Research and analysis

Innovation and productivity in DCMS sectors

Published 10 July 2025

Report authors:

• Dr Caterina Branzanti
• Dr Martin Mitchell
• Aisling Draper
• Emily Cretch
• Phoebe Weston-Stanley
• Rob Fontana-Reval
• Celia Lam

Acknowledgements

The authors wish to thank Dr Neil Lee for his contribution and support throughout the project.

Executive summary

Background

Improving living standards relies on sustained economic growth and high productivity as they increase incomes and improve public services. However, since the 2009 recession, UK productivity has struggled to recover, and post-pandemic estimates indicate this trend is continuing. As a result, productivity in the UK now lags behind that of other countries, such as the United States, Germany, and France. Albeit with variation at the sub sectoral level, productivity in DCMS sectors in 2023 was lower than the UK average, with output per hour at £35 compared to £43 across all sectors (DCMS, 2025a).

Productivity measures the output generated per unit of input in the production process. The most common measure is labour productivity, i.e. the total output produced per hour worked. A more comprehensive measure is Total Factor Productivity (TFP), which considers a broader range of inputs such as infrastructure, equipment, technology, real estate, and machinery. Innovation is a key driver of long-term productivity, as it enables firms to apply new ideas, ways of working, and technologies to improve products, services, and productive efficiency.

Against this backdrop, the Department of Culture Media and Sport (DCMS) commissioned the National Centre for Social research (NatCen) to carry out mixed-methods research aimed at investigating the role of innovation in reinvigorating and supporting productivity across its sectors, and the drivers affecting it.

Methods used in this study involved a Rapid Evidence Assessment (REA), eight in-depth interviews and a workshop with 12 industry practitioners. REA insights were used to develop four case studies. Additionally, four broad policy recommendations were formulated to support innovation and productivity in DCMS sectors. Lastly, a benefits assessment of the proposed policy recommendations was carried out to evaluate their potential impact.

Key findings

Innovation and productivity gains in DCMS sectors

There is evidence to suggest that innovation in DCMS sectors leads to productivity gains through two mechanisms:

• Streamlining processes and improving efficiency: by streamlining workflows, eliminating redundant processes, and integrating advanced technologies, organisations can significantly reduce their operational costs and improve productivity. For instance, AI-driven automation in sectors such as tourism, journalism, sound design, and civil society accelerates production timelines and decreases reliance on manual labour, thereby lowering labour costs. Moreover, lean manufacturing and production methods, such as 3D printing in design and virtual production in film and TV, help minimise waste and optimise resource utilisation. These strategies enable organisations to produce more products and services more efficiently, generating productivity gains
• Boosting engagement, sales and revenue: creating new or enhanced products and services enables organisations to address changing consumer demands, thereby boosting customer retention and increasing revenue, which in turn improves productivity. Technologies like Augmented Reality (AR) and Virtual Reality (VR) in museums and games, as well as smart technologies and voice assistants in tourism, offer unique experiences that engage customers, improve satisfaction, and promote repeat visits. Furthermore, diversifying service offerings can generate additional revenue streams and mitigate the risk of dependence on a single customer group. For instance, performing arts and sports organisations attract wider audiences and customers by offering innovative activities that appeal to various demographics. These innovations help businesses stay adaptable and resilient in a dynamic market

The evidence suggests that technological innovations are more common than non-technological innovations, particularly in the creative and cultural industries, tourism, and gambling. For example, innovations like VR, AR, and Artificial Intelligence (AI) are adopted across multiple sectors. VR and AR support innovation in film, museums, games, and tourism, while AI is used in tourism, civil society, journalism, and sound design. However, the complexity and advancement of technology applications vary across sectors. For example, while charities tend to use basic AI chatbots to carry out routine tasks, the creative and cultural industries and tourism employ AI for more advanced activities such generating music and providing complex guest services. These examples demonstrate how the same technology is applied differently across sectors, either to create innovative products and services or to support the production process, and indicate varying levels of technological sophistication.

Non-technological innovations are less frequent, and are mainly found in sports, civil society, and the creative and cultural industries, revolving around co-production and collaboration to optimise resources and foster growth. For example, charities and sport clubs use open innovation to engage stakeholders, share knowledge, and co-create initiatives that better meet community and organisational needs.

Innovation barriers and enablers

The evidence suggests three categories of factors that can either facilitate or hinder innovation within DCMS sectors: individual and organisational attitudes and values; access to finance and funding; and access to knowledge, skills, and training. Although the literature most commonly references a lack of finance and skills, the evidence is predominantly qualitative and the few quantitative findings available are often based on small-scale, cross-sectional surveys. This prevents from drawing meaningful conclusions about the scale and prevalence of these factors.

• Individual and organisational attitudes and values: employees’ and managers’ attitudes can both hinder and facilitate innovation. Evidence indicates that in sport and the creative and cultural industries, some employees resist new technology as they fear that automation and other advancements may threaten job security. This resistance is likely due to principal-agent issues, where employees’ goals do not align with those of management. The evidence also suggests that some managers in these sectors might be unaware of the benefits of new technology and cautious about adopting innovations developed elsewhere. This is likely due to information asymmetry, driven by a lack of comprehensive, up-to-date information about emerging technologies. Conversely, positive attitudes towards change, entrepreneurship, team diversity, and ongoing learning among staff and managers are crucial factors enabling innovation
• Access to finance and funding: finance and funding are major barriers to innovation in the creative and cultural industries and civil society. High technology costs and limited access to early-stage funding challenge smaller creative and cultural organisations and start-ups. The charity sector struggles due to its reliance on public funding and lack of private investment. These issues suggest market failures that prevent some organisations from obtaining the necessary finance, particularly in sectors with many young, small firms producing intangible value
• Access to knowledge, skills, and training: skills gaps and limited access to knowledge and training hinder innovation across the creative and cultural industries, civil society, and tourism. For example, skills shortages are significant obstacles to growth among organisations using immersive technology. Moreover, charities lack the digital skills needed to manage information, communicate, handle transactions, and problem-solve. In the tourism sector, gaps in digital and technical skills slow innovation, particularly in the application of robotics and blockchain technology. Contributing factors include the high costs of training programmes, the risk of employee turnover after upskilling, and uncertainty about the long-term benefits of training, especially in rapidly changing industries

Against this backdrop, local ecosystems promoting collaboration and knowledge-sharing can overcome barriers to innovation. For example, creative clusters that bring together industry, academia, and funding institutions provide access to finance, technological expertise, and business development advice. Moreover, open innovation supports organisations by fostering partnerships, enabling access to innovative technologies, leveraging external knowledge, and co-creating initiatives to better meet community and customer needs.

Innovation adaptation, diffusion and gaps

Adaptation to innovation refers to how organisations adjust and integrate new technologies, processes, or ideas into their existing systems and operations. Albeit limited, the evidence suggests three categories of adaptations: technological, organisational, and skills adaptation.

• Technological adaptation involves organisations updating software and integrating new systems with existing ones. For example, film and TV productions invest in ready-to-use software systems for virtual production, while hotels upgrade their technological infrastructures to integrate voice assistants
• Organisational adaptation refers to changes in structures, strategies, and operations in response to innovation. In film and TV, the shift to virtual production has led to hybrid work models and redesigned workflows. Organisations adopting AI change their workflow to incorporate human feedback and oversight. Civil society and sports organisations adopting open innovation need to ensure process flexibility to incorporate feedback from various stakeholders at different stages of service delivery
• Skills adaptation involves upgrading skill sets to effectively integrate innovation. For example, the creative and cultural industries require mentoring, bootcamps, and accredited training. In the tourism sector, comprehensive training and continuous learning are essential to overcome employee resistance to change

The evidence on how innovation spreads and where gaps exist is limited and cannot be broadly generalised. In the creative and cultural industries, innovation diffusion is inconsistent, with larger organisations leading in innovation, while smaller firms face financial barriers. The diffusion of digital innovation in the tourism sector is limited, with companies hesitant about adopting new technologies due to costs and uncertainties, resulting in a slow progress towards smart tourism.

Policy recommendations

Policy recommendation 1: Improve workforce digital skills

Addressing the digital skills needs within DCMS sectors is crucial, and future policies and training initiatives, such as Skills England and the Digital Skills Inclusion Plan, will play a key role in achieving this. Additionally, fostering ongoing dialogue between employers, higher education institutions, and further education organisations will help keep educational programmes relevant to industry requirements. To maintain the quality and relevance of higher education, further education, and training courses, an accreditation and certification system should be established. Lastly, encouraging small and medium-sized organisations to collaborate on training and development programmes will enable them to pool resources and reduce costs effectively.

Policy recommendation 2: Provide guidance to employers on the use and adoption of technology

It will be important to connect organisations within DCMS sectors with leading innovative companies across the UK, facilitating inter-sector secondments and exchanges. By enabling the workforce from DCMS sector organisations to engage with innovative companies, this initiative will support the transfer of skills, knowledge, and innovative practices. Furthermore, establishing formal agreements with countries that excel in digital innovation will facilitate structured collaboration. Implementing exchange programmes will enable professionals and experts to visit partner countries to observe and learn from their practices. Additionally, capacity-building initiatives should be supported, where practitioners receive training from national and international experts. These measures will collectively enhance the innovative capabilities of DCMS sectors and drive forward digital advancement.

Policy recommendation 3: Foster a supportive environment and culture for innovation

To foster a culture of innovation and entrepreneurship, it is recommended to develop targeted social media campaigns that promote the benefits of these practices. This can take the form of collaborating with charismatic influencers and thought leaders that could inspire and motivate individuals and organisations to adopt innovation. Additionally, establishing formal awards and recognition programmes will celebrate those demonstrating outstanding innovation within their sectors. These programmes can also be leveraged to compile and publish detailed case studies, showcasing successful examples of innovation and providing valuable insights for others to follow.

Policy recommendation 4: Enhance financial support for technology adoption

It will be important to ensure that funding is available for innovative ideas still in their early stages, even without evidence of viability or commercialisation strategies. Funding applications should also include provisions for upgrading technologies and skills, fostering future growth and development. Additionally, subsidising access to essential licensed technologies, such as cloud computing services, CRM systems, and cybersecurity software, will further support DCMS-sector organisations.

Simplifying government funding processes and portals, enhancing clarity, and removing bureaucratic obstacles will make it easier for organisations to access necessary funds. Moreover, developing a structured process for providing personalised feedback to applicants whose funding applications are unsuccessful will help them improve future applications. Lastly, establishing a mentorship programme where successful applicants are paired with those whose applications were unsuccessful will foster a collaborative environment and encourage knowledge sharing.

1. Introduction

1.1 Policy context

Sustained economic growth and high productivity are crucial to improve living standards, as they result in higher incomes, more goods and services, and improved public service provision. However, productivity in the UK has struggled to recover since the 2009 recession, and post-pandemic estimates indicate this trend is continuing (Harari, 2025). The result is that the UK now lags behind higher productivity peers. In 2023, Gross Domestic Product (a measure of how much the economy is producing) per hour worked in the UK was $79 when accounting for differences in costs between countries (purchasing power parity), well below that of the United States ($97), Germany ($94) and France ($88) and comparable to that of Italy ($77) (Harari, 2025).

Albeit with variation at the subsector level, productivity in DCMS sectors in 2023 was lower than the UK average (DCMS, 2025a)). In 2023, output per hour in the DCMS sectors was £35, compared to £43 across all economic sectors in the UK. From 2022 to 2023, output per hour fell by 3.3%. In comparison, UK productivity overall rose by 2.8% from 2019 to 2023 and fell by 0.5% from 2022 to 2023.

Against this backdrop, both macro and micro economic models show that innovation is a key driver of productivity in the long-term (Solow, 1957). Innovation occurs when firms apply new ideas and technologies to improve the range and quality of products and services offered to meet market demands, as well as their overall productive efficiency (OECD and Eurostat, 2005). Innovation can increase productivity as it allows firms to produce more output, or the same output with fewer inputs. For example, a new product increases sales and, ultimately, income, whereas the use of artificial intelligence in production processes allows workers to produce the same outputs more rapidly.

However, innovation is relatively concentrated across firms and across places. The bulk of research and development (R&D) spending, for example, happens in a small number of larger, high-tech firms, and much is concentrated in London and the South East (Aitken, et al., 2021), causing regional disparities and growth differentials across the country. Although innovation is challenging to quantify and R&D represents only one metric of innovative activity, increasing the number of firms engaging in innovation is crucial to enhance productivity within the UK.

1.2 Research objectives

In November 2024, the Department of Culture Media and Sport (DCMS) commissioned the National Centre for Social research (NatCen) to carry out mixed-methods research aimed at investigating the role of innovation in reinvigorating and supporting productivity across its sectors, and the drivers affecting it.

This study focuses on five sectors that make up the DCMS’s policy remit: civil society, creative and cultural industries, gambling, sport and tourism. It has three main objectives:

1. Undertake an evidence review into the links between innovation and productivity, specifically with respect to current and potential activity across DCMS sectors

2. Conduct specific qualitative analysis into relevant case studies which identify driving factors of innovation leading to productivity

3. Provide actionable recommendations on how DCMS can create further growth opportunities for innovation leading to productivity gains across its sectors

In this context, the research seeks to answer the following research questions:

• what does innovation driving productivity gains in DCMS sectors look like?
  • what forms of innovation are adopted to drive productivity gains in DCMS sectors?
  • what are the mechanisms that turn these innovations into productivity gains?
  • what are the identified gaps in innovation in DCMS sectors?
  • what are the factors that are enabling or hindering innovation in DCMS sectors?
• how are DCMS sector organisations changing their systems, practices and operations to adapt to innovation?
• how widespread is innovation within DCMS sectors?
• is there innovation spillover and crosspollination across DCMS sectors?

