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Successful creative businesses need a combination of creativity and business strategy - what I call 'T-Shirts' and 'Suits'.
Sometimes, one individual has both of these elements in good measure, but more often than not, the harmony of creativity and business is formed by two people, or a larger team.
Frederick Henry Royce met Charles Stewart Rolls in Manchester in 1904. Royce was the engineer and Rolls the businessman, and their partnership formed the world-famous company Rolls-Royce.
Jennifer Harris, writing in Management Today, points out that different skills can combine in a complementary way but different attitudes cannot. I agree.
There must be a shared vision for the enterprise, even if the partners involved are very different characters with different skills. So the shared vision is in many ways the starting point. If people are working hard together but with different goals in mind, conflict - or at least stalemate - is likely to occur.
Matters of risk, growth, financial reward and lifestyle are all issues about which partners might have different views. If these are not in harmony, each person may have a valid, but different, business strategy in mind as their road map to different destinations.
Success means different things to different people, so simply agreeing together that you want the business to be 'successful' is not clear enough. Working towards different definitions of success will inevitably bring problems. That definition of success needs to be clearly defined and agreed.
"Start with the end in mind", says Steven R Covey in his bestselling book The Seven Habits of Highly Effective People.
Having that clear vision of the future, and then starting with that end in mind, is exactly what successful creative entrepreneurs do.
Congratulations to one of my client creative businesses, Sparkle Media on their successful projects in Australia !
The visual effects and animation company has recently worked in Australia with Oscar-winning actress Cate Blanchett and Joseph Fiennes, producing video footage for the multimedia theatrical performance Minutes of a Separation.
Sparkle Media also worked for Reebok whilst in Australia on an 'advanced fitness' website project.
It's a pleasure to work with creative entrepreneurs like Glenn Maguire and Andy Cooper, who are the company's directors.
Over the several months I have been involved in their business growth, I have been able to advise them on matters such marketing, intellectual property and enterprise development.
Sparke Director Glenn Maguire said:
"Since attending David's workshop and then engaging him as an adviser, Sparkle Media has gone from strength to strength. The company now operates on a global level, going head to head with world wide agencies - and beating them. We've never looked back and have a lot to thank David for."
Working internationally from their base in Liverpool, Sparkle has worked closely with creative industries support agency Merseyside ACME.
Westminster Council bought the copyright in the design of its iconic street signs (pictured).
This means that it can now generate income fom licensing this intellectual property to businesses.
The designs were created by Misha Black in 1967 and the copyright remained with the designer until his death, when it passed to his estate. Black's son then sold the copyright to Westminster Council in London for £50,000 GBP (100,000 USD).
The Council plans to charge licence fees to more than 100 companies that use the design on popular tourist souvenirs and other products.
Designers should follow Misha Black's example by retaining copyright when creating designs for clients, to make a profitable sale later - or to generate licensing income themselves.
Photo credit: DearCatastropheWaitress.
See related blogposts:
Protecting - and profiting from - your IP
Whose photos are on your website?
Let's follow George Lucas
In contrast to the business strategies of collaboraton or Co-opetition, there is another strategy to consider: 'Don't Co-operate'.
This is one of the characteristics of the success of Apple Inc., according to Wired Magazine in an article called 'How Apple Got Everything Right By Doing Everything Wrong'. The article shows how Apple breaks several of the conventional rules of business adopted by most hi-tech companies, such as 'Communicate', 'Play Nice', 'Love Your Customers', and 'Coddle Your Employees'.
Apple's unconventional strategy demonstrates that there are no universal rules in business - you have to create a unique formula which works for your enterprise, and your customers.
Creative entrepreneurs often ask me how they can make money from their music or computer games when MP3 files and software is so easy to copy.
One answer is to use the fact that people copy your stuff to change a threat into an opportunity.
Banda Calypso's music is copied onto CDs and sold on street corners in Brazil. They don't get a cut of this income but they don't mind. In fact they supply theses street-sellers with master CDs to copy! And they organise things so that there is a plentiful supply of their music for sale in each town on the route of their tour, before they arrive to perform. They see this copying and selling as an advertising function and they don't have to pay these street-corner entrepreneurs. Their gigs are always full and they've made enough money to buy a private jet to take the band on tour.
Timothy Chan, one of the richest men in China used to get ripped off by copyright pirates. His computer game CDs were copied illegally and sold cheaply. He could have tried in vain to stop this. Or he could have let his business go bankrupt. Instead he changed his business to take advantage of the copying. He decided to make his money from online connection fees instead of CD sales. He changed the game so people had to play online and pay a very small fee per minute. The copied CDs spread like wildfire and so did his customer base. Every CD copied now helped his business.
Smart entrepreneurs see opportunities when others see only threats.
They change their business models to take advantage of changing technology, economics and social trends.
A creative passion is often the driving force for creative entrepreneurs.
My advice is always to recognise this, in order to understand our own motivations in business. In other words, what 'makes us tick'.
