The Role of SHAPE in R&D and Innovation: Case Studies (Frontier Economics)

The British Academy has a long history of research on research & development (R&D), from a joint four-Academy study – with the Academy of Medical Sciences, the Royal Academy of Engineering and the Royal Society – of UK R&D investment by sector funding, sector performance, and region, to R&D explainers and support for initial work into how R&D is measured. This work has highlighted several key issues, not least the exclusion of SHAPE (Social Sciences, Humanities and Arts for People and the Economy) R&D from official statistics, and the possible impact of this exclusion on our understanding of the full breadth of the evidence base. As a result, our recent research endeavours have focussed on a central issue: “How well do we understand SHAPE R&D and innovation in the UK?”.

This report by Frontier Economics was commissioned by the British Academy in 2022 and provides evidence to support a better understanding of the realities of commercial innovation. Two specific issues motivated the focus of this study: first, innovation relies on a much broader set of inputs than R&D, and second, R&D and innovation are influenced by a wide range of disciplines and expertise. In particular, there is evidence that the role that SHAPE disciplines play in innovation is not fully recognised.

To explore these issues in greater depth, Frontier Economics interviewed more than 20 individuals with expertise in innovation from eight large, high-profile service sector organisations in four different industries. This included deep-dive case studies with four businesses: Tesco, Phoenix Group, Accenture and Netflix. These expert views gave critical insights and case study examples into the practicalities of commercial innovation in the services.

The key findings of this report include:

Innovation is highly important for service sector businesses.

Service sector businesses rely on innovation to help them grow and to weather significant industry changes. Innovation in services is centred on customers and solving customer needs, with customer expectations of quality and experience now driving innovation and insights from one part of the sector to another.

Businesses vary in how they organise and undertake innovation.

Service sector businesses organise their innovation efforts differently. While many tend to adopt a formalised approach, with innovation explicitly within the responsibility of selected teams, others worked on the premise that innovation can, and should, happen at all levels as part of a broad ‘culture’ of innovation.

Business investment in innovation is broader than formal R&D.

Formal R&D is only one part of the investments that service sector firms make in innovation – and sometimes quite a small part. The efforts put into innovation are much wider, particularly the investment of time and resource focused on internal innovation teams. These innovations, however, often appear harder to measure and value than R&D.

A wide variety of SHAPE insights are perceived as important for innovation.

Businesses perceived SHAPE insights, drawn from both internal and external sources, to be important for their business innovation. While customer needs places SHAPE disciplines like psychology and sociology at the core of efforts to understand where to innovate to add value for customers, disciplines like economics, linguistics, creative writing, and geography were valued as central to innovation.

There are potential dangers associated with excluding insights from SHAPE disciplines in business innovation.

As well as noting the added value of including SHAPE insights, many businesses emphasised the dangers of excluding them. In a world where technology is ever more present, there is a real risk in excluding the SHAPE perspective in the impact of technology on people and society, and how people engage with technology in reality. A common perspective was the need to integrate insights from SHAPE and STEM for effective innovation, rather than having them siloed. There is evidence that the “collision of perspectives” that such a combination brings is increasingly appreciated.