2. Overview of methods

The study is based on a mixed-methods design, including:

• a rapid evidence assessment (REA) of existing literature on innovation and productivity across the five DCMS sectors, which was used to summarise the evidence and develop four case studies
• eight depth interviews and a workshop with 12 industry practitioners. This data was used to supplement REA findings and develop policy recommendations that could be implemented to boost innovation leading to productivity gains
• a benefits analysis of the policy recommendations

These are briefly introduced in the following sections. A detailed description of the methodology can be found in Appendix A.

Rapid evidence assessment

NatCen conducted an REA to review and summarise the evidence, using rigorous and transparent methods for searching, screening, assessing, and synthesising evidence. The process involved searching for both academic and grey literature. Academic literature was identified through search strings in academic databases, while grey literature was sourced from relevant organisations’ websites. Sources had to meet criteria such as being written in English, based on data from 2015 onwards, and covering one or more DCMS sectors. Studies from Europe and North America were also included due to their relevance to the UK context.

As shown in Figure 1, the REA process involved several stages:

• i) a systematic search of relevant evidence
• ii) title and abstract screening
• iii) full-text screening
• iv) prioritisation, resulting in the selection of 40 papers based on relevance and quality
• v) extraction and organisation of relevant information within the selected papers in a thematic framework. Quality assessments were conducted for each paper.

Case studies

Four case studies were identified from the REA, each exploring different types of innovations, challenges and outcomes, across various DCMS sectors. Supplementary desk research, including press articles and academic literature, was conducted to expand on the selected case studies.

Depth interviews with industry practitioners

NatCen conducted eight, 60-minute online interviews with industry practitioners recruited through a recruitment agency. These practitioners represented diverse organisations across DCMS sectors, ranging from 2 to over 10,000 employees and located in various regions and countries within the UK. The interview findings supplemented the REA data and provided examples of lived experiences of innovation.

Figure 1: REA process

Use zoom on your browser to view.

Workshop with industry practitioners

NatCen held a 2.5 hour, online workshop with 12 industry practitioners recruited through a recruitment agency. The workshop addressed four themes: productivity challenges, industry innovations, barriers and enablers to adopting new innovations, and policies to address these barriers.

Policy Recommendations

The combined findings from the REA, case studies, depth interviews, and workshop informed the development of four policy recommendations aimed at supporting innovation and improving productivity in DCMS sectors.

3. Innovation and productivity gains in DCMS sectors

This chapter examines the types of innovations adopted by organisations in DCMS sectors and how these innovations result in increased productivity. The chapter also presents four case studies, selected based on the findings of the REA to illustrate the breadth of opportunities for innovation to drive productivity across DCMS sectors. The selection process aimed to cover a diverse range of sectors and types of innovation, based on the most compelling and comprehensive evidence reviewed. Most of the case studies are UK-based, providing insights and examples that are directly applicable to the local context. However, one case study focuses on civil society in Italy, which was included due to its relevance. This particular case study offers valuable lessons and perspectives that can be applied to similar circumstances in the UK, illustrating the universal principles and strategies that can be effective in different cultural and societal settings. 

3.1 Forms of innovation adopted across DCMS sectors and productivity gains

The evidence suggests that innovation in DCMS sectors can lead to increased productivity through a range of mechanisms. These mechanisms can be grouped into two categories. Firstly, innovation enables streamlined processes and efficiency, with organisations often using new digital technologies to increase delivery speed and reduce staff and administrative costs. Secondly, innovation boosts engagement, sales and revenues by bringing new or improved products and services to market, enhancing customer experience, and improving customer retention. Innovations discussed in the following sections are categorised accordingly and further divided by sectors.

The definition of innovation adopted in this study draws on the Oslo Manual’s (2018) classification, the most widely used and robust conceptualisation available. This comprises four categories of innovation that organisations adopt to improve their performance and competitiveness.

• product or service innovation refers to the introduction of new or significantly improved goods or services. This includes changes in design, components, materials, software, or other functional characteristics. Product innovation enables organisations to meet new consumer needs, improve user experience, or open new market opportunities
• process innovation involves implementing new or significantly improved production or delivery methods. This includes changes in techniques, equipment, software, or procedures. Process innovations aim to increase efficiency, reduce costs, enhance quality, or improve environmental sustainability
• marketing innovation refers to the development and implementation of new marketing strategies that differ significantly from existing ones. These innovations can include changes in product design or packaging, new distribution channels, promotional techniques, or pricing strategies. Marketing innovation enables organisations to meet customer needs, open new markets, or improve their competitive position
• organisational innovation involves new organisational methods in business practices, workplace organisation, or external relations. This includes changes in management structures, employee responsibilities, or collaborations with external partners. Organisational innovations aim to improve efficiency, productivity, and workplace satisfaction, and to enhance the ability to adapt to market changes

Figure 2 provides with an overview of the key innovations identified in the evidence and how they support productivity.^{[footnote 1]}

Figure 2: Key innovations found in REA in DCMS sectors and how they support productivity

Use zoom on your browser to view.

3.1.1 Creative and cultural industries

There are a wide range of process, business model, and marketing innovations adopted in the cultural and creative industries that drive productivity by streamlining processes and improving efficiencies, as well as boosting engagement and revenue.

Streamlining processes and improving efficiency

Process innovation through virtual production technologies is progressively transforming film and TV production. Borrowed from the games industry, virtual production is defined as the range of tools and techniques that allow film and TV to be created within virtual sets (Willment & Swords, 2023; Willment, et al., 2024; Lupu, et al., 2022). This is achieved through a range of virtualising technologies including real-time game engine, virtual and augmented reality systems, motion-capture, LED screens and in camera-visual effects. Virtual production brings a range of benefits to the production process (Willment & Swords, 2023; Willment, et al., 2024) including:

• recreating natural environments in the studio
• filming even with adverse weather conditions or when locations are unavailable
• limiting external interferences while filming, such as changes in lighting and noise
• providing total freedom on how elements such as props, costumes and hairstyles should look

Process innovation through virtual reality (VR) and virtual production leads to productivity gains through a more streamlined production process (Willment, et al., 2024). Using VR to pre-visualise scenes and images before filming enables production crews to modify the virtual environments on the spot (Willment, et al., 2024). This approach contrasts with traditional film making processes, where changes are typically addressed after filming. Resolving issues during the pre-visualisation stage enables most shots to be captured in final image quality live, reducing the need for extensive visual effects or post-production adjustments. For example, Willment and Swords (2023) note that using LED walls^{[footnote 2]} to display a real-time set eliminates the need for most green screens on set. Green screens often cause reflections, leading to unwanted green shades on actors and objects. This requires significant effort from the post-production team to remove the glare, a process that can be time-consuming and expensive (Business Matters, 2022, cited in Willment and Swords, 2023). It is important to note that the relatively recent application of virtual production in film and TV production means that its various applications are still in an exploratory phase (Willment, et al., 2024). Therefore, their wide-ranging productivity outcomes are yet to be fully understood.

Process innovation in film and TV production also facilitates more environmentally sustainable practices. Lupu et al. (2022) examine the range of technological innovations used in Welsh productions, including paperless scripts and cloud documents, video meetings, streamlined shooting schedules, eco-friendly backup technologies, energy-saving approaches, and efficient certified equipment. The authors note that these practices not only improve efficiency but also significantly reduce the environmental impact of production activities.

Journalism and sound design introduce process innovation by integrating AI technology into their creative processes (Anantrasirichai & Bull, 2022). Automated journalism, also known as robot journalism, uses AI to generate news articles by scanning and analysing vast amounts of data. Leading news organisations have already tested automated journalism as a way of covering data-driven stories more efficiently. For instance, the BBC used AI to report on the 2019 UK general election, and the Washington Post to cover the Rio Olympics (Anantrasirichai & Bull, 2022). Integrating AI into the news production process enables reporters and editors to focus on providing in-depth analysis, and capturing the atmosphere, emotions, and unique aspects of the events in ways only humans can achieve. In sound design for television, film, video games, and theatre, AI is used to search large databases for appropriate sounds. Machine learning algorithms enables AI to analyse data and identify musical patterns, such as chords, tempo, and instrument sounds, and then suggest new sounds and melodies for artists to use as inspiration (Anantrasirichai & Bull, 2022).

In these sectors, process innovations leveraging AI lead to productivity gains by reducing costs and increasing output. AI automates manual, time-consuming tasks, speeding up the creative process, enabling faster turnaround times and more content production. However, it is important to note that there are concerns among artists about AI infringing on copyright and intellectual property rights, with AI-generated content replicating their unique styles without proper attribution or compensation.

The perspective of industry participants

A video editor reported successfully using AI to edit and remove backgrounds in videos, as well as to produce subtitles. However, they noted that AI was less effective at creating art backgrounds and images as it often produced generic and flawed images. (Industry participant – creative and cultural industries)

A participant working for a media company reported using AI to moderate chats during live streaming. This process innovation was introduced to manage the high volume of live video streams, involving interactions through a chat bar. The company adopted AI to detect and prevent inappropriate content from being posted. (Industry participant – creative and cultural industries)

The design sector introduces process innovations by using additive technology, commonly known as 3D printing. Spina and Compañó (2021) define 3D printing as the process of creating objects by adding material layer by layer, based on a digital model. This contrasts with traditional manufacturing methods that often involve cutting, removing, or carving out parts from a larger piece of material. This production process allows designers to produce intricate geometries and customised items that are difficult or impossible to produce with traditional manufacturing techniques. Moreover, 3D printing significantly reduces material waste, as it only uses the exact amount of material needed to create the final product (Spina & Compañó, 2021).

Process innovation based on 3D printing improves productivity by simplifying manufacturing and making supply chains more efficient (Spina & Compañó, 2021). By transforming data files (e.g. CAD models) into physical products, the technology offers a novel approach to production. This streamlines the manufacturing process and simplifies supply chains, by reducing dependence on external suppliers, leading to improved efficiency, lower costs, and faster time-to-market. Spina and Compañó (2021) also note that 3D printing enables organisations to transition from traditional custom production, where each item is individually created, to mass customisation. Products can be tailored to individual customer preferences but still produced in large quantities, without significantly raising production complexity or costs.

The perspective of industry participants

A graphic designer explained that they introduced process innovation through online proofing for artworks, which significantly streamlined the design process. With several stakeholders involved in multiple sign-off stages, amendments were frequently requested at various points. The participant noted that the ability to conduct all proofing online saved considerable time and reduced print costs, as it eliminated the need to present designs in person. This process innovation enabled them to meet tight deadlines effectively. (Industry participant – creative and cultural industries)

Boosting engagement, sales and revenue

Museums and games are two of the sectors in the creative and cultural industries adopting product innovation leveraging Augmented Reality (AR) and Virtual Reality (VR). AR technology allows organisations to add a computer-generated element to the real world, making it more interactive and engaging for users. These elements are superimposed on what users see through devices like smartphones or AR glasses, creating a mixed reality experience. The National Gallery, for example, has launched a smartphone app called ‘The Keeper of Paintings’, which uses an AR interface to encourage children to explore the Gallery’s collection of paintings. This innovative application allows children to interact with the artworks in a playful and educational manner, bringing the paintings to life through AR elements such as animations and informational overlays (Culture, Media and Sport Committee, 2023).

VR is a computer-generated environment that users can interact with in real time, using VR headsets. For example, video game developers Valve and Sony Interactive Entertainment have developed their own VR headsets to provide an immersive gaming experience. These headsets allow players to engage with game environments in real-time, providing a heightened sense of presence and making the gameplay more interactive and realistic (Culture, Media and Sport Committee, 2023).

The advertising and marketing sectors introduce marketing innovation through QR codes, which have transformed how brands engage with prospective customers (Bolat, 2024). QR codes are matrix barcodes that can be scanned using a smartphone or other device, directing users to digital content such as websites, promotions, or product pages. QR codes allow customers to interact with the brand beyond just seeing the ad, making the experience more engaging (Bolat, 2024). This keeps users interested for longer, providing opportunities for brands to offer more information or convert interest into actions like purchases or sign-ups.

Adopted by a growing minority, performing arts and cultural organisations introduce marketing innovations by leveraging dynamic pricing (Nesta, 2019). Dynamic pricing is a strategy where the price of a service is adjusted in real-time based on current market demand and supply. This approach is commonly used in various industries, including travel and hospitality to maximise revenue and manage inventory more efficiently. By adjusting ticket prices based on factors such as the popularity of an event, booking trends, and remaining time until the event, performing arts and cultural organisations can maximise revenue while ensuring that more seats are filled. For instance, the London International Festival of Theatre applied dynamic pricing during their 2018 edition, with notable success for one event. After the initial ticket batch sold out before the event, the festival released additional tickets at a higher price, resulting in a 12% increase in overall revenue (Nesta, 2019). This approach can also make tickets more accessible to a broader range of customers by offering reduced prices during periods of lower demand.

In the performing arts sector, nonprofit organisations introduce organisational innovations to address financial pressures and audience engagement issues (McDonald, et al., 2021). By collaborating and partnering, organisations can expand their audience base, access funding, and tailor their cultural programming accordingly. Collaborations include working with educational institutions to offer tailored programmes, partnering with healthcare facilities for therapeutic performances, and teaming up with local businesses for sponsorship. For example, McDonald et al. (2021) describe how a dance company partnered with a cognitive neuroscientist to develop a performance on dementia, performed in an assisted living facility. Some organisations offer performances in unconventional venues such as community centres, private homes, parks, and warehouses, creating appealing alternatives to traditional theatre settings, which improve accessibility and attract a more diverse audience (McDonald, et al., 2021).