I was asked recently by Putte Svensson from Rockparty in Hultsfred, Sweden, what would be my advice if someone said they just wanted to have fun. My answer was that fun is important and essential to any enterprise. I went on to say that I do indeed want people to have fun - and for a long time! Having fun for a short while and then going bankrupt isn't much fun at all. I help people to also look at the business issues that will help them to continue to have fun in a sustainable way, long-term. Things like marketing, finance and intellectual property also need to be taken into account to make sure the fun continues.
The philosophy of T-Shirts and Suits is about combining creativity and business acumen. It's about using rationality as well as emotion - the left side of the brain as well as the right side. I sometimes talk about 'using our heads as well as our hearts'.
Sara Lönnroth, who is the project leader for Mötesplats Mode&Design (MM&D), at the Transit Business Incubator at Konstfack in Stockholm, suggested a phrase about this, which I've adapted and translated as:
"Let your heart drive you and your head guide you".
I'm going to adopt this as one of my sayings from now on!
Instead of dreaming about having millions of fans, nurture one thousand 'true fans'.
That's the advice for creative individuals from guru Kevin Kelly.
He writes:
"A creator, such as an artist, musician, photographer, craftsperson, performer, animator, designer, videomaker, or author - in other words, anyone producing works of art - needs to acquire only 1,000 True Fans to make a living."
True fans are the people who will buy whatever you produce or drive out of their way to see you perform.It's a feasible target and these people become the core of your customer base. You can then build up from there in partnership with a publisher, distributor or agent.
The article has lots of examples of creative people using cool business methods to build a customer base and generate income streams at the same time.
The full article is online at Kevin Kelly's Technium website/blog.
Madonna has recently terminated her contract with Warner Music after 25 years and signed a new contract with tour company Live Nation.
Now that digital music is so cheap, not to mention illegal downloads, Madonna recognises that her main income in future will be from performances and related products, not music sales. So she has changed her business model and Live Nation is a more appropriate partner than a traditional record label.
"The paradigm in the music business has shifted and as an artist and a businesswoman, I have to move with that shift," said Madonna.
Madonna's move illustrates that creativity is not just about being an artist. You can use creativity in business too, by rearranging your business to maximise income as technology and customers' behaviour changes.
As an artist and a businesswoman (a T-Shirt and a Suit), Madonna is a topical example of how creativity and business can be combined intelligently.
Time Management is an issue that comes up frequently when I'm advising creative businesses.
It seems there's always too much to do, and not enough time to do it.
In my view, time management is both a strategic issue and an operational challenge.
If we are unrealistic about what can be achieved with finite resources, we will always be frustrated. Trying to run two businesses when you only have the time needed to run one is an impossibility, not a matter of better time management. So firstly we need to prioritise strategically and decide what we are going to do - and not do. The 'Not To Do' list is as important as the 'To Do' list. It's more realistic to focus on a few things and do them well than to attempt too much and do nothing properly.
Then it comes down to operational matters - ie how to actually manage our time on a day to day basis.
Business Coach Mark McGuinness has published 'Time Management for Creative People' as a free eBook. I've recommended it to my clients as well as finding it useful for my own work. It’s subtitled ‘Manage the Mundane - Create the Extraordinary’ as it’s designed to help you maintain your creative focus while dealing with your other commitments.
Download the eBook from Mark's 'Wishful Thinking' blog .
Rob Kinsey is an artist with a passion for the sport of motocross, defining himself on his website as ‘motocross racer, fan and award-winning artist’. Art and sport have been important to Rob for many years. He qualified as a technical illustrator in the 1970’s and his artwork has developed in parallel with his participation in motocross. He competed in the British Motocross Championships from 1977 to 1981 and still rides in Vintage Motocross events. He specialises in painting with acrylic on canvas and produces high quality prints using the Giclée process, which ensures that the colours do not fade over time.
 Photo: Rob Kinsey with one of his motocross paintings. “They are all painted with a passion,” says Rob, and he combines his passions for art and motocross with business acumen. He sells pen and ink drawings, prints and original artworks through his e-commerce website to a world-wide customer base of riders, fans and motocross businesses. To help make his creative enterprise even more successful, Rob attended a business development course close to his home in Derbyshire, England. The ‘Focusing Creativity’ workshops helped Rob and other creative entrepreneurs to devise business strategies which combine their creative talents with smart business thinking. “I went on the course feeling that I should diversify my range of artwork away from just motocross because I felt vulnerable by having all my eggs in one basket,” said Rob. However, by the end of the course, after having considered a range of factors such as his competitive advantage, market segmentation and pricing strategies, Rob decided that his best option was to play to his strengths and focus on motocross art. “The course encouraged me to focus on what I’m passionate about and to capitalise on my position in the world of motocross” said Rob. “The message I came away with was ‘Believe in yourself and don’t worry about only working in a niche market – simply become the best motocross artist in the world!’ from the aptly named Focusing Creativity course” said Rob. Despite being a one-person enterprise, Rob’s business strategy is similar to that of some of the biggest corporations. Jim Collins identified that the most consistently successful companies use the ‘Hedgehog Concept’. (The hedgehog is supremely good at one defensive position, and it survives by sticking to its winning strategy.) Businesses using the Hedgehog Strategy have identified the one thing at which they can be world-beaters. This results from an objective understanding of what you can be best in the world at combined with the thing you are deeply passionate about. This focused strategy worked. Within a year he was appointed as the ‘Official Artist to the 2007 Motocross de Nations’ in Maryland, USA. This accolade will give him the opportunity to exhibit and sell his works of art in the VIP and Press buildings at the event, which is the ideal marketplace at the very heart of this international sport. Rob Kinsey has achieved world-class status by focusing on his niche market, concentrating on his specialist creativity and being driven by his passion. ---
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Download this article as a PDF document (PDF, 140KB) --- Let me know about other creative entrepreneurs who have focused on a specialist niche to achieve world-beating success.
