Digital creativity

Compared to atoms which make up the physical world, digital bits are weightless and intangible. Digital coding is a major technological influence on how ideas are expressed, shared and communicated. Robert Metcalfe, who invented Ethernet networking and founded 3Com Inc., the maker of the Palm Pilot, proposed a law of networks which says that the community value of a network grows as the square of the number of nodes increases. The smallest possible network consists of two people. In this case, Metcalfe’s value is 4. If a third person joins, the number of connections rises to three and Metcalfe’s value is 9. If a fourth, it rises to six and the value is 16.

The Internet is not a hard-wired network, like the telephone network, but a soft network, consisting of the manners, rules and procedures by which hard network is used. It is best described as a set of administrative arrangements for connecting users to information via other networks. At first, the owners of the hard networks hardly noticed the Internet. For many years, it had no impact on their infrastructures, services or prices.

Creative workers

However, creative workers can start up their own business at any moment. What they need to possess are: vision, focus (on one thing only), financial skills, pride and urgency (doing things at the right moment). The work of a creative person may be intermittent and volatile, but someone who creates their own intellectual property and manages their own work can be more secure than a salaried employee of a large corporation.

In the creative economy, people start their own companies, process which entails a decrease in traditional full employment. The post-industrial society needs the post-employment job. Employment will only include just-in-time persons (people who are hired only when and where they are needed) with specific expertise and the ability to insert into the team. Gerard Fairtlough, the former chief executive of Celltech, believes the ideal size of a team is seventy, which he calls a creative compartment. This team should be dynamic, so as to encourage leaders.(1)

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(1) HOWKINS, John, “The Creative Economy. How people make money from ides”, London Allen Lane, The Penguin Press, London, 2001, p. 150

Thinkers and creative people

In a creative organization, creative people must take control. Thinkers are highly needed, as their job involves not only pondering, but also the use, the management, of every kind of thought process. The team should be guided by the creative entrepreneur. Entrepreneurs in the creative economy believe that creative wealth, if managed right, will engender more wealth. Sometimes, workers have better ideas about how to run their company than do the managers, but they can never put their ideas to practice. They have no access to financial capital and their intellectual capital is not sufficient.

There are innumerable obstacles to innovation in the actual corporate environment. Thus, managing innovation is an absolute must. Competition, mistrust, and scarcity of time, money and other resources make it very difficult to innovate. These same reasons make innovation imperative. Almost any major innovation was developed as a response to a problem of some kind. Besides, there will never be a shortage of opportunities to innovate. Historically speaking, a series of innovations have changed the economy of many countries and the world. Most often, these innovations were badly managed (or not managed at all) and had unfavourable or tragic consequences for the people involved with them.

In order to capitalize on the innovative capacities within a company, there are some basic elements that foster it in the organization. The way these elements are provided can be formal or informal, and adapted to the size and nature of the company, but they must be present in some form to truly encourage and leverage innovation. They are direction and alignment between the goals of the individuals and the company, a safe environment to take risks and share ideas, and a compensation system that recognizes and rewards innovation and collaboration.

The economics of creativity

The economics of creativity differs from Adam Smith’s conventional economics. The latter revolves around the firm, which is considered more efficient than the individual in identifying and using resources. In the economics of creativity, creative people are not dependent on organizations to the same extent. They do not need large resources of capital and equipment. They often have low transaction costs. The law of diminishing returns, first formulated by David Ricardo, hardly applies. It states that each additional input factor of production becomes harder or more expensive to acquire and that therefore at some point the cost of producing one more unit exceeds the revenue obtained from selling it. The point at which marginal cost meets marginal revenue is called the equilibrium point. This holds true if resources are limited and under price competition. But in an economy based on intangible and often immeasurable resources the costs of production are less important.

In the creative economy, individuals and firms use resources which are not rare, over which they assert intellectual property rights, which may be short-run, and which do not compete primarily on price. The world of diminishing returns and scarcity of physical objects is being replaced by a world of increasing returns based on the infinity of possible ideas and people’s genius for using those ideas to generate new products and transactions. Control of product and price (performed by the company) become less relevant if production resources are freely available, if products are intangible, if price competition is negligible, and if the market is driven by demand not by supply. In the knowledge economy, firms either charge prices well in excess of marginal costs, or they give their products away for free (the case of free software and its mechanism will be approached in the next part of the paper).