3.1.2 Case study: InGAME

The Innovation for Games and Media Enterprise (InGAME) in Dundee is a research and development centre aimed at positioning the city as a global leader in videogames and immersive technologies (Grewar & Chillas, 2023). It is one of nine creative clusters set up under the UK Industrial Strategy’s Creative Industries Cluster Programme. Led by Abertay University in collaboration with the University of Dundee, the University of St Andrews, and industry partners, InGAME receives funding from an £11 million grant from the Arts & Humanities Research Council, with additional support from the Scottish Funding Council and industry partners.

InGAME operates through several initiatives, one of which is the Collaborative R&D Voucher Scheme. This scheme provides up to £50,000 of non-monetary R&D support, granting access to research and development expertise, state-of-the-art equipment, and diverse talent.

Product and process innovations

One of the projects supported by the scheme was Dislectek, a text-to-speech plug-in tool aimed at improving game accessibility and experience for dyslexic players (Grewar & Chillas, 2023). In collaboration with InGAME, games studio Lowtek developed a prototype and tested its functionality with game developers and end-users. Lowtek contributed art and design ideas for the plugin, while InGAME addressed technical challenges and supported user testing. Games developers were recruited through the InGAME network, and end-users were engaged via Abertay University’s accessibility group and Dyslexia Scotland. The plugin was praised for its straightforward integration process, utilising a simple drag-and-drop mechanic. In February 2021, Dislectek was successfully launched on the Unity Asset Store, a marketplace where Unity developers can buy and sell assets, including 3D models, textures, scripts, and tools, to aid in game and application development (InGAME, 2021).

InGAME also facilitated the transfer of knowledge and game technology to other sectors. For example, the Agri-EPI Centre, an Agri-Tech Innovation Centre based in Edinburgh, collaborated with InGAME to explore the application of game technology to enhance animal welfare and productivity in the dairy sector (Grewar & Chillas, 2023). This collaboration resulted in the development of SmARtview, an AI-powered AR tool designed to monitor and assess animal health and productivity. SmARtview integrated data from various farm technologies to access data on individual cows. This approach enabled farmers and veterinarians to make informed decisions regarding animal care by providing a real-time, comprehensive view of each animal’s health and needs.

Dislectek and SmARtview are emblematic examples of both product and process innovation Dislectek introduces product innovation by improving game accessibility for dyslexic players, a niche yet significant need in the games industry. By filling this gap, Dislectek enhances user experience and broadens the accessibility of games to a wider audience. Similarly, SmARtview addresses a critical need in the agricultural sector by applying game technology to ensure efficient and effective animal health monitoring. Both examples also highlight the importance of process innovation through collaboration among industry, academia, and funders to successfully bring new products to market.

Productivity gains

InGAME plays a pivotal role in enhancing the productivity of local SMEs. Firstly, it supports innovation by mitigating risks associated with creative experimentation and commercialisation. Developing innovative ideas can be costly and may not always lead to market success or product launch. InGAMES supports SMEs in exploring high-risk, high-reward concepts for products, services, and processes by providing affordable prototypes and tests. This reduces financial burden and increases the likelihood of successful innovation. Secondly, InGAME assists organisations in broadening and advancing their technological portfolios, which is crucial for sustainable growth. Lastly, through dedicated research and development initiatives, and business skills training, InGAME strengthens the organisational capacities of SMEs, rendering them more resilient and commercially adept. 

3.1.3 Case study: ABBA Voyage

ABBA Voyage is a concert residency by the Swedish pop group ABBA, held at the custom-built ABBA Arena in London (Culture, Media and Sport Committee, 2023).

Process and product innovation

The concert is an example of process innovation, leveraging groundbreaking motion capture and holographic technology to create digital avatars, known as ‘ABBAtars’ (Matthews & Nairn, 2023). The production involved ABBA members performing for five weeks in special suits to record their movements, which were then replicated by younger performers. Visual effects artists used advanced computer technology to overlay ABBA’s 1970s appearance onto these performances. ABBA Voyage is also an example of product innovation as it introduces a novel form of entertainment that seamlessly combined live music with digital technology, offering a unique and engaging experience for audiences.

This process posed two key challenges. Firstly, the project required advanced and costly motion capture systems, and sophisticated software to create lifelike digital avatars. Secondly, it involved coordinating 800 visual effects (VFX) artists from motion picture visual effects company Industrial Light & Magic, across three different locations over the span of two years (Mitchell, 2024).  Managing such a large and geographically dispersed team required systematic planning and communication to ensure consistency and quality across all visual effects work.

Productivity gains

ABBA Voyage demonstrates how established artists can continue to engage with their audiences by using modern technology. Even in the absence of live, in-person performances, artists can still create compelling and interactive experiences for their fans through digital innovations (Mitchell, 2024). Such an innovative approach has led to substantial productivity gains, evidenced by unprecedented sales and a significant contribution to the local economy. The venue sold over a million tickets, with prices reaching up to £181.50 each, making it the sixth most visited paid attraction in London in 2022. In its first year, ABBA Voyage generated £322.6 million in spending and added £177.7 million in Gross Value Added (GVA) to the London economy (Sound Diplomacy, 2025).

3.1.4 Tourism

The evidence reviewed suggests a diverse range of process, service, and organisational innovations introduced in the tourism sector to streamline operations, increase efficiencies, and boost engagement and revenue. These innovations leverage technological tools such as voice assistants, robotics, blockchain, smart technology, and ICTs.

Streamlining processes and improving efficiency

Businesses in the tourism sector are increasingly employing technology to optimise operations and expedite service delivery. For example, hotels adopt process innovations driven by voice assistants (Buhalis & Moldavska, 2022). Typically placed in guest rooms and public areas, voice assistants are voice-activated AI technology that uses digital interfaces to mimic intelligent human behaviour. Guests can use voice assistants to perform various tasks, such as controlling room features (e.g. lights, temperature, curtains), accessing information about the hotel (e.g. restaurant hours, event schedules), making service requests (e.g. housekeeping, room service, maintenance), and obtaining local information (e.g. directions, weather updates, nearby attractions).

Similarly, tourism businesses are increasingly using robotic technology to provide front-line services. Belanche et al. (2021) identify a range of tasks robots can perform. In hotels, robots at reception desks check guests in and out, provide directions, and recommend local attractions. In hotel restaurants, robots take orders, serve food and beverages, and process payments, streamlining the dining experience and reducing wait times. Robots can also improve housekeeping operations by performing tasks such as cleaning rooms and floors. Belanche et al. (2021) emphasise the importance of robots’ appearance in influencing customer perceptions and acceptance. Customers are more likely to appreciate and feel comfortable interacting with robots that have human-like features, such as facial expressions, gestures, and natural language capabilities^{[footnote 3]}, rather than those with a more mechanical or industrial appearance.

Robotic technology and voice assistants boost productivity in hotels and restaurants by automating routine tasks (Belanche, et al., 2021; Buhalis & Moldavska, 2022). This allows staff to focus on more complex and higher-value responsibilities, which better support business growth and efficiency.

The perspective of industry participants

A participant from a travel company reported introducing product and process innovation to streamline processes through a new app designed to support customers in planning and purchasing holidays, including a chatbot to organise holiday details. However, they noted that uptake was low due to a lack of public interest and trust in using apps for booking holidays. The company was exploring ways to encourage app usage by offering deals and discounts. (Industry participant – tourism)

Although in the early stages of adoption, businesses in the tourism sector are beginning to introduce blockchain technology to innovate their processes. Fragnière et al. (2022) explore this in their research on the use of blockchain technology among hotels in Switzerland. Blockchain can perform a range of tasks, including digital payments, reservations and ticketing; inventory managements (e.g. tracking inventories and streamlining interactions with suppliers); and identity management (e.g. securely store, manage, and verify individuals’ identities). This enables staff to complete administrative tasks, typically requiring several days, with significantly faster delivery times. Fragnière et al. (2022) also note that Blockchain technology improves transparency by eliminating the need for intermediaries, such as banks or booking platforms. By recording all transactions on a public ledger that everyone can access, no single entity controls the information, reducing the risk of fraudulent activities or hidden fees. Moreover, the security features of blockchain ensure that data is not altered or tampered with, increasing the reliability and trustworthiness of the entire process.

Boosting engagement, sales and revenue

Innovations leveraging voice assistants, robotics and blockchain technology not only streamline operations but also enhance the service delivered, providing a personalised and convenient experience for guests. Buhalis and Moldavska (2022) note that as guests become more familiar with such technologies in their daily lives, hotels respond by modernising their services through innovative approaches. By catering to guests’ digital habits and preferences, hotels can improve customer experience, increase loyalty, and boost revenue.

On a larger scale, tourist destinations are increasingly using smart technology to provide innovative services to visitors. For example, the city of Porto adopts a comprehensive range of ICT infrastructure, including cloud computing, the Internet of Things (IoT), and extensive Wi-Fi coverage, to ensure tourists have easy access to information and services (da Costa Liberato, et al., 2018). Mobile applications provide real-time details on points of interest, maps, cultural attractions, and weather forecasts, aiding in planning and navigation. Interactive tourist information centres equipped with digital tools, along with VR and AR applications, offer immersive experiences of historical sites and landmarks. Location-based services like GPS and beacons provide tourists with notifications about special offers and events. Additionally, recommendation systems personalise suggestions for attractions and activities based on tourists’ preferences. These technological innovations collectively enhance the tourist experience, making Porto a more attractive and accessible destination (da Costa Liberato, et al., 2018). This leads to greater tourist satisfaction, repeat visits and increased spending, which in turn support the local economy.

The perspective of industry participants

A participant working in the hotel sector noted that it was essential to be innovative to stay ahead of the competition. They highlighted the example of an hotel chain that created virtual tours of hotels and rooms that guests could see before they booked via an app. They believed that this gave their competitor an advantage over them, one they aspired to replicate within their own operations. (Industry participant – tourism sector)

3.1.5 Case study: Alexa for Hospitality

Alexa for Hospitality is a customised version of Amazon’s voice-activated assistant designed specifically for hotels and holiday rentals, allowing guests to access information, control room amenities, and request services through voice commands. First introduced in the United States in 2018, Alexa for Hospitality launched in the United Kingdom in 2021. The Mercure franchise was among the early adopters, introducing Alexa for Hospitality in selected hotels, including the Mercure Hyde Park, in London.

Process innovation

Alexa for Hospitality is a process innovation that enhances guests experience by enabling voice commands for various services and information, offering conveniences similar to those at home. These include playing music, setting alarms, answering questions, ordering room service, calling the front desk, checking out, and controlling in-room lighting (Buhalis & Moldavska, 2022). Additionally, hotels can add features through the Alexa Skills Store, including checking airport wait times, playing games, accessing guided workouts, and using sleep sounds. Alexa Hospitality can also be used for data analytics, enabling hotels to gather and analyse guest interaction data.

Productivity gains

Alexa for Hospitality improves productivity by optimising and streamlining operations, alongside ensuring effective labour allocation. It allows guests to make requests without needing to contact the front desk. Moreover, by identifying patterns in guest behaviour, the system allows hotels to adjust their offerings in real-time, leading to more personalised and efficient service delivery. For example, if the system identifies a high demand for room service at certain times, the hotel can allocate more staff to handle these requests promptly. Similarly, if guests frequently enquire about local attractions, the hotel can provide more detailed information or arrange special tours. Alexa for Hospitality also improves process efficiency. For example, housekeeping and maintenance staff use Alexa to report when a room has been cleaned or repaired, which subsequently updates the property management system in real-time. This integration significantly reduces the time required for manual updates and communication (Hanson, 2021).

3.1.6 Sport

In the sport sector, extensive evidence highlights the role of non-technological, organisational and service innovations in differentiating activities to increase revenue. However, there is limited evidence on technological innovations to streamline processes.

Streamlining processes and improving efficiency

Nonprofit sport clubs and federations implement process innovation by adopting new IT systems for online course registrations and improved data management (Wemmer & Koenigstorfer, 2015; Winand, et al., 2016). Sport clubs in Germany, for example, are increasingly upgrading their websites to more user-friendly platforms that allow members to easily browse, select, and register for courses, while automated data management systems handle enrolment records and payment processing efficiently. Transitioning to more advanced IT infrastructure allows sports organisations to improve productivity through streamlined registration processes and reduced staff costs (Wemmer & Koenigstorfer, 2015; Winand, et al., 2016; Winand & Anagnostopoulos, 2017).

Boosting engagement, sales and revenue

Organisational innovations enable sports clubs to enhance productivity by broadening the range of activities offered and extending their reach. In Germany, some sports clubs adopt an open innovation approach to design and deliver their activities (Wemmer & Koenigstorfer, 2015). This involves seeking inputs on services offered from both internal and external stakeholders, including trustees, customers, suppliers, and competitors. It also involves engaging with external partners, who possess the necessary skills and expertise, to co-create and develop new products, services, and solutions. Open innovation allows sports clubs to tap into a diverse range of perspectives and expertise, while ensuring that their offerings are more aligned with market demands and preferences.