Many creative enterprises offer a range of goods or services and regard this as a way of maximising their options and income-generating potential. I understand what they are trying to do. They say it's a case of 'keeping your options open' and 'casting the net widely' in order to increase the chances of winning new customers.
One of the problems with this approach is that you also increase the number of your competitors. And in each market you are competing in, the chances are that somebody is better than you at that particular thing. So you end up being a 'jack of all trades but master of none'. Even if that is too critical an analysis of your position, it may still be the customers' perception of your business.
Instead of competing on several fronts, I often urge my clients to identify the one thing at which they excel in relation to competitors, in other words, the one thing which 'puts them head and shoulders above' competing enterprises.
The question is : What is the one thing at which you can be world-class?
In a study of the most consistently successful companies, Jim Collins identified that each of these companies uses what he calls the Hedgehog Concept. The fox, renowned for his cunning, has many strategies for killing the hedgehog. On the other hand, the hedgehog has only one strategy for defending itself. Whenever the fox attacks, from whatever direction, the hedgehog rolls itself into a ball of spikes. It works every time. The hedgehog is supremely good at one thing, and it survives by sticking to its winning strategy.The most consistently successful companies identified the one thing at which they can be world-beaters -and then they focused on this speciality to consistently beat the competition.
Identifying your own organisation's Hedgehog Strategy flows from a thorough and objective understanding of:
1. What you are deeply passionate about. (Not what you would like to be passionate about, or what you 'ought' to be passionate about, but what innate passion can you draw on.)
2. What you can (and cannot) be best in the world at (not what you would like to be, but CAN be best at).
3. What 'drives your economic engine', ie how value is created. Ideally this should be crystallised into a single financial measure.
Your Hedgehog Strategy is derived from the intersection of the three factors above.
This strategy applies to large corporations but also to smaller businesses and enterprises in the creative sector. For example, painter Rob Kinsey has combined his passion for the sport of motocross with paintings of motocross that he sells to riders, fans and companies in the industry. By focusing on this narrow niche, he has found the place where his passion, creative talent and target market overlaps. This is the niche in which he can be a world-beater.
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Let me know about your own Hedgehog Strategy!
Telling Africa’s story from Africans’ point of view is the mission of Africa Media Online, the agency representing African media professionals to the global market.
“In the ‘information society’, if we are to create some semblance of global information democracy, it is important that Africans are heard from their perspective,” says Africa Media Online’s David Larsen
His company has created systems to gather, market and deliver media to users and markets around the world. For the benefit of their world-wide customers, media from a comprehensive range of African picture libraries, museums and archives are available in one place, and managed in conformity with global standards. As well as using the latest digitisation technology, e-commerce systems make financial transactions easy, secure and quick.
The technology driving all this is MEMAT 2.0 (Media Market Technologies), which is an online content management system, developed in-house using open source technology, and launched in 2004. This software provides each member organisation with the facilities to organise their libraries and archives, backed up by training and technical support.
As well as being relatively inexpensive, it is highly scaleable. This means that it can power the collections of individual photographers such as South African news photographer, Rajesh Jantilal, but also the multiple collections of a media organisation such as Cape Town’s Oryx Media and the world-class Bailey’s African History Archive, based in Johannesburg, South Africa.
In addition to running their own websites, African picture libraries and media archives recognise that they benefit by working together in a form of ‘co-opetition’. They can do this by also offering their images through ‘africanpictures.net’, which David Larsen describes as an ‘online superstore’.
Clearly this offers great customer benefits as the global audience can find most content in one convenient place.
David Larsen, a photographer and journalist, set up Africa Media Online Pty. (Ltd.) in Pietermaritzburg, South Africa in 2000, along with Paul De Villiers, an internet entrepreneur. Paul sold his shares in 2006 and new investors were attracted to the company, including Kabusha Technology Investments Pty. (Ltd.), a black-owned enterprise which now controls the single largest shareholding in Africa Media Online. This relationship demonstrates a clear commitment to social transformation, according to David Larsen. The investment structure brings financial resources to the company and at the same time creates an organisational structure which is fitting to the local cultural and political environment.
