs. of experiences Businesses don’t find it easy to reproduce such new approaches, though some technical But the creative industries are different from developments (for example, useful lines of most others, because their products are code in videogames) may be systematically fundamentally intended to provoke particular archived. kinds of response from their users. They enable experiences to be co-produced, to greater or The creative industries are experiencing lesser extents, with the product’s consumers. important changes that require and create Innovation often occurs when those producing opportunities for innovation. These changes creative content respond to the experiences include: of consumers and users, and make changes to their offer as a result. • New technological platforms – new information technologies, and the 1. This taxonomy is elaborated associated digitisation of much creative on in NESTA (2007). content, are changing the way products A good deal of innovation in the are created, delivered and marketed. creative industries turns out to be This is particularly true in videogames hidden development, but is occurring across the creative industries. ‘Hidden innovation’ – that which is not recorded using traditional innovation indicators • Consumers – both individuals and firms – is common in the creative industries studied:1 are becoming more sophisticated in their tastes and choices. Consumers are sharing • Sometimes it is because innovation similar their views more readily among themselves to activities measured by traditional and with producers, leading to more co- indicators is excluded from measurement. production of creative products. Much activity in creative industries involves research and development (R&D) of new • Institutional changes such as new products – though outside product design, it regulatory requirements and the is not usually described in such terms. Such globalisation of industries, markets and activities may not take place in conventional labour. Many businesses are out-sourcing laboratories. But research into people’s work overseas or even relocating abroad. tastes and preferences is vitally important in shaping new products and services. Yet it is • New products are being generated for excluded from R&D surveys and tax credit new markets – for example, entertainment systems. firms moving into educational markets with new types of videogame, or manufacturing • Another form of hidden innovation concerns firms becoming service providers. innovation in organisational forms or business models – this is also very common These developments are driving innovation in our creative industries. The most important in the creative industries, not least because developments often involve the users of competitors use innovation to gain market creative products in the innovation process. share and enter new markets. • A third type of hidden innovation, novel combinations of existing technologies and processes, is also common, with creative industries often using existing content 6 But many creative businesses struggle Policymaking: We offer three main to formalise their innovation processes recommendations. First, further evidence must be collected into how policy might assist The firms we study find it difficult to manage innovation in the creative industries. Though their innovation processes systematically. some research has been undertaken on this Innovation often remains spontaneous or ad theme, more detailed evidence would underpin hoc; creativity tends to involve the ideas of and guide the policy process. charismatic senior professionals, with little formal R&D. University links are limited for Second, targeted innovation programmes innovation, though graduates provide vital should be available to the creative industries. technical skills. However, communities of The creative industries welcome targeted practice – professional associations and more innovation support where it is provided. informal groups – are an extremely important Existing, general innovation support source of new ideas. programmes are often not relevant to their work. Initiatives such as the R&D Tax Credit scheme do not, as structured, support the sort of innovations undertaken
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