Similarly, sports organisations introduce organisational innovations to offer flexible memberships and increase participation. Voluntary sport clubs in Belgium, for example, offer alternative memberships that allow individuals to use only specific parts of a club’s facilities and services, or to join in on an ad-hoc basis, instead of committing to a traditional, comprehensive membership (Corthouts, et al., 2023). These innovations address the changing demands of stakeholders by providing more personalised and convenient options for engaging in sports activities (Corthouts, et al., 2023).

Service innovations allow sport organisations to expand and differentiate their services and cater to a wider audience. In Belgium, sports federations offer a range of new activities designed to increase participation and inclusivity (Winand, et al., 2016). For example, national cycling days bring together cyclists of all levels for shared riding experiences. Family sports events encourage family members of all ages to participate in sports together, fostering community and promoting healthy lifestyles (Winand, et al., 2016). Moreover, some federations broaden their customer base by delivering activities for disabled individuals, youth, and seniors. This includes toddler jujitsu, which introduces young children to martial arts in a fun and safe environment, and senior sports days offering a range of physical activities tailored to older adults. By increasing service flexibility and differentiation, these non-technological innovations improve productivity by reaching underserved customer groups, while generating new revenue opportunities.

3.1.7 Civil society

Evidence on innovation in civil society is limited. Some evidence explores the use of AI technologies among charities to improve task efficiency and accelerate processes. Other evidence examines process innovation through micro-volunteering apps, and organisational innovation within social entrepreneurship organisations.

Streamlining processes and improving efficiency

AI-driven process innovation enables charities to streamline processes and tasks. Firstly, AI assists in developing online content, such as social media posts (Amar & Ramsay, 2024). By automating the creation of engaging and relevant content, charities can maintain a consistent online presence without dedicating extensive human labour to the task. This allows staff to focus on more strategic activities while ensuring effective communication with their audience. Secondly, AI performs various administrative tasks (Amar & Ramsay, 2024). For example, AI tools can summarise meeting notes, capturing key points and action items accurately and quickly. This reduces the time staff spend on documentation and ensures that important information is easily accessible. Thirdly, AI can write reports and draft grant applications (Amar & Ramsay, 2024), automating repetitive tasks and improving the quality and consistency of the documents produced. This enables charities to submit more grant applications more efficiently, potentially increasing their funding opportunities. Furthermore, AI is used to conduct desk research and gather information on specific topics (Amar & Ramsay, 2024). By automating the research process, AI can quickly sift through vast amounts of data, streamlining the research process, and allowing staff to make informed decisions at speed. This suggests that, for resource-constrained charities, AI can significantly enhance operational efficiency by automating routine tasks and reducing the need for manual labour, allowing organisations to reallocate resources toward more mission-focused activities.

Product innovation in civil society can also take the form of micro-volunteering apps, which enhance productivity by making volunteering more efficient and flexible. For instance, the Danish app BeMyEyes connects blind and visually impaired individuals with sighted volunteers for assistance via video calls (Mukhopadhyay, 2023). The app provides a combination of human- and AI-delivered services. Human volunteers are responsible for tasks requiring judgement, empathy, and complex interaction, such as providing navigation guidance, and offering emotional support. The AI component provides instant assistance for straightforward tasks, such as reading text from images and basic object recognition, ensuring help is available even when volunteers are not (Mukhopadhyay, 2023). By digitising and automating aspects of the volunteering process, such as task matching, scheduling, and tracking, the app reduces administrative costs and make it easier for organisations to manage volunteers.

The perspective of industry participants

The manager of a charity that promotes wellbeing through community-based social activities explained how they implemented a software on their website to allow users to ask questions about their services, thereby reducing the number of telephone calls they received. The participant explained that incorporating this software into their website reduced the time spent answering queries. This freed up time for more strategic work, and for tasks and initiatives that required direct human interaction, engagement, and personal touch. (Industry participant – civil society)

Boosting engagement, sales and revenue

Micro-volunteering apps not only streamline processes but also enable organisations to tap into a larger pool of potential volunteers. BeMyEyes, for example, allows individuals to contribute their time and skills in small, manageable tasks that can be delivered remotely or in short bursts (Mukhopadhyay, 2023). This makes volunteering accessible to people with limited time, enabling charities to serve more beneficiaries, expand their reach, and increase their impact.

The perspective of industry participants

The co-founder of a small homelessness charity explained that due to financial constraints, they prioritised allocating funds to directly support homeless individuals overrunning large publicity campaigns. Instead, the charity made a modest investment in developing a website and generating a QR code. This QR code was displayed on the high-visibility jackets worn by their outreach workers. People encountering the charity’s outreach workers on the streets could easily learn about the organisation by scanning the QR code. This strategy enabled the charity to expand its outreach and operations more cost-effectively than traditional advertising methods. (Industry participant – civil society)

3.1.8 Case study: social entrepreneurship organisations

Social entrepreneurship organisations (SEOs) are businesses that aim to fulfil a commercial purpose while addressing societal needs. In recent years, SEOs in Southern Italy have launched a range of social innovation projects aimed at tackling socio-economic inequalities (Scuotto, et al., 2023). These organisations operate in economically disadvantaged areas with very limited resources. They often struggle to secure stable funding due to the commercially risky nature of the projects they deliver, which in some cases involve long-term investments in areas with uncertain economic returns (Scuotto, et al., 2023).

Organisational innovation

To overcome these barriers, SEOs introduce organisational innovations based on the concept of social bricolage. Social bricolage refers to the process through which individuals or groups creatively and resourcefully use available resources, networks and knowledge to address challenges and pursue opportunities (Di Domenico, et al., 2010). This concept is rooted in the broader notion of bricolage, which involves making do with what is at hand and repurposing existing resources in innovative ways. In a social context, such innovative approaches offer solutions to unique social deprivation challenges where investment is low, or resources are unavailable.

SEOs in Southern Italy employ social bricolage through various methods, such as collaborating with local communities and businesses, and raising funds locally. Believing that locals are best suited to advise on the use of their own resources, SEOs co-produce their services with the local community (Scuotto, et al., 2023). Roman et al. (2020) stress the importance of engaging citizens to influence regional development, fostering a sense of connection with the organisations and their mission.

By partnering with local organisations, SEOs share the delivery and costs of a range of activities, including legal, financial and marketing (Scuotto, et al., 2023). Legal partnerships help SEOs navigate regulatory requirements and ensure compliance, reducing the time and resources spent on legal matters. Financial collaborations provide access to funding and financial management expertise, streamlining financial operations and enhancing stability. Marketing partnerships reduce costs by sharing expenses with other organisations.

Moreover, building robust local relationships enables SEOs to leverage financial resources by attracting local investments, grants, and donations that are more likely to be given to initiatives with strong community support. This is especially important as many organisations rely on philanthropy and micro-donations for their financial survival (Scuotto, et al., 2023).

Another form of organisational innovation introduced by SEOs is generative leadership (Scuotto, et al., 2023). Generative leadership builds work relationships based on a shared vision, responsibility, trust, empathy, and loyalty. This creates a system where knowledgeable individuals can convene and interact with minimal obstacles (Surie & Hazy, 2006). By sharing decisions and strategic choices, SEOs empower workers and partners, encouraging experimentation and innovation in repurposing existing resources. This fosters a collaborative workforce motivated to share and implement innovative ideas and committed to business success.

Productivity gains

Social bricolage leads to productivity gains in various ways. It fosters resourcefulness and adaptability within organisations, enabling SEOs to creatively utilise available resources. Moreover, social bricolage promotes collaboration, partnerships and the sharing of resources and expertise. This optimises resource allocation, reduces operational costs, and fosters a collaborative environment, boosting productivity and growth. Furthermore, building robust local relationships allows SEOs to secure local investments, which is crucial for financial sustainability, and reduces the time and effort needed to secure funding, allowing SEOs to focus on their core activities.

3.1.9 Gambling

Evidence on innovation in gambling is limited as most research tends to focus on the effect of gambling innovation on risky behaviours and addiction. Some evidence explores how product and marketing innovations are reshaping the gambling experience, increasing engagement and revenue.

Boosting engagement, sales and revenue

Online gambling, online sports betting, and advanced electronic gaming machines are among the most impactful product innovations in the gambling sector in recent years (Lawn, et al., 2020). Firstly, online gambling increases accessibility and convenience, allowing individuals to place bets and participate in casino games from any location with an internet connection. Secondly, online sports betting expands the customer base. Driven by advancements in technology and the increasing popularity of sports events worldwide, this innovation allows bettors to place wagers on a wide range of sports. Advanced electronic gaming machines enhance the gambling experience through sophisticated graphics, interactive features, and immersive gameplay. These machines attract a broader audience and keep players engaged for longer periods, contributing to higher revenues for gambling companies. Moreover, the convergence of video gaming and gambling, driven by their similar automated functions, immersive experiences, and prominent audiovisual elements, further contributes to increased engagement (Lawn, et al., 2020).

The gambling sector also introduces marketing innovations through targeted marketing and advertising to attract new customers and retain existing ones (Lawn, et al., 2020; Xu, et al., 2021). By leveraging data analytics and consumer insights, gambling companies create personalised marketing campaigns that appeal to specific demographics. These campaigns often utilise social media, email marketing, digital advertisements and live betting to reach potential customers. In their analysis of live on-screen betting odds during XFL game broadcasts, Xu et al. (2021) suggest that such marketing innovation boosts audience interest and enjoyment, increasing gambling intention.

Notwithstanding this, innovations in the gambling sector raise significant ethical concerns. The increased accessibility of online gambling and betting could lead to higher rates of problem gambling and addiction, as individuals may be more susceptible to gambling behaviours when convenient access is combined with aggressive marketing tactics (Lawn, et al., 2020). Moreover, targeted advertisements could disproportionately affect vulnerable populations, encouraging risky behaviour or excessive spending.

3.2 Conclusions

Although the evidence provides a wealth of examples of innovation in the DCMS sectors, there is little quantitative evidence on their impact on productivity. This hinders a comprehensive understanding of the broader benefits of innovation across these sectors. Moreover, the absence of research incorporating control groups makes it difficult to demonstrate a definitive correlation between the introduction of innovation and increased productivity. Lastly, the lack of comprehensive cross-country data and analyses that account for varying contexts and conditions prevents drawing meaningful conclusions about differences or trends across countries.

Notwithstanding this, there is some descriptive evidence^{[footnote 4]} suggesting that innovation in DCMS sectors leads to productivity gains through two sets of mechanisms: streamlined processes that reduce production costs and improved efficiency; and increased sales and customer retention through the development of new products and services.

Streamlined processes that reduce production costs and improve efficiency are critical components for the profitability of any organisation. By optimising workflows, reducing unnecessary steps, and adopting advanced technologies, organisations lower their operational costs. For example, AI-driven automation in tourism, journalism, sound design and civil society can expedite production timelines and reduce the need for manual labour, cutting down on labour costs. Additionally, lean manufacturing and production techniques (e.g. 3D printing in design, and virtual production in film and TV) can minimise waste and ensure that resources are used more effectively. This allows companies to produce more products and services at a faster rate.

Developing new or improved products and services enable organisations to meet evolving consumer demand, while ensuring customer retention and increasing revenue. Technologies like AR, VR, smart technologies, robotics, and voice assistants create novel experiences that captivate customers, increase satisfaction and encourage repeat visits. Moreover, offering a diverse range of services can create new revenue streams and reduce the risk of only relying on one customer group. Performing arts and sports organisations, for example, expand their audiences through innovative activities that broaden participation by catering to diverse groups. These innovations ensure businesses remain adaptable and resilient in a changing market.

The evidence and the case studies identified predominantly focus on technological innovations that enhance productivity through more efficient production processes and improve products and services. Examples of technological innovation are mostly found in the creative industries, tourism and gambling. The evidence identifies a smaller number of non-technological innovations mainly in sport, civil society, and the creative and cultural industries. Common among these sectors are practices that enable co-production and collaboration in service design and development. Such partnerships optimise resource allocation, reduce operational costs, and foster a collaborative environment conducive to innovation and growth.

The evidence also suggests forms of innovation that are common across multiple sectors. For example, VR and AR technologies support innovation in film, museums, games, and tourism. Similarly, AI is used across tourism, civil society, journalism, and sound design. However, the applications of these technologies vary in complexity and advancement. For example, charities use basic AI chatbots for simple tasks, which are new to the organisation but represent a relatively simple application of the technology. In contrast, the creative industries and tourism use AI for more advanced applications, such as generating music and offering sophisticated guest services, which represent cutting-edge, new-to-the-sector innovations. These examples illustrate how the same technology is applied in different contexts and may reflect the level of technological sophistication within DCMS sectors.

4. Innovation barriers and enablers

This chapter discusses innovation barriers and enablers in DCMS sectors. Barriers are factors that hamper the development, adoption and diffusion of new ideas, processes, or products within an organisation or industry, e.g. a resistant organisational culture and resource limitations. Conversely, enablers are factors that facilitate and support innovation, e.g. a supportive working environment, access to finance, skilled personnel, and effective leadership. It is important to note that the same factor can act as both a barrier and an enabler. For example, financial resources can be limited or abundant, and the organisational culture can be resistant to innovation or supportive of it. Against this backdrop, the evidence reviewed highlights three factors that can either enable or hinder innovation (Figure 3): individual and organisational attitudes and values; finance and funding; access to knowledge, skills and training.

Figure 3: Innovation barriers and enablers identified in the evidence

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4.1 Individual and organisational attitudes or values

Across civil society, creative and cultural industries, gambling and sport, evidence shows that innovation is often held back by concerns that it might lead to job losses or place profit over core values. Conversely, positive attitudes of managers and staff towards innovation, entrepreneurialism, and team multi-disciplinarity enable innovation.