In its first seven years of business, Africa Media Online has concentrated on photographic images but its systems have always been designed for multiple media forms. The company is aligning itself to the convergence of media so that it will be able to also offer documents, sound and video files. This will mean an even better service for its global distribution partners and clients all around the world.
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Link to Africa Media Online
More about Co-opetition
More about Organisational Structures
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Let’s make a distinction between planning for a successful creative business and ‘writing a business plan’. The two are not necessarily the same. In my own experience, many people write business plans purely because they are a requirement of investors or funders. These business plans tend to be written without conviction and are then quickly shelved once the third party investor has accepted (or rejected) the plan. A business plan should be primarily for the business itself, a ‘route map for success’, setting out the objectives and steps to be taken to achieve its objectives. Ideally a good business plan should serve the business well as a working document – as well as to articulate to third parties the benefits of the business, return on capital invested, risk management and other concerns of stakeholders and partners.
But the business plan is not a sacred document. A business plan does not automatically guarantee business success. Many business plans present the details but fail to address the fundamentals. Any business plan must be based on the values and objectives of the entrepreneurs concerned and at its heart must be a feasible business formula.
A successful creative business will be built upon producing goods and services at which we excel, matched with carefully selected customers. In this way, creative entrepreneurs can unleash their creativity without compromise and achieve commercial success.
This unique business formula is the key. Get this wrong and compromise or failure will result. Get it right and the creative enterprise will have a great chance of both creative and commercial success.
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This is anextract from an article first published as ‘Making a business plan’ in the book ‘Read this First: Growth and Development of Creative SMEs. (ISBN/EAN 978-90-810079-2-4)
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Making a Business Plan
TÉLO is the first public telephone especially designed for public transport vehicles. Using a card for payment, millions of people using public transport are already
using the phone on buses, trains and underground transport networks.
Founded in August 2004, by Paulo Lerner and André Averbug, Brazilian company PV Inova (Public Vehicular Innovations) invented the system and have registered a patent to protect their intellectual property, initially
in Brazil.
“Writing the patent was very time consuming, having lasted about six months”, said Leonardo Gadelha Sampaio, “we had the support of a patent lawyer for the writing of the patent itself, and of a respectable law-firm for the registration of it. We registered the patent in Brazil and internationally through the PCT”. The Patent Co-operation Treaty provides a standardised method of registering a patent, initially in the country of origin, and paves the way for easier registration of the same patent in 137 countries which have signed up to the Treaty. Despite the PCT, there is no such thing as an ‘international patent’ – a further separate registration is required for every additional member state.
Photo: Inova’s executive partners: Paulo Lerner (Technology), André Averbug (Planning) and Leonardo Gadelha Sampaio (Marketing).
In choosing further countries for patent registration, PV Inova will be targeting other countries with similar social profiles as Brazil, in Latin America, East Asia and Africa. In these countries, millions of people use public transport and rely on public communication networks rather than personal mobile phones. They will also register the patent in Europe and the USA for strategic purposes – to deter competition for as long as possible.
PV Inova has a social mission – to make communication accessible and affordable to the masses. They also have commercial objectives and recognise that these customers, though not wealthy as individuals, collectively have massive amounts of money to spend. The company has used socio-economic statistics combined with transportation data to analyse the Brazilian market. Instead of focusing on the wealthy elite, their income streams will come from the aggregated spending power of millions of ordinary people. This is a ‘base of the pyramid’ or ‘BoP’ strategy, selling services in high volume but at low prices.
Innovate in product design, Leonardo and his colleagues at PV Inova have used a novel combination of strategies to raise funds for their projects. Investors see the potential of the company and PV Inova has had two rounds of investment, firstly from a ‘business angel’, and later from an ‘investment club’ of seven smaller shareholders. 80% of shares are owned by the three executive partners, with the remaining 20% shared by 11 others. The company’s business plan forecasts an outstanding return on investment. PV Inova also plans to reinvest its profits in further technological developments, including digital TV.
Apart from the huge Brazilian public transportation market, growth will also come from international strategic partnerships with telecommunications companies, based on the provision of the service and the licensing of their intellectual property.
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Link to PV Inova website.
Please contact me with other examples of creative enterprises using interesting marketing strategies and intellectual property to develop their businesses.
Combining traditional Vietnamese fine art with pioneering technology has created success for VietnamArtist.com, a virtual online gallery based in Ho Chi Minh City (Saigon).
Tran Thi Anh Vu (pictured, right), an art gallery proprietor, set up VietnamArtsist.com in 1999, seizing the opportunities offered by e-commerce to develop her business. She engaged the services of an Indian web company and a design consultant from the USA to create one of the first websites in Vietnam to accept credit card transactions from all around the world.