Barriers

In the creative and cultural industries and tourism, fears that technological innovations and automation might replace traditional roles can hinder innovation. For example, workers in the film and TV production are worried that the increasing use of virtualising technology could lead to significant job losses (Willment, et al., 2024). Similarly, Belanche et al. (2021) highlight that when hotel workers perceive that innovations such as blockchain are introduced to cut costs and eliminate jobs, they become resistant to change. This resistance discourages support for new initiatives and the adoption of new technologies, ultimately hindering innovation.

Some organisations in the sport sector, alongside the creative and cultural industries and gambling, struggle to reconcile their values with the drive for innovation and enhanced productivity. For example, nonprofit sports federations occasionally resist adopting innovations that are primarily aimed at increasing revenue (Corthouts, et al., 2022). Similarly, there are ethical concerns associated with dynamic pricing used to manage ticket sales during periods of high demand; although this practice augments revenue, it does not consistently benefit consumers (Nesta, 2019). Within the gambling sector, regulators raise ethical concerns regarding the industry’s growth and profitability due to the related social harms (Lawn, et al., 2020).

Enablers

An organisational culture open to change, entrepreneurship and collaboration significantly enhances innovation across both the sport sector and civil society. Nonprofit sport federations with a positive disposition towards change implement more service innovations than those resistant to it (Winand & Anagnostopoulos, 2017). This is likely due to the supportive environment such attitudes foster, encouraging risk-taking ideas. Sport clubs that draw on multiple external sources of knowledge, such as customers, partners, or competitors, are more likely to innovate than those that rely solely on internal resources. (Wemmer & Koenigstorfer, 2015). This tendency can be attributed to diverse perspectives offering ideas and insights that can be incorporated into new practices or services. In the charity sector, a positive attitude towards entrepreneurship facilitates the development and testing of innovations (The Social Investment Consultancy, 2017). This suggests that entrepreneurial thinking encourages a culture of experimentation, motivating charities to explore and implement new concepts more effectively.

Moreover, diversity within teams, continuous learning, and a supportive team environment are key factors motivating individuals to innovate. In publishing, for example, innovation thrives in companies that support multidisciplinary teams and create a safe space for risk-taking suggestions (Noorda & Schlüter, 2024). Diverse skills and experiences bring together various viewpoints and expertise, while a safe environment for idea-sharing fosters open communication and collaboration. In the voluntary care sector, a culture of learning, good team spirit, and job satisfaction encourages new approaches (Lopes, et al., 2024). Continuous learning keeps individuals engaged and informed, strong team spirit fosters collaboration and mutual support, and high job satisfaction motivates employees to take initiative and share innovative ideas.

4.2 Finance and funding

The evidence reviewed suggests that finance and funding are major barriers to innovation, especially in the creative and cultural industries and civil society. However, when an effective funding model is combined with strong collaboration, it can support innovation. This synergy creates an environment where new ideas can flourish, risks are mitigated, and resources are optimally utilised.

Barriers

The cost of technology is a significant barrier for organisations in the creative and cultural industries and tourism. For example, dynamic pricing is financially prohibitive for smaller arts and cultural organisations (Nesta, 2019). This consideration is especially significant since the cultural sector predominantly comprises micro and small-sized organisations. Similarly, the high upfront cost of 3D printing technology poses a significant challenge for small design start-ups (Spina & Compañó, 2021). In the tourism sector, the cost of new technology is an obstacle, particularly when it has not been tested or proven to generate efficiencies and savings (Ballina, 2022).

Another financial barrier affecting mostly the creative and cultural industries is access to angel or early seed funding. A lack of investment during the initial idea-development stage makes it difficult for early-stage AR and VR businesses to prove commercial viability (Mateos-Garcia, et al., 2018). The funding gap is particularly significant for businesses selling their own intellectual property, as funders are deterred by the absence of established business models and a lack of strategy around consumer reach. Similarly, in creative sectors using extended reality (XR) technologies, funders expect evidence that a business model or a project will achieve its outcomes, e.g. revenue generation and market traction, but do not provide advanced funding to generate this evidence (Willment, et al., 2024). Willment et al. (2024) suggest that the application and awarding processes should reflect the needs of creative SMEs, with XR projects, for example, requiring a mix of large and small funding, including support for initial R&D.

The charity sector faces significant barriers due to its over-reliance on public funding and lack of early private investment in innovations (The Social Investment Consultancy, 2017). Moreover, the strict criteria of public funding processes require charities to adhere to rigid guidelines for programme and service delivery. This prevents them from experimenting with innovative approaches and adapting services accordingly. In a related observation, Amar and Ramsay (2024) emphasise that digital costs should be a key consideration in funding applications and that funders need to recognise the importance and implications of these costs.

Enablers

Despite these challenges, when an effective funding model is combined with strong collaboration, it can create an environment where innovation and experimentation thrive. For example, the AHRC-funded InGAME cluster in Dundee brings together a range of stakeholders, including academics, funding institutions, game studios, publishers, and venture capitalists, to develop a Scottish videogames ecosystem. This tight-knit ecosystem reduces risks for developers, improves scale-up capabilities, and promotes innovation opportunities (Grewar & Chillas, 2023).

4.3 Knowledge, skills and training

There is evidence to suggest that skills gaps and limited access to knowledge and training hinder innovation across the creative and cultural industries, civil society and tourism. However, local clusters promoting collaboration and networks of partners sharing knowledge and skills can overcome these barriers.

Barriers

Except for gambling, evidence across all DCMS sectors highlights that a lack of knowledge, skills, and training hinders innovation. For example, skills shortages are a significant obstacle to growth among creative organisations using immersive technology (Mateos-Garcia, et al., 2018). In their secondary analysis of the Innovation Survey, Gkypali and Roper (2018) highlight how skills shortages in areas such graphic arts, advertising, multimedia and/or web design, may significantly hinder innovation.

Arts Council England-funded organisations have poorer digital skills compared to previous years (Nesta, 2019). This may be due to a lack of investment in digital training and development, rapid technological advancements that outpace the organisations’ ability to keep up, and limited access to expert guidance. In the performing arts sector, Webb and Layton (2023) highlight the importance of universities re-evaluating and updating their content to better prepare students for the digital economy, focusing on both technical and transferable digital skills, to enhance graduate employability and sector resilience.

In civil society, charities struggle with digital competencies and access to expert guidance, with many requiring funding to access training (Amar & Ramsay, 2024). Most charities lack the digital skills needed to manage information, communicate, handle transactions, and problem-solve (The Social Investment Consultancy, 2017). If not addressed, this lack of digital skills could significantly impair charities’ sustainability and their ability to meet the evolving needs of their beneficiaries.

Similarly, gaps in digital and technical skills slow innovation in the tourism sector. For example, staff’s limited technology aptitude hinders a more widespread application of robotics in hotels (Buhalis & Moldavska, 2022). Moreover, Fragnière et al. (2022) note that only a small proportion of hotel managers are aware of blockchain technology. This issue is particularly evident in small and medium-sized hotels, where staff feel overwhelmed by digital changes and cannot afford to hire skilled workers to use the technology effectively (Fragnière, et al., 2022).

It is worth noting that some sectors, particularly the creative and cultural industries, predominantly consist of freelancers working on project-based commissions (Wijngaarden, et al., 2020). Despite the efforts of some organisations providing training and funding (e.g. ScreenSkills, Creative Scotland, and Creative Wales) training and upskilling opportunities remain limited in these labour markets. One significant barrier is the cost of training programmes, as freelancers must often self-fund their professional development, which can be prohibitively expensive. Additionally, freelancers face time constraints due to juggling multiple projects and clients, making it difficult to dedicate time to training. Access to relevant training resources is limited, as freelancers lack corporate-funded or in-house training programmes to draw on and must seek out external resources that may not be tailored to their specific needs. Isolation exacerbates the situation, as freelancers typically work independently and lack the professional network found in traditional workplaces. This makes it challenging to learn about new training opportunities or find mentors. Finally, there can be a lack of awareness or understanding of the importance of ongoing training, with freelancers prioritising immediate income-generating activities over long-term professional development.

Enablers

Local ecosystems that promote collaboration and networks of partners that share knowledge and skills enable innovation and enhance productivity. In the creative industries, for example, local creative clusters that bring together industry, academia, and funding institutions support talent and knowledge sharing, access to technological expertise, and business development advice (Grewar & Chillas, 2023; Willment, et al., 2024). Similarly, Dimitropoulou et al. (2023) highlight that creative firms collaborating with government, education institutions and clients are more likely to innovate than those that operate in isolation. In civil society, tourism and sport, open innovation and collaboration helps organisations break down silos and foster partnerships (Vigoroso, et al., 2023; Wemmer & Koenigstorfer, 2015; Stene, 2021). By seeking ideas, resources, and expertise both inside and outside their organisations, open innovation allows organisations to access innovative technologies, leverage external knowledge, and co-create initiatives to address community and customer needs more effectively.

4.4 Conclusions

Although there is extensive evidence exploring barriers and enablers to innovation, little is known about their scale and prevalence across DCMS sectors. This is due to the evidence being predominantly qualitative or based on small scale, cross-sectional surveys, which make it difficult to draw broader conclusions. Notwithstanding this, the evidence suggests three categories of factors that can either facilitate or hinder innovation within DCMS sectors: individual and organisational attitudes and values; finance and funding; and access to knowledge, skills, and training.

Across all DCMS sectors, attitudes towards and knowledge of technology and innovative practices can either support or hinder the development and adoption of innovations by managers and staff. Managers might be unaware of the benefits of new technology and cautious about innovations developed elsewhere, a situation indicative of information asymmetry. This occurs when one party has more or better information than the other, leading to an imbalance in decision-making power. Moreover, managers may lack comprehensive, up-to-date information about emerging technologies and their potential advantages, causing them to be sceptical about adopting innovations. This information gap can arise from insufficient communication channels, limited exposure to industry advancements, or a lack of technical expertise within the management team. As a result, managers might rely on outdated practices and resist change, fearing that unproven innovations could disrupt current operations and lead to unforeseen costs or complications.

Conversely, employees may not share the same incentives as management to adopt new technology, a circumstance indicative of principal-agent problems. Principal-agent theory highlights the conflicts that arise when the goals of the principal (management) do not align with those of the agent (employees). In the context of adopting new technology, this misalignment can be particularly pronounced due to differing perceptions of risk and reward. Employees often fear that automation, artificial intelligence, or other technological advancements could render their skills obsolete, leading to job losses or reduced job stability. This fear generates a natural resistance to change, as employees prioritise their immediate job security over the potential long-term benefits that new technology might bring to the organisation.

Bridging these gaps requires fostering a culture that supports change. Managers can address information asymmetry by engaging in continuous learning and accessing communication channels to stay informed about industry advancements. Addressing principal-agent issues requires involving employees in the decision-making process, providing transparent communication about the impacts of new technology, and offering retraining or upskilling opportunities to ensure employees can adapt to new roles.

Digital skills gaps and limited access to training hinder innovation across the creative and cultural industries, civil society, and tourism. Various factors contribute to this issue. The immediate costs of training programmes can be substantial, including expenses related to course fees, and the time employees spend away from their regular duties. For organisations operating with tight budgets, these upfront costs can be a significant barrier. There can also be attitudinal issues related to employee turnover. When organisations invest in training, they enhance their workforce’s skills, making employees more valuable and potentially more attractive to other employers. This increases the risk that trained employees may leave for better opportunities elsewhere, resulting in a loss of the organisation’s investment. Lastly, there may be uncertainty about the long-term benefits of training. Organisations may be unsure whether the training will lead to measurable improvements in productivity or profitability, making it difficult to justify the investment. This uncertainty can be particularly pronounced in rapidly changing industries, e.g. the creative and cultural industries, where the relevance of specific skills may quickly diminish.

Finance and funding are major barriers to innovation, especially in the creative and cultural industries and civil society. Thes barriers suggest there may be market failures for some organisations, preventing them from accessing finance which they would otherwise obtain in perfectly functioning markets. For instance, the costs associated with background checks, or a lack of financial history may prevent smaller firms from securing finance, despite their creditworthiness (Stiglitz & Weiss, 1981). These issues are particularly pronounced for firms within certain DCMS sectors, especially those characterised by a high proportion of young, small firms, freelancers, project-based funding, and intangible content that may be challenging to value or use as collateral^{[footnote 5]}(Lee, et al., 2015).

5. Innovation adaptation, diffusion and gaps

The following chapter summarises evidence on how organisations across DCMS sectors adapt to innovation. Adaptation to innovation refers to how organisations adjust and integrate new technologies, processes, or ideas into their existing systems and operations. The chapter then explores how widespread innovation is across those sectors and any gaps in diffusion.

5.1 Adapting to innovation

In the creative and cultural industries, tourism, gambling, and civil society, there is some evidence exploring how organisations adapt their practices and systems to integrate innovation. However, the evidence on the subject is limited, with examples often being implicit or mentioned briefly, rather than considered in depth.

Examples of adaptations described in this section are grouped into three overarching categories: technological adaptation, organisational adaptation, and skills adaptation. These are further illustrated in the following sections. It is important to note that there is an unavoidable degree of overlap across these categories as in practice many examples of adaptations involve elements of each category.

5.1.1 Technological adaptation

Technological adaptation refers to how organisations adjust to the introduction of innovative technologies. This could include ensuring compatibility between the old and new systems, integrating new software seamlessly into existing infrastructure, and updating hardware to support advanced technological capabilities.

In film and TV production, large companies adopting virtual production invest in ready-to-use software systems that minimise the need for extensive customisation, expediting the implementation of new technologies (Willment & Swords, 2023). This approach allows companies to adapt to virtual production without extensive delays and costs.

In the tourism sectors, hotels adopting voice assistants invest in upgrading their technological and software infrastructures to ensure interoperability and interconnectedness (Buhalis & Moldavska, 2022). Interoperability ensures that various systems and devices can communicate and work together seamlessly. Interconnectedness allows for the real-time exchange of data, enabling voice assistants to provide tailored services and personalised experiences (Buhalis & Moldavska, 2022). It is important to note that hotels often use a variety of legacy systems that may not be easily compatible with new voice assistant technology, requiring significant investment in both time and resources to achieve integration.

5.1.2 Organisational adaptation

Organisational adaptation refers to the process by which organisations change their structures, strategies, and operations in response to innovation.

In film and TV production, the introduction of virtual production technologies drives companies to adapt their working practices, shifting to a hybrid work model for certain roles (e.g. VFX artists) and functions (e.g. pre-visualisation) (Willment & Swords, 2023). This requires companies to redesign workflows to support remote working and invest in new collaborative tools and platforms to ensure seamless communication. The evidence also suggests that large companies occasionally acquire smaller companies to more rapidly adapt to technology, rather than waiting for skills to mature and infrastructure to be developed. For example, in 2022, Sony Pictures acquired Pixomondo to enhance technological capabilities and address skills shortages related to LED volumes^{[footnote 6]} (Willment & Swords, 2023).

In the creative and cultural industries, adapting workflow to integrate AI is crucial to ensure that the technology functions as an effective support tool. To do so, organisations adapt their processes to include human oversight of outputs and provide feedback to the AI model (Anantrasirichai & Bull, 2022). This involves establishing protocols for monitoring and improving AI performance and allocating time and resources within delivery timelines to accommodate training, oversight, and continuous improvement activities.

In the civil society, sport, and the creative and cultural industries, organisations adopting open innovation adapt their processes to incorporate inputs from external partners and customers throughout the delivery process (Wemmer & Koenigstorfer, 2015; Vigoroso, et al., 2023; Martin-Rios & Parga-Dans, 2015). This approach contrasts with the conventional practice of seeking feedback at later stages and requires openness to new ideas and a willingness to adjust strategies based on the input received. As a result, processes become more iterative, agile, and flexible to regularly incorporate feedback.

5.1.3 Skills adaptation

Skills adaptation refers to the process by which organisations upgrade and enhance their workforce skill sets to effectively respond to and integrate innovation.

In the creative industries, companies adopting and developing immersive technologies often use informal training methods to keep pace with technological advancements (Mateos-Garcia, et al., 2018). These methods include mentoring and shadowing, where experienced employees provide guidance and share applied knowledge with their less experienced colleagues. Formal training opportunities, such as academic programmes and placements, are less accessible and not tailored to the specific needs of the industry (Mateos-Garcia, et al., 2018).

In film and TV production, diverse training programmes are important for developing the knowledge and skills needed to successfully adopt virtual production. These include introductory sessions for various stakeholders, specialised ‘bootcamps’ for digital skills, and industry-standard training with recognised accreditation. Partnerships and in-kind support from industry leaders contribute to enhancing training and development (Willment, et al., 2024). It is important to note that, in labour markets dominated by project-based and freelance work, such as film and TV production, training and upskilling opportunities are limited (Wijngaarden, et al., 2020). This lack of consistent training infrastructure makes it challenging for freelancers to access ongoing professional development, often leaving them to seek out and fund their own training opportunities (see the Innovation barriers and enablers section for further detail).

In the hotel sector, comprehensive training is important to overcome staff’s initial resistance to technological innovation. Effective training programmes enhance employees’ confidence in adopting innovations and foster a culture of continuous learning and adaptability (Buhalis & Moldavska, 2022; Stoffers, et al., 2021). This is crucial for the successful integration of advanced technologies in the sector.

5.2 Innovation diffusion and gaps

There is limited and inconclusive evidence on the spread of innovation and gaps across the creative and cultural industries, tourism and sport. This review has found no evidence exploring the diffusion of innovation and gaps in civil society and gambling.

Creative and cultural industries

The diffusion of innovation within the creative industries is uneven, with smaller organisations facing significant financial barriers. For example, in film and TV production, innovation driven by virtual production technologies is more widespread among large companies than SMEs, due to prohibitive hardware and software costs (Willment, et al., 2024). In this context, most LED volumes and LED-based virtual production studios are built and owned by large corporations, which often prioritise lucrative commercial opportunities over offering smaller companies affordable access for testing and developing concepts and projects (Willment, et al., 2024).

Moreover, financial constraints hinder the screen sectors from adopting green innovation. Only 17% of organisations in the sector adopt green innovation, compared to over 30% of firms in music, performing and visual arts, IT, software and computer services, and publishing (Lupu, et al., 2022). Screen businesses often view green technology as costly and uncertain, which discourages adoption.

While 3D printing technology is widely used for prototyping and manufacturing in various industries across the economy, it is still in its early stages within the design sector. Desk research conducted by Spina and Compañó (2021) identifies 430 design start-ups in Europe using these technologies. However, further and more accurate research is warranted to estimate the rates of adoption of 3D printing across the creative industries to enable more definitive conclusions about the spread of the technology.

Tourism

There is some evidence suggesting the limited diffusion of digital innovation in the tourism sector, with companies being cautious about adopting digital technologies due to costs and uncertainties.

A survey conducted by Molina-Castillo et al. (2023) among 2499 Spanish companies finds that only 11% of hospitality firms have delivered any recent product or process innovations, compared to 24% in the overall service industry and 54% in manufacturing. Similarly, Ballina (2022) notes that smart tourism in Spain has not yet reached its full potential as companies are cautious about adopting digital technologies, due to costs and uncertainty about benefits. It is important to note that Ballina’s (2022) findings draw on a cross-sectional survey based on a small sample size of 133 managers of tourist companies. This limitation prevents robust conclusions on the spread of innovation.

Similarly, although AI-powered voice assistants are recognised as a leading technology and a crucial investment for the tourism sector, their diffusion is limited as they are only just starting to be introduced in public spaces, including hotels (Buhalis & Moldavska, 2022).

Sport

The evidence on the diffusion of innovation in the sport sector is limited and lacks generalisability. A survey by Winand et al. (2016) of 101 regional sport federations in Belgium suggests that most federations implemented at least one innovation in 2015, while a minority did not introduce any innovations. However, due to the small sample size and the cross-sectional nature of the survey, the results may not fully capture the broader trends and variations in innovation diffusion across all sport federations in the country. Further research is required to enhance the reliability and generalisability of the findings.

5.3 Conclusions

The evidence provides only limited examples of how organisations in DCMS sectors adapt to innovation. These can be broadly grouped into three categories of adaptations: technological, organisational, and skills adaptation.

Technological adaptation involves organisations adjusting to innovative technologies. This often requires updating software and ensuring new systems integrate seamlessly into old ones. For example, film and TV productions invest in ready-to-use software systems for virtual production, while hotels upgrade their technological infrastructures to integrate voice assistants, ensuring interoperability and interconnectedness.

Organisational adaptation refers to changes in structures, strategies, and operations in response to innovation. In film and TV production, the shift to virtual production has led to hybrid work models and redesigned workflows. Organisations within the creative and cultural industries incorporate human feedback and oversight when integrating AI into their workflows. Civil society and sports organisations adopting open innovation become more flexible and agile to incorporate feedback from beneficiaries, partners, and stakeholders throughout the delivery process.

Skills adaptation involves upgrading and enhancing skill sets to integrate innovation effectively. In the creative and cultural industries, various upskilling methods, such as mentoring, bootcamps, and accredited industry training, are needed to keep pace with technological advancements. In the hotel sector, comprehensive training helps organisations overcome staff resistance to innovative technologies and fosters continuous learning.

The evidence reviewed on innovation diffusion and gaps is limited in both depth and coverage across DCMS sectors. In the creative and cultural industries, innovation diffusion is inconsistent, with larger organisations leading in innovation while smaller firms face financial barriers. This is especially relevant for costly technologies like virtual production and green innovations. Digital innovation in the tourism sector is still limited, with companies hesitant about adopting new technologies due to costs and uncertainties, resulting in a slow progress towards smart tourism.

6. Evidence gaps and further research

The evidence reviewed varies in depth and quality. For example, it provides rich and detailed qualitative insights into areas such as innovation adoption, including the factors that hinder or enable this process. However, there is a noticeable absence of quantitative evidence that would support these qualitative insights, thereby limiting the ability to generalise findings and measure their impact comprehensively. The following section outlines evidence gaps and further research required for each substantive chapter of this report.

The evidence reviewed offers valuable qualitative examples of innovation driving productivity gains. As discussed in Chapter 3, these have been organised into a conceptual framework (see Figure 2) exploring the key mechanisms through which innovation leads to productivity gains in DCMS sectors, i.e. streamlining processes and improving efficiency; and boosting engagement, sales, and revenue. Notwithstanding this, there is little quantitative evidence on the impact of innovation on productivity. This makes it difficult to assess the direct benefits and effectiveness of these innovations and their influence on output, efficiency, and economic growth. Although qualitative evidence is essential for understanding the types of innovation developed and adopted, further quantitative research is needed to evaluate these relationships and guide policy priorities. This could include metrics such as increased revenue, reduced operational costs, or enhanced production speed directly attributable to innovative practices.

Relatedly, the most effective evidence for assessing the relationship between innovation and productivity involve a control group or counterfactual methodology, comparing productivity outcomes between firms that innovate and similar firms that do not. While such design is commonly employed in studies exploring non-DCMS sectors, particularly manufacturing, this review found no evidence of its use within DCMS sectors. Further research based on control groups is warranted to determine whether observed improvements in productivity are directly attributable to innovation or to external influences, e.g. market trends, economic conditions, and regulatory changes.

The evidence predominantly focuses on technological innovations that enhance productivity through more efficient production processes and improved products and services. There is a comparatively lower number of sources investigating non-technological innovations. This is likely due to technological innovation drawing more interest because of its transformative potential. Innovations in technology can disrupt industries, create new markets, and significantly alter the way we live and work. Against this backdrop, further research is needed to explore non-technological innovation, particularly process and organisational innovation, which can be equally valuable and often more cost-effective to develop and implement.

There is ample qualitative evidence examining the barriers and enablers to innovation. As discussed in Chapter 4, these have been organised into a conceptual framework (see Figure 3) comprising three key factors: individual and organisational attitudes and values, finance and funding, and knowledge, skills, and training. However, the extent, prevalence and impacts of these factors across DCMS sectors remain largely unknown. This is due to the evidence being predominantly qualitative or based on small-scale, cross-sectional surveys, which makes it challenging to generalise conclusions more broadly. Further research is needed based on larger-scale survey designs to better understand the breadth and incidence of barriers and enablers to innovation across DCMS sectors.

As outlined in Chapter 5, there is some evidence showing that organisations in DCMS sectors adapt their practices and systems to integrate innovation in different ways. These can be broadly categorised into three groups: technological adaptation, organisational adaptation, and skills adaptation. Notwithstanding this, the literature on the subject is limited, with examples of adaptation often implicit and lacking depth. Further qualitative research is needed to comprehensively understand the adaptation processes, specific strategies and mechanisms organisations use, the challenges they face, and the outcomes of their effort.

Lastly, evidence on the spread of innovation and gaps within DCMS sectors is limited in depth and coverage across sectors, with little evidence exploring the subject in the context of the creative and cultural industries, sport and tourism, and no evidence found for gambling and civil society. Moreover, the evidence cannot be generalised due to the mostly qualitative designs and the small-scale, cross-sectional nature of the few survey-based studies found. Further primary research is warranted to explore how innovation spreads and to identify existing gaps. This could include indicators such as adoption rates of new technologies, frequency of innovative practices, and the spread of new ideas within and between organisations.

7. Policy recommendations

This chapter outlines four broad recommendations that could support innovation across DCMS sectors. These are intended as policy areas for government consideration to facilitate policy change and development.

The recommendations were formulated based upon the findings from the REA, and the main policy themes and suggested interventions identified during depth interviews and a workshop with industry participants. Each policy recommendation is accompanied by an assessment of the potential economic benefits it could generate.

It is important to note that the successful implementation of these recommendations requires a coordinated effort among various stakeholders, including government, private funders, industry, sector bodies, membership organisations, and education institutions. Joined-up decision making and delivery are essential to ensure these initiatives achieve their intended impact.

Policy recommendation 1: Improve workforce digital skills

The evidence suggests that digital skills gaps and shortages are major barriers to innovation and growth among DCMS sectors. The structure of many DCMS sectors, characterised by small firms and project-based work, often prevents organisations from fully capturing the benefits of digital skills training, leading to its under provision. Gaps range from basic digital skills to manage information, communicate, and handle transactions in civil society, to advanced, job-specific skills to use technologies such as AR and VR, robotics and AI in the creative industries and tourism. Additionally, there is a lack of awareness of emerging technologies (e.g. blockchain and robotics in tourism), particularly among smaller organisations. Challenges in accessing digital training and expert guidance hinder innovation and often require additional funding. The evidence also suggests a need for higher education institutions, particularly in the creative and cultural industries, to ensure their curriculum better prepares students with both technical and transferable digital skills, alongside vocational skills.