The business currently promotes hundreds of works of art, at prices ranging up to $10,000, by 20 artists, including the most famous artists in Vietnam, such as Nguyen Thanh Binh, Bui Huu Hung, Do Xuan Doan and Ho Huu Thu.
One of the problems all art galleries face is that there is never enough room to display all the art available. However, in contrast to a walk-in gallery, the virtual world of the internet offers almost infinite ‘gallery space’. This means that all the artwork, not just a select few, can be promoted online. These other works form what Chris Anderson calls the ‘long tail', the many items that would never win gallery space yet can collectively achieve remarkable sales online. Unlike physical shops and galleries, online retailers can be ‘scaled-up’ without traditional constraints of space, cost and staffing.
VietnamArtist.com represents two galleries plus some individual artists. Anh invites other artists and galleries to join, even their competitors, because by working together to reach international markets, they can all benefit. “We have an open door policy” says Anh, “we call it co-opetition, friendly competition.”
By being creative with her business model, Anh has transformed her enterprise from physical to virtual – ‘from bricks to clicks’ – replacing old problems with new opportunities. 50% of sales are online. No longer local, it’s now truly global. Limited space is now infinite; previously seasonal trade is now perennial. Inventory is ‘virtual’ – artworks can be displayed without the gallery having to store or buy them until they are sold to a customer. Trading globally on behalf of local artists, VietnamArtist.com has turned competition into co-opetition.
Image: Schoolgirls with Lotus Flower 2 by Nguyen Thanh Binh
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Link to VietnamArtist.com
Please let me know of other examples of co-opetition, e-commerce and international marketing in the creative industries.
"Ideas don't make you rich. The correct execution of ideas does."
So says Felix Dennis, poet, owner of Dennis Publishing, and one of the wealthiest self-made entrepreneurs in Britain.
I met him several years ago when he gave generously to support a project I helped with at the National Library for the Blind, though he didn't say this to me when we met. I just read it in his book 'How to Get Rich'.
I agree with him, totally. In my experience as a business adviser to creative people and businesses, there is certainly no shortage of great ideas. But making them happen is a totally different matter and it needs different skills and attitude. For an idea to make you rich it requires not only creativity (the T-Shirt) but also business acumen (the Suit).
For a start, you cannot 'own' an idea in a legal sense, through copyright, patent or any other intellectual property rights. It is only the expression or execution of the idea in a tangible form that can be owned. For example actually writing the novel, not just thinking up the plot, actually designing the invention after thinking up the concept, recording or writing down the tune in your head, etc.
After the idea becomes real in some sense it can then be protected through copyright, patents, design registration or a registered trade mark. That's necessary but not sufficient. Next comes a whole series of options, challenges and decisions about financing the enterprise, ownership, marketing, possibly manufacturing and distribution, and a lot of other business matters.
I've met plenty of people with good ideas, even with these ideas protected through copyright and patents, who have been unable to move things forward into a profitable business.
And I've met people who have said of a successful business "I thought of that myself, years before they did!".
Liz Pugh is the co-founder and producer of Walk the Plank, Britain's only touring theatre ship. She manages another creative enterprise which is very different from Dennis Publishing, but agrees with Felix's point about execution of ideas being the key.
"I often get people coming up to me saying 'we had the same idea years ago' and my retort to them is always 'Where's your theatre ship, then?!'
The difference between the wealthy creative entrepreneur and the 'ideas person' is their ability to (metaphorically) wear a suit as well as a t-shirt, or team up with people who are more experienced and skilled in these matters.
It also requires focus. It's a frustrating fact that we are capable of thinking up many more good ideas than we will ever have the time to implement. So we need to select from the many ideas the best one or two to concentrate on - and then focus on these at the expense of the rest. Saying No to the distraction of other good ideas is the price we must pay to achieve success.
This blog, website and my book 'T-Shirts and Suits: A Guide to the Business of Creativity' all offer ideas, information and help in turning your creative ideas into sustainable income streams.
The other day I advised a photographer to consider following George Lucas. I wasn't suggesting he became a film director, but simply that he negotiated with his client in a similar way to Lucas when he struck a deal with 20th Century Fox before directing Star Wars.
Lucas turned down a massive director's fee and instead asked for 40% of the merchandising rights to the Star Wars film and any sequels, plus a modest director's fee of $175,000. Over 30 years, the income from the merchandise has far exceeded the box office takings and he receives his 40% of this income stream. After six films and thousands of products, he's now worth around $3.6billion.
Nice one, George.
(Another example is the film director Robert Altman and his son Mike, who wrote the song for the film M*A*S*H.)
The photographer is negotiating a deal to shoot a series of images in connection with a major construction project. He could be a creative labourer and simply take a fee for the work. On the other hand, he could keep ownership of his intellectual property in the images and receive license fees for each use of the images in different circumstances - annual reports, advertising, exhibitions, etc. There is no guarantee that it will bring in more cash than a fee, of course. And it's unlikely to make him a billionaire. There is a business judgement to be made and there is a risk involved.