The perspective of industry participants

Across all DCMS sectors, industry participants felt that inadequate digital skills hindered innovation, and that organisations often lacked knowledge and resources to provide on-the-job digital training to their staff. This was a particular concern for older staff and, in civil society, volunteers who may not possess the digital skills necessary to utilise modern technology. Participants suggested that increased funding for training or the provision of free training courses to address digital skills gaps would be beneficial. Additionally, participants felt that investing in younger staff through apprenticeships and graduate schemes would introduce fresh ideas and stimulate innovation within their sectors. Overall, participants noted that any investment in technology should be accompanied by investment in skills and competencies. Effective use of new technology necessitates a team equipped with the appropriate skill set to achieve the desired innovation and improvements in productivity.

The launch of Skills England in 2024 (DfE, 2024), a new government body dedicated to addressing skills gaps and enhancing the country’s skills system, alongside the Department for Science, Innovation, and Technology’s Digital Inclusion Plan (DSIT, 2025), represent a significant step towards overcoming the challenges faced by the UK workforce. Against this backdrop, it will be important that DCMS sectors are adequately represented in forthcoming policies and that their specific skills gaps and shortages are considered. While some of these skills gaps and shortages may be relevant for other sectors, other – potentially more advanced – gaps and shortages will likely be unique to the DCMS sectors. The new Growth and Skills Levy will be instrumental in supporting the workforce in upskilling. However, its effectiveness in fostering innovation within DCMS sectors will depend on the relevance of the training provided through it, as well as its capacity to address pertinent digital skills gaps affecting the creative and cultural industries, sport, tourism, civil society, and gambling.

This policy recommendation could involve a range of initiatives:

• Ensure digital skills needs in DCMS sectors are addressed in future policies and training initiatives provided through Skills England, the new Digital Skills Inclusion Plan, and any other government measures
• Foster ongoing dialogue between employers and higher education institutions and further education organisations to keep educational programmes relevant. This can take the form of regular industry advisory panels comprising representatives from employers, higher education institutions, and further education organisations. This will ensure that government investments in skills and education training match employer demand
• Ensure the quality and relevance of higher education, further education, and training courses through an accreditation and certification system. This system should involve industry experts who evaluate and endorse programmes based on their quality, relevance, and alignment with current industry standards and technological advancements. An exemplary model to consider is ScreenSkills Select (ScreenSkills, 2025), which endorses higher and further education courses within the screen industries
• Encourage small and medium-sized organisations with similar skills needs to collaborate on shared training, development programmes, and apprenticeships to pool resources and distribute costs effectively. This can take the form targeted funding grants and subsidies specifically for collaborative training initiatives

Benefit assessment

Economic benefits

Interventions which seek to address challenges related to digital skills within DCMS sectors will yield significant economic benefits for organisations, employees, and the broader UK economy.

These initiatives will primarily address skill gaps and shortages, hampering business innovation and competitiveness, within affected organisations. Research by DCMS (2025b) highlights that 33% of businesses in the creative industries report vacancies due to skills shortages, with 27% indicating that this leads to delays in developing new products or services. Reducing skill gaps will increase innovation, enhance productivity, attract investment, and improve employee retention, thereby driving growth and profitability.

Additionally, these initiatives will support employees with low digital proficiency, promoting career advancement, employability, adaptability, and higher wages. For example, research by Burning Glass (2019) indicates that workers who acquire digital skills often enjoy a wage premium of about 29% compared to those without such skills.

Below is a hypothetical case example that illustrates a high-level theory of change for interventions addressing digital skills gaps in DCMS sectors.

Hypothetical case example

A regional hotel chain faces challenges in adapting to the digital demands of modern hospitality. To address these issues, some employees participate in training courses offered by Skills England, focusing on digital marketing, customer relationship management (CRM) systems, and online booking platforms. Through this training, staff acquire essential digital skills that allow the chain to optimise its online presence, improve customer engagement, and streamline booking processes. As a result, the hotel chain experiences a significant increase in direct bookings and customer satisfaction. The efficiency gains from these digital improvements enable the hotel to expand their team, creating new roles such as revenue managers and online customer service representatives.

Improvements in skills within DCMS sectors will drive wider benefits to the UK economy. It is estimated that the digital skills gap costs the UK economy £63 billion per year in lost gross domestic product (DCMS, 2022). Therefore, closing the skills gap could boost economic growth. Moreover, interventions that support innovation and productivity in DCMS sectors could contribute to cementing and reinforcing the UK’s comparative trade advantage in DCMS-sector activities. In 2021, the DCMS sectors collectively achieved a trade surplus of approximately £0.6 billion (Evennett, 2024). This surplus was primarily driven by the creative industries, which had a trade balance of £2.1 billion, and the cultural sector, with a trade balance of £0.5 billion. Interventions supporting digital skills and improving DCMS sector productivity and competitiveness could sustain and expand the UK’s international comparative advantage and trade surplus. This will further benefit the economy by generating more income from international trade and enhancing the UK’s global reputation as a world leader.

Possible deadweight, leakage and displacement

Interventions to boost digital skills in DCMS sectors could – like many policies of this nature – generate deadweight loss, particularly when upskilling would have occurred without government intervention. For example, workers may already be improving their digital skills through self-directed learning, on-the-job training, or informal networks (Milligan, et al., 2014), and thus may not need additional funding or training courses to acquire the skills the interventions aim to foster. Therefore, targeting interventions towards those most in need of digital skills support e.g., the sports, tourism, civil society, and the creative and cultural industries (Preston, 2019; Minor, et al., 2024; ukactive, 2024), and who are unlikely to obtain it through other means, can effectively minimise deadweight.

Another challenge associated with this policy could arise from skill mismatch. Some DCMS sectors, such as gambling and the creative and cultural industries, exhibit skills gaps in specialised areas. For example, DCMS research indicates that 68% of organisations in the creative industries identify specialist skills and knowledge as their primary gap, with 54% reporting gaps in skills needed to solve complex problems (DCMS, 2025b). To maximise impact, digital skills interventions should specifically target these skills gaps.

Wider spillovers or acceleration of trends

Enhancing digital skills in DCMS sectors could offer benefits that extend beyond economic gains. Evidence suggests that engaging in sport, creative and cultural activities, and volunteering can have a positive impact on physical and mental health (Evennett, 2024; Government Technology, n.d.). Therefore, enabling these sectors to expand their audience and consumer base leveraging new technologies can generate significant health and well-being benefits.

Improving digital skills will ensure DCMS sectors thrive, reinforcing their reputation as leaders in the international market. This will attract inward investment, which can be directed towards R&D and human capital, creating a cycle of innovation. Moreover, by improving the ability of DCMS sectors to connect with international audiences and increase access to their content, the UK can more effectively share its values, traditions, and innovations, boosting the UK’s soft power.

Policy recommendation 2: Provide guidance to employers on the use and adoption of technology

The evidence suggests that organisations in DCMS sectors often lack the knowledge and know-how needed to adopt technology effectively and to appreciate its benefits. This is frequently observed in small-sized charities struggling to access expert guidance on digital tools, as well as family-run businesses in the tourism sector, frequently unaware of how technologies could be beneficial to their operations. Moreover, untested technology and unknown impacts pose risks, discouraging organisations from adopting innovations.

To foster innovation, it is important to provide clear guidance on technologies available, setting a standard for best practices and driving consistent implementation. This could involve supporting collaboration and knowledge sharing with highly innovative sectors. Establishing platforms for cross-pollination of ideas and practices can facilitate the exchange of expertise and lessons learned on successes and challenges. Research by the Royal Society of Arts and the Creative Industries Policy and Evidence Centre set out a policy framework based on stronger collaboration across higher education institutions and creative and non-creative firms to develop innovative products, services and business models (Hay, et al., 2024). This framework could be adopted by the other DCMS sectors. Additionally, learning from other countries known for their sectoral excellence can provide valuable insights into effective strategies and technologies. This could involve promoting international partnerships to explore best practices and how to adapt them to local contexts.

The perspective of industry participants

Some industry participants successfully adopted innovative practices using new technologies, yet there was a prevalent lack of knowledge about available technologies, their applications, and their impact on productivity. Participants highlighted the need for comprehensive information and best practice guidance to make informed decisions as organisations often lacked the time and resources to identify suitable innovations. They suggested that drawing insights and best practices from other sectors could be a constructive and strategic approach. To this end, participants noted that disseminating research clearly outlining which technologies facilitate specific innovations, and their impacts, would instil confidence and encourage adoption. Against this backdrop, participants who had experience working abroad identified valuable examples of sectoral excellence, such as technological innovation in the tourism sector in Dubai. They emphasised that this information should be freely accessible, easy to understand, and clearly demonstrate the benefits of technology adoption. Some participants also suggested that international exchange programmes could support knowledge sharing.

This policy recommendation could involve a range of initiatives:

• establish a National Innovation Partnership Programme that connects organisations within DCMS sectors with leading innovative companies across the UK. This programme could include matchmaking services, mentorship, funding for collaborative projects, and regular networking events to foster partnerships and knowledge exchange
• facilitate inter-sector^{[footnote 7]} secondments and exchanges, enabling workforce from DCMS sector organisations to engage with innovative companies, supporting the transfer of skills, knowledge, and innovative practices. Some DCMS sectors (e.g. the creative and cultural industries) are particularly likely to benefit, as they are reliant on networks for learning and contracts
• establish formal bilateral agreements with countries that excel in digital innovation to facilitate structured collaboration. This could include Memorandums of Understanding (MoUs) or partnership agreements
• develop and implement exchange programmes where professionals and experts can visit partner countries to observe and learn from their practices. These programmes could include internships, study tours, and temporary placements
• support capacity-building initiatives where practitioners receive training from national and international experts. This could include online courses, webinars, and in-person training sessions focused on the latest digital skills and technologies

Benefit assessment

Economic benefits

The UK ranks 5th in the Global Innovation Index 2024 but only ranks 12th for knowledge diffusion and 31st for knowledge absorption (DSIT, 2024). This suggests that while knowledge is disseminated across the economy, it is not effectively applied and adopted within organisations.

Interventions aiming to provide guidance on the use and adoption of technology in DCMS sectors will particularly benefit managers in small-sized organisations, who often struggle more with adopting new technologies and tend to perform worse in international comparisons than larger companies. For example, research by the OECD (2019 cited in Be the Business, 2020) shows that 62% of large UK firms use CRM systems, compared to 68% in Germany. For small businesses with 10 to 49 employees, the usage drops to 26% in the UK versus 40% in Germany.

Small-sized organisations are a significant component of the UK’s economy and contribute significantly to employment (60% of UK jobs) and turnover (52% of the total UK economy) (DBT, 2024). Research by Sage (2022) suggests that if small and medium-sized organisations made full use of technology, it could add £232 billion to the UK economy. Supporting these organisations to overcome barriers and leverage digitalisation will increase innovation, improve productivity and boost competitiveness, creating new jobs across the country (The Hidden Story, 2017).

Below is a hypothetical case example that illustrates a high-level theory of change for interventions aiming to provide guidance to DCMS-sector employers on the use and adoption of technology.

Hypothetical case example

A regional arts organisation receives guidance on adopting digital ticketing systems and online marketing strategies. By collaborating with a local tech firm, the arts organisation successfully implements these technologies, resulting in streamlined operations and increased ticket sales. The growth in revenue enables the organisation to expand its team, creating new jobs such as digital marketing coordinators and IT support specialists.

Additionally, international partnerships can support DCMS sectors in accessing global talent, technology and resources, boosting foreign direct investment and opening new trade markets, benefiting the broader UK economy. Supporting intra-^{[footnote 8]} and inter-sector collaboration and cooperation, as well as international partnerships, will also foster stronger business relationships, potentially leading to long-term partnerships, joint ventures, and expanded market opportunities. This is further illustrated in the hypothetical case example below.

Hypothetical case example

A UK sports management company partners with an international sports technology company. Through this partnership, the sports management company gains access to advanced performance analytics and athlete management software. They collaborate on a project to develop a comprehensive training programme for elite athletes, incorporating data-driven insights and virtual coaching tools. This initiative attracts international athletes and teams to train in the UK, boosting the company’s reputation and increasing revenue.

Possible deadweight, leakage and displacement

This policy may generate a deadweight loss if organisations are reluctant to share knowledge for fear of losing their competitive advantage (Klein & Spychalska-Wojtkiewicz, 2020). Moreover, cultural or operational differences between DCMS and non-DCMS sectors could pose a challenge to the adoption of new practices. For example, cultural and creative organisations rely on intellectual property (IP) for renumeration and protection of their content, but the sector faces specific challenges in exploiting IP, such as limited legal expertise, lack of awareness and the risk of losing control over content in digital environments. These factors can make it harder to adopt innovation practices that are more common in sectors with a stronger IP management infrastructure (DCMS, 2019).

Deadweight loss could most prominently arise for larger organisations, who already engage in international partnerships. For example, they may already be part of global networks, have access to international markets and adopt best practices. Moreover, while international collaboration can bring knowledge and attract investment, it can also result in the outflow of talent, expertise or intellectual property to other countries. Additionally, collaboration can expose organisations to potential theft of intellectual property, sensitive research, and data infrastructure, such as data systems and computational resources (UK Research and Innovation, 2025).

Wider spillovers or acceleration of trends

Policy interventions in this area would likely lead to spillover effects across the wider economy. First, increased knowledge on adoption and use of technologies can reduce the digital divides among large and small companies, particularly in different regions in the UK. This could have long-term positive effects on regional development and reduction in inequalities. Organisations in underserved areas can become more competitive, attract investment, and create new job opportunities. This, in turn, may stimulate local economies, improve living standards, and support the overall resilience and sustainability of the UK economy.

Moreover, innovations in DCMS sectors can drive wider economic growth through their connections with supply chains and job creation. New ideas, innovations, or processes developed by organisations in DCMS sectors can be adopted by other non-DCMS sectors (Frontier Economics, 2023). An example of cross-sector innovation is demonstrated by heritage scientists who have advanced the capabilities of optical coherence tomography (OCT) for more detailed examination of microscopic features in historical artworks. This innovation has led to the development of ultra-high-resolution OCT, which has since been applied in biomedicine for rapid in situ imaging of biofilms in neonatal feeding tubes (Council for Science and Technology, 2023).

Policy recommendation 3: Foster a supportive environment and culture for innovation

The evidence suggests that individual and organisational attitudes significantly impact innovation within the DCMS sectors. Some organisations in sport and creative and cultural industries struggle to align their principles with the drive for innovation, occasionally resisting revenue-focused initiatives and raising ethical concerns about new technologies. Conversely, openness to change, input from external sources, and a supportive environment for risk-taking facilitate innovation. Moreover, a positive attitude towards entrepreneurship encourages experimentation and new ideas.

The perspective of industry participants

Industry participants stressed the need for fostering a culture of innovation, especially among small and family-run organisations. They felt that this could improve management buy-in and increase the adoption of innovative practices. To nurture this environment, participants emphasised the importance of collaborating with charismatic influencers and thought leaders, who could inspire individuals and organisations to adopt new practices, by sharing experiences and success stories through various media channels. Participants felt that documenting innovation through case studies could provide valuable insights and showcase effective strategies. They also suggested recognising best practice and examples of innovation excellence within their sectors. For example, establishing a government-sponsored award to acknowledge particularly innovative organisations could motivate others to adopt similar practices.

This policy recommendation could involve a range of initiatives:

• launch targeted social media campaigns that promote the benefits of innovation and entrepreneurship. This could involve using interactive posts and live sessions to engage with a wide and diverse audience
• produce high-quality, engaging content that highlights the benefits of innovation and entrepreneurship. This could include videos, articles, podcasts, and infographics that showcase success stories and the positive impact of adopting innovative practices from across the UK economy
• identify and collaborate with charismatic influencers and thought leaders who can inspire and motivate individuals and organisations to adopt new practices. These influencers could share their experiences and successes through various media channels
• create formal awards and recognition programmes that celebrate individuals and organisations demonstrating outstanding innovation in their sectors. This could involve offering public recognition through media coverage, award ceremonies, and official endorsements
• leverage formal awards and recognition programmes to compile and publish detailed case studies showcasing successful examples of innovation. These case studies should highlight the challenges faced, the solutions implemented, and the positive outcomes achieved

Benefit assessment

Economic benefits

Creating a supportive environment is crucial for enabling organisations to explore new technology and innovation, particularly for small and micro-sized organisations that often perceive technology adoption as challenging, costly, and risky. Against this backdrop, management commitment is essential in overcoming such perceptions and driving successful technology integration (Be the Business, 2020). Effective management can alleviate these concerns by fostering a culture of openness and readiness for change, providing necessary resources, and offering clear guidance throughout the adoption process.

This policy will primarily benefit micro- and small-sized organisations, which often struggle with overcoming internal resistance and gaining organisation-wide support to build confidence and capability in adopting new technologies and practices (Abel-Koch, et al., 2019; Xero, 2023). Communicating and promoting successful case studies will address information asymmetry and enhance confidence to embrace technology and innovation, demonstrating tangible benefits and practical strategies for overcoming common barriers. This, in turn, will encourage organisations in DCMS sectors to enhance their offerings, with more cost-effective innovation, potentially leading to higher quality and better value for consumers (Cebr, 2022). This is further illustrated in the hypothetical case example below.

Hypothetical case example

Senior management within a small charity focused on environmental advocacy is reluctant to adopt data analytics technology. After learning about a successful case study of a similar organisation that improved its campaign’s effectiveness and donor engagement through data analytics, senior management becomes more receptive to the idea. Encouraged by the tangible benefits demonstrated in the case study, the charity adopts the new technology. This leads to more targeted and efficient campaigns, providing greater value to their supporters. The successful integration of data analytics not only enhances the organisation’s impact but also strengthens its ability to attract funding and support, furthering its mission.

Successful technology adoption will narrow the digital gap between small and large organisations in DCMS sectors, fostering balanced economic growth. It is also likely to reduce regional inequalities, as businesses in less advantaged areas often face greater barriers to technological adoption (Government Technology, n.d.) due to a lack of financial resources, lower access to technical and technological skills and external advice (Fanelli, 2021).

Possible deadweight, leakage and displacement

This policy may generate deadweight loss, particularly if it does not differentiate between DCMS sectors and organisations in need of support and those that are already innovative or are adopting digital technologies. Evidence suggests that technological adoption varies across DCMS sectors, with the creative and cultural industries leading (OECD, 2024) and the sports sector lagging (ukactive, 2024). Therefore, promoting innovation within already adaptive businesses may lead to inefficient resource allocation. Moreover, social media campaigns tend to attract organisations already active online, while SMEs less involved with digital channels – those needing the most support – may remain disengaged.

Wider spillovers or acceleration of trends

Increased digitalisation in DCMS sectors can create a ripple effect across the economy, influencing non-DCMS sectors. Additionally, information transparency – achieved through experience-sharing by influencers and thought leaders, as well as public recognition programmes – can be replicated in other sectors, encouraging businesses to adopt better practices and enhance consumer value.

Policy recommendation 4: Enhance financial support for technology adoption

The evidence suggests that organisations across DCMS sectors struggle with the high costs of technologies, often due to challenges in financing intangible or creative projects and the small size of many firms. For example, dynamic pricing is often financially prohibitive for smaller cultural and creative businesses, while design start-ups face high upfront costs for 3D technology. In the tourism sector, the cost of innovative technology remains a barrier, particularly when it has not been proven to generate efficiencies and savings.

Access to early-stage funding presents another critical issue. Early investment during the initial idea-development stage is essential for proving commercial viability in creative sectors utilising XR and virtual production technologies. However, funders are often discouraged by the lack of established business models and strategies for reaching consumers. The charity sector faces analogous difficulties, being overly reliant on external funding and lacking investment in innovations. Furthermore, digital costs are not adequately considered in charities’ funding applications.

There are a range of funding programmes in place designed to support innovation and the adoption of new technologies. Innovate UK’s Innovation Loans Future Economy programme (Innovate UK, 2025), for example, offers up to £25 million in loans to micro, small, and medium-sized enterprises (SMEs). The programme specifically targets highly innovative, late-stage research and development projects that have a clear path to commercialisation and economic impact. Similarly, the EIT Culture & Creativity: Short Innovation Projects 2025 (EIT Culture & Creativity, 2024) funds high-impact initiatives that address urgent challenges in the creative and cultural industries. This programme targets fast-paced, results-driven projects with a maximum duration of six months, aiming to deliver tangible and market-ready solutions quickly.

Despite their benefits, neither of these schemes provides support for early-stage research and development, which is crucial for organisations that are still developing their innovative concepts and need initial funding to demonstrate commercial viability. As evidenced in this study, some of the most cutting-edge innovations in the DCMS sectors are based on advanced technologies that are still in an exploratory phase, with their wide-ranging outcomes yet to be fully understood, e.g. XR in the creative and cultural industries, and blockchain and robotics in tourism.

The perspective of industry participants

Industry participants, particularly those from small businesses and those relying on external funding, highlighted budget constraints as a significant barrier to investing in technology within their sectors. Participants from sport and the creative and cultural industries noted that while free-to-access software enabled a degree of innovation, it was not as effective as proprietary software and had significant limitations. They highlighted that additional funding opportunities would enable these organisations to invest in advanced technology, the subscription costs of which are currently prohibitive. Additionally, participants whose organisations already received government funding recommended improvements to funding processes, such as making government portals more straightforward and user-friendly, and providing more feedback on unsuccessful funding applications. These would increase their chances of securing future funding and reduce staff time spent on applications.

This policy recommendation could involve a range of initiatives:

• undertake a review of public and private funding schemes available, mapping eligibility criteria and the extent to which they align with the needs of organisations in DCMS sectors
• ensure funding is available for innovative ideas that are still in the early stages and do not yet have evidence of viability or commercialisation strategies. This could involve funding for pilots or small-scale testbeds to trial technologies, products, and applications
• ensure that funding applications allow for provisions to upgrade technologies and skills. This should also involve engaging with the wider ecosystem of funders to implement this requirement broadly
• subsidise access to basic licensed technologies, e.g. cloud computing services, CRM systems, cybersecurity software
• improve the accessibility and efficiency of funding processes. This includes simplifying government funding processes and portals, providing greater clarity, and removing bureaucratic obstacles. Streamlining these processes will enable organisations to allocate more time and resources towards implementing innovative practices
• develop a structured process for providing personalised feedback to applicants whose funding applications are unsuccessful. This should detail the specific areas where the application fell short, such as project feasibility, innovation potential, financial planning, or alignment with funding criteria. AI could be used to provide individualised feedback on applications
• establish a mentorship programme where successful applicants are paired with those whose applications were unsuccessful. Such peer-to-peer support systems can foster collaboration and knowledge sharing within the sector

Benefit assessment

Economic benefits

Funding can help organisations across DCMS sectors improve efficiency and productivity by adopting new technologies such as cloud solutions, digital project management tools, CRM systems, and cybersecurity. These technologies can modernise operations, developing innovative products and services that better meet the user demand, enabling organisations to stay competitive and improve overall performance.

Moreover, the UK has routinely ranked in the bottom 10% of OECD countries for overall investment intensity. Increased access to funding could encourage greater investment in these technologies, thereby boosting long-term productivity (DSIT, 2024). Funding that supports both technology and skills upgrades can improve both operational performance and employee productivity, further driving economic growth (Khlystova & Kalyuzhnova, 2023). This is further explored in the hypothetical case example below.

Hypothetical case example

A charity faces significant challenges in securing funding for technology upgrades and staff training. The charity applies for and receives government funding to upgrade its IT infrastructure and implements advanced data management systems. Additionally, it invests in comprehensive training programmes for staff, focusing on digital literacy and project management. These improvements streamline operations, enhance service delivery, and increase employee productivity. As a result, the charity can better serve its community and boost its charitable impact.

Against this backdrop, it will be important to balance clustered funding, which targets specific areas to create innovation hubs, and dispersed funding, which supports a wider range of disadvantaged or geographically isolated regions. On the one hand, evidence suggests that the impact of funding can often be maximised through the concentration of grants around certain industry clusters (NP11, 2024). This approach can generate positive spillover and multiplier effects. Concentrated funding brings dynamic benefits by drawing additional firms to those regions (Devereux, et al., 2004). This agglomeration can foster innovation ecosystems where collaboration and competition boost productivity and accelerate technology diffusion, supporting local economies, creating jobs, and enhancing prosperity.

On the other hand, more dispersed funding can be beneficial in supporting underserved or geographically isolated areas or organisations that might otherwise be excluded from established clusters, although it may lead to more modest outcomes compared to a cluster funding approach. Ensuring an effective mix of these funding strategies will be crucial to guarantee both depth and breadth of impact across different parts of the economy.

Possible deadweight, leakage and displacement

This policy may involve a deadweight loss if larger, more established companies already have access to funding or only need marginal support to adopt technology. Deadweight loss can be reduced by targeting incentives for specific technologies or company sizes, but this risks overly restricting access across DCMS sectors.

One of the initiatives of the policy recommendation is around simplifying government funding processes, which can reduce administrative burdens for both applicants and government departments. However, it should be noted that this approach could lead to funding misallocation if screening becomes less rigorous or there is insufficient time to fully evaluate applicants, potentially diverting funds away from those most in need or with the greatest growth potential.

Wider spillovers or acceleration of trends

With increased funding, firms in DCMS sectors can explore new digital tools, develop innovative products and services, and potentially drive broader advancements across other industries. Additionally, this can result in more successful startups and scale-ups within DCMS sectors, as greater access to funding supports early-stage companies in growing, attracting talent, and bringing innovative products or services to market more effectively.

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1. The evidence did not suggest any gambling innovations leading to streamlined processes and improved efficiency. ↩

2. In virtual production, LED walls are used to create immersive and interactive environments for filming. These large-scale panels are made up of light-emitting diodes (LEDs) and can display high-resolution images, videos, and animations with excellent brightness and colour accuracy. They serve as dynamic backgrounds, replacing traditional green screens and physical sets. This allows filmmakers to shoot scenes in real-time with realistic settings that can be easily adjusted and controlled. The technology enables the projection of digital environments directly onto the LED walls, providing actors and directors with a visually rich and interactive space to work in. ↩

3. Natural language capability refers to the ability of a computer system or software to understand, interpret, and generate human language in a way that is both meaningful and useful. ↩

4. Descriptive evidence is based on data gathered through direct observation of a phenomenon, without establishing a definitive cause-and-effect relationship. ↩

5. An asset that a borrower offers to a lender as security for a loan. ↩

6. LED volumes are a system of linked high-end LED panels used to display video footage or 3D content to form a background behind your actors. ↩

7. Inter-sector collaboration refers to activities taking place between two different sectors, e.g. collaboration between the creative industries and telecoms. ↩

8. Intra-sector collaboration refers to activities taking place within a single sector, e.g. collaboration within tourism. ↩