The crucial issue, though, is that it's a different way of thinking about building a business. It an entrepreneurial approach which is about creating long term income streams that continue to make money while you sleep, through licensing, rather than just taking a fee for your immediate labour.
Forget the adage 'Never Quit'.
Instead, quit often!
That's one of the messages in Seth Godin's new book 'The Dip'.
It links in to what I often write about 'Saying No'.
In order to focus on becoming highly successful in one field, you have to say no to distractions that don't help you towards your goal. Quit the wrong things, in order to do the right thing well. Then stick to your focused strategy and don't quit !
There is a lot written about business strategy, but in essence it can all be boiled down to seven simple steps:
1. Be clear where you want to go - your Vision
2. Know yourself and your current situation
3. Understand customers' needs, competition and external forces
4. Carefully create your unique Business Formula
5. Devise a plan of action - your Business Strategy
6. Turn the plan into action
7. Stick to it - be prepared to Say No Taken from 'T-Shirts and Suits: A Guide to the Business of Creativity'
Are you a true entrepreneur - or just a creative labourer?
This was the question posed in my article about the E-Myth.
Here's a true story. Robert Altman was paid a cool $70,000 (US dollars) for directing the 1970 hit movie M*A*S*H.
They needed a song for the movie so Robert Altman's 14 year old son, Mike Altman, co-wrote the song 'Suicide is Painless' with his friend Johnny Mandel.
Robert Altman sold his labour as a film director for a fee. Mike Altman didn't sell his copyright in the song. Instead, he kept ownership of the intellectual property he created and through licensing deals allowed the film-makers to use it. The song also became a hit separately, after it was used in the film. Over the years, Mike Altman made over a million dollars for co-writing the song. Much more than his father earned for directing the film!
The key to generating income in the long term - rather than being a creative labourer and working for wages - is to use our creativity to produce intellectual property that can generate income streams.
That's what George Lucas did.
It's a different approach and a different business model. It's about being a true Creative Entrepreneur rather than merely a creative labourer.
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* Contact me about your experiences of generating income streams through licensing intellectual property.
Creative enterprises can use the ICEDRIPS checklist to identify opportunities and threats in a fast-changing world.
All businesses and organisations operate in a changing world and are subject to forces which are more powerful than they are, and which are beyond their control. Just as a ship at sea is subject to powerful natural forces of which it needs to be aware and deal with, organisations are influenced by forces in their external business environment. Any business strategy needs to take account of all these forces so that opportunities and threats can be identified and the organisation can navigate its way to success by matching its internal strengths to external opportunities. (A SWOT Analysis can help here.) As an aid to identifying all these external forces, a couple of acronyms come in handy.
A PEST (or STEP) Analysis invites you to list all the relevant external forces using four headings: Political, Economic, Sociological and Technological. These are useful headings; it doesn't matter that some items might be both political and economic (eg taxation and exchange rates).
However, to look in eight rather than four directions, use the ICEDRIPS checklist:
Innovation including new technology and the Internet (of course) but other innovations too which may be particular to an industry.
Competitors. Not only direct competitors but threats from substitute products etc .
Economic factors such as inflation, exchange rates, downturns in the industry, public spending etc.
Demographics. The relevant statistics of age, gender, geography, social class etc, and changes in these.
Regulatory environment, ie laws, regulations, agreements and conventions.
Infrastructure such as telecommunications networks, transport, public services and utilities.
Partners. Strategic alliances with other companies or organisations.
Social trends, including acceptance of technology, use of leisure time, fashions and changing beliefs.
NB: The factors above are not in order of importance, the checklist merely provides an easy to remember acronym.
Tip: the best way to use ICEDRIPS is to jot down lots of ideas quickly - maybe in a group - and without pondering or challenging them at first. Afterwards you should sift through them to identify the important few factors from the trivial many. (According to the 95:5 Rule, it's likely that just 5% of opportunities and threats could have 95% of the positive or negative effects on your business.)
Michael E Gerber, in his book on the E-Myth (E-myth Revisited) , points out that there is a fundamental difference between knowing a technical skill or trade (eg as a designer, mechanic, chef) and running a business based on that skill (a design agency, a workshop or a restaraunt). Many would-be entrepreneurs who break away from paid employment to set up their own businesses become trapped, not liberated. They end up working as a cog in a machine of their own making, rather than setting up a money-making machine that they are in control of. This is the Entrepreneur Myth. These people are workers, not true Entrepreneurs, according to Gerber.
Many people have a dream of building up a business so that they can eventually sell it and secure a significant financial reward, maybe for retirement or reinvestment. In order to be able to do this, however, the business must ultimately be independent of the ongoing labour of the owner. Many businesses become virtually worthless once the owner retires and therefore have no value to a potential buyer.
A true entrepreneur will work 'on' a business rather than 'in' it. In other words, they will set up money-generating business, which ultimately makes money for the owner without his/her direct involvement.
This is the difference between being a 'worker' (or labourer) on the one hand, or a true 'entrepreneur' on the other.
Even if you have your own creative business, are you in fact a 'creative labourer' - or a true entrepreneur? In short, the 'acid-test' question is this: have you set up a business which can generate income even when you sleep - or is your income totally dependent on your ongoing labour? In the creative industries, the key to building a business which generates income independent of your ongoing labour, is the management of intellectual property.
The Long Tail refers to the statistical phenomenon that represents the 'trivial many' of the Pareto Principle or '80:20 Rule' (see the "95:5 Rule").
Businesses operating in the physical world need to concentrate resources on the 'important few', ie the top 20% or even the top 5% that provide the bulk of sales or profits - at the expense of the rest: the 'trivial many'.
So for example a bookshop can only stock a small percentage of books available in print at any one time and naturally the bookseller will choose the bestselling 5% or less because these will produce the maximum sales. In contrast, the slower selling titles cannot be stocked because they cannot justify the expense of shelf-space.
However in the digital world, shelf space is not an issue. An MP3 music download service can just as easily stock every title, even those 'trivial many' that only sell once or twice in a year. In a record shop, stocking these items would be commercial suicide. In the digital world there is virtually no cost to stocking these too, and so even one or two sales are welcome.
The Long Tail refers to the sum total of these 'trivial many' items, which collectively can account for more sales than the 'important few'.
In other words, in the digital world, the 'trivial many' can become the 'important many'.
For more information about the Long Tail, see Chris Anderson's website and book of the same name.
Paradoxically, great art lies in what the painter chooses to leave out as much as what s/he decides to put in. Similarly, the art of business strategy is not just about deciding what you are going to do; just as important is deciding what you are not going to do. Having a 'must not do' list is as important as your 'to do' list.
In an article in Harvard Business Review, Susan Bishop wrote:
"Today, saying no is our growth strategy. That is, our growth strategy is saying no to the wrong kind of clients - those who take us away from a business model based on our mission, values and areas of expertise".
And of course it is impossible to know to whom to say no, which projects to decline, and which customers not to deal with, if the enterprise is not clear about its mission, values and areas of expertise (core competencies)
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"I don't know the key to success, but the key to failure is to try to please everyone."
Bill Cosby. Actor (and multimillionaire)
"The talk turns to Bill Gates. Chan says Gates's business model works because he had the self-discipline not to diversify. "He can resist temptation, that's why he is so great. I think that's what I should learn from him."
Timothy Chan. China's second richest man. (Guardian. 08 November 2004)
"The art of leadership is saying no, not yes. It is very easy to say yes."
- Tony Blair
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However, let's not pretend it's easy! Though I advocate Saying No to projects and jobs that don't take you in the right direction, I admit that I find it difficult.
Let me know of your own experiences of focusing your creative business by Saying No to attractive but un-strategic opportunities.
The Pareto Principle, also known as the "80:20 Rule", states that 80% of results flow from 20% of causes. So, for example, 80% of sales can come from just 20% of customers; 80% of road accidents occur in just 20% of accident locations; and maybe 80% of headaches are caused by just 20% of your friends. 80% of profits may come from just 20% of your products, 80% of the wear and tear on a carpet happens in just 20% of the surface area (near the doors), etc, etc. You get the idea.
(This 80:20 Rule is also named after Wilfredo Pareto, an economist, who identified that 80% of the wealth was owned by just 20% of the population.)
The point is that not all thing are equal. Indeed there is a disproportionality, with the 'important few' (20% or so) having more effect than the all the rest put together.
In terms of business, it's crucial to identify the 'important few' from the 'trivial many' - and then pay special attention to them. Maybe the top 20% of customers that generate 80% of profits, maybe the top 20% of stock items that are responsible for 80% of sales.
Once you've identified the important few, it helps you to make decisions about priorities: which customers to provide even better service to, which items we must never let run out of stock, which projects to pay special attention to, which employees to keep at all costs ... etc
In practice, the imbalance or skewing is even more pronounced than 80:20. I reckon it's often more like the top 5% of causes (customers, items, investments etc) that can be responsible for 95% or more of effects (profits, sales, dividends etc). That's why I call it the 95:5 Rule.
* Please contact me with examples of the 95:5 rule in practice in your creative enterprise. Thanks
Analysing Competitors and Charting your Competitive Strategy
The technique of 'charting the competition' is extremely effective in analysing competitors' strengths and weaknesses in relation to your own business. Using clearly understandable charts, it dramatically illustrates the competitive landscape. Most importantly, however, it allows executives to develop competitive strategies which will beat the competition and from which clear and realistic action plans can be derived.
The methodology is as follows:
1. Decide the 'factors of competition', ie the things a customer takes into account before deciding to buy from your business (eg location, price, reputation, service, etc). Of course these will vary according to the industry you are in.
2. Give every competitor a score (out of 10) for each factor of competition. Plot these scores on a chart (graph) to give a distinctive 'profile' for each competitor. (Ideally this process should involve extensive research, but can work well using the existing knowledge of experienced company staff.)
3. Score your own business against the factors of competition. Evaluate the current position honestly. Plot the chart.
4. Looking at all the charts together, decide the profile your business needs to have in order to compete successfully. Remember that you need not (and indeed cannot) be the best at everything. Choose the factors of competition at which you can excel, and which will give your business a clear market position. Plot the chart.
5. Now remove competitor data to clearly see the gap between (a) where your business is now, and (b) where you need it to be.
6. Draw up action plans to close the gap for each factor of competition.
References and Further Reading
W.Chan Kim, and Renee Mauborgne. Charting Your Company's Future. Harvard Business Review, 2002
It's natural for creative people to want to make a career out of their creativity. But it doesn't necessarily follow that creativity automatically qualifies a person for a job - or guarantees they can build a successful business from their creativity.
For those about to embark on a journey into creative enterprise, the first question must be: Why do it? Why build a business around your creative passion? The obvious answer is to express your creativity and make a good living at the same time. But is it that simple? This book outlines a range of challenges affecting businesses and offers some pointers towards solutions. There are many hurdles to cross, compromises to be made and tough decisions to make along the way. So first it’s worth taking stock of what’s at the heart of your creative enterprise and why you do it – or plan to do it.
Though the intention is to allow your creativity ‘free rein’ by doing it full-time as a business, some people complain that now they are in business they have less time for their creative passion, not more. Others have considered changing to a conventional job to earn money so as to be able to indulge their creativity in a pure way, free of the constraints and pressures of business.
Perhaps it is better to separate earning a living on the one hand and creativity on the other so as to do each one to the utmost, rather than doing neither one properly. Is there a risk that your creativity will be curbed by business? You may consider this suggestion inappropriate in a book like this, but it is better to deal with this issue frankly now if it is a matter you are facing – or likely to face in the future.
Yes, there is a risk of compromising your creativity with business – and compromising your business profitability by indulging your creativity – if you don’t get the ‘business formula’ right. For example a financial formula that works for a hobby usually does not work for a business when higher prices need to be charged to cover the real costs of labour and other expenses.
Three options are worth considering:
1. Hobby. Keep your creative passion free from the constraints of a job or a business and pursue it purely as a hobby. This means you can indulge your passion in its purest form. But you will need to earn a living elsewhere.
2. A Job. Sell your creative labour to an employer. This means earning a living from your creativity but it will have to be channelled towards the needs of the employer and their business needs. Also, the intellectual property created from your ideas will probably belong to your employer, not you.
3. A Business. Use your creativity to set up your own enterprise. This will mean getting involved in all kinds of business matters in addition to your creative endeavours. It also means using your creativity to solve your customers' problems and cater to their needs.
Paradoxically, great art lies in what the painter chooses to leave out as much as what s/he decides to put in. Similarly, the art of business strategy is not just about deciding what you are going to do; just as important is deciding what you are not going to do. Having a 'must not do' list is as important as your 'to do' list.
In an article in Harvard Business Review, Susan Bishop wrote:
"Today, saying no is our growth strategy. That is, our growth strategy is saying no to the wrong kind of clients - those who take us away from a business model based on our mission, values and areas of expertise".
And of course it is impossible to know to whom to say no, which projects to decline, and which customers not to deal with, if the enterprise is not clear about its mission, values and areas of expertise (core competencies)
"I don't know the key to success, but the key to failure is to try to please everyone."
Bill Cosby. Actor (and multimillionaire)
"The talk turns to Bill Gates. Chan says Gates's business model works because he had the self-discipline not to diversify. "He can resist temptation, that's why he is so great. I think that's what I should learn from him."
Timothy Chan. China's second richest man. (Guardian. 08 November 2004)
"The art of leadership is saying no, not yes. It is very easy to say yes."
- Tony Blair
Co-opetition is a business strategy which combines co-operation and competition, based on the concept that business competitors can benefit when they work together.
The co-opetition business model is based on games theory, a scientific approach to understanding various strategies and outcomes through specifically designed games.
Businesses succeed by combining cooperative strategies with competitive strategies. Other businesses do not have to fail for others to succeed. They cooperate to enlarge the pie and compete to divide it up. Traditional business philosophy translates to games theory's zero-sum game in which the winner takes all, and the loser is left empty-handed; whereas the co-opetition approach leads to a plus-sum game, in which the sum of what is gained by all players is greater than the combined sum of what each of the players started with.
See also: Co-opetition - friendly competition
References and Further Reading
Adam M. Brandenburger and Barry J. Nalebuff.
Co-opetition. Harper Collins. 1996
Link to Amazon
Creating ‘Interprises’ – how to make successful collaborations between creative enterprises.
Successful collaborations between creative enterprises –‘Interprises’ – are formed when there is an alignment of several factors between the businesses involved.
Some of the important issues that need to be considered and worked through in devising an effective Interprise can be described as the “Five C’s of Collaborations” :
Continue reading "Creating Interprises" »
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