Creative and Innovative Management - part 1

Business is one of the most creative activities ever. It creates ideas. Both creativity and business can go together, they are not mutually destructive as the majority believes. The economics of creativity deals with two system values. One concerns the physical products, which are tangible. The other is based on intellectual property, which is intangible. Managing creativity involves knowing when to exploit ideas and then when to assert intellectual property rights.

Despite the fact that business is meant to make a profit, free-riding, which means benefiting from another person’s ideas without paying, occurs. Free riding can be seen as a cost for the creative economy. Some of the most self-explanatory costs of creative economy are broadly described in the second last part of this paper. People use free-riding to enhance their own knowledge and skills. From a supplier’s point of view, free-riding shortens technological and product life cycles. Being first to market is a major advantage but an innovator has only a short time to establish a new product before others begin to compete. But, in order for some people to benefit, others must go without. Debate has gone on about this exchange. Some economists argue that any constraint on idea hampers creativity slows down economic development; others consider that monopoly is necessary to reward innovation and to better allocate resources.

The Recognition, Protection and Classification of Creative Products - Part 3

Human beings are called homo creator, but creativity does not always lead to a creative product. The creative equation deals only in creative products, not creativity, and differentiates between a creative product and a transaction. It states that the creative economy (CE) is equivalent to the value of creative products (CP) multiplied by the number of transactions (T); that is, CE=CPxT. Creativity itself cannot be quantified. The number of creative products can be quantified, but the multiplicity of products and the confidentiality of many deals may hamper the process of making an accurate account.(1)

Apart from the creative products and the transactions incurred which come to a fore when talking about creative economy, management plays an important role in the deployment of the creative activity. Thus, a creative and innovative management system best suits a creative and innovative activity.

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(1) HOWKINS, John, “The Creative Economy. How people make money from ides”, London Allen Lane, The Penguin Press, London, 2001, p. xi-xiv

The Recognition, Protection and Classification of Creative Products - Part 2

The case for intellectual property in economic theory notes certain substantial differences from the case for tangible property. Consumption of tangible property is rivalrous. For example, once one person eats an apple, no one else can eat it; if one person uses a plot of land on which to build a home, that plot is unavailable for use by others. Without the right to exclude others from tangible resources, a tragedy of the commons can result. The subjects of intellectual property do not share this feature of rivalness. For example, an indefinite number of copies can be made of a book without interfering with the use of the book by owners of other copies. When combined with a lack of exclusive intellectual property rights, this nonrivalrousness and nonexcludability combine to make them public goods and susceptible to the free rider problem. A rationale for intellectual property therefore rests on incentive effects to overcome the free rider problem. This case asserts that without a subsidy that is afforded by exclusive rights, there is no direct financial incentive to create new inventions or works of authorship.

As Wikipedia and free software demonstrate, works of authorship can be written without direct financial incentives. Moreover, many important works were created before copyright was invented. One might argue that much more invention occurred after patents came into existence; however, one could also argue that patents were brought into law as the power and influence of industrial interests grew. The status of intellectual property is disputed by various commentators in India, China and other developing nations. The United States and the United Kingdom are the only two nations who consistently receive net balance of payment benefits from intellectual property, and are amongst the chief supporters of intellectual property systems.

The Recognition, Protection and Classification of Creative Products - Part 1

Once new products and services are created, they have to be protected. Many creative products qualify as intellectual property. Besides the attribute of belonging to someone, intellectual property is intangible. Copyright, patents, trademarks and designs are the most common forms of intellectual property.

By an economic analysis, the incentives granted for intellectual property rights have sometimes served the public benefit purpose and promoted innovation by ensuring that someone who devoted, say, ten years of penury while struggling to develop vulcanized rubber or a workable steamship, could recoup her or his investment of time and energy. Using monopoly power, the inventor could exact a fee from those who wanted to make copies of his or her invention. Set it too high, and others would simply try to make a competing invention, but set it low enough and one could make a good living from the fees (1)

Exclusive rights such as copyrights and patents secure their holder an exclusive right to sell, or license rights. As such, the holder is the only seller in the market for that particular item, and the holder is often described as having a monopoly for this reason. However, it may be the case that there are other items of intellectual property that are close substitutes. For example, the holder of publishing rights for a book may be competing with various other authors to get a book published. In such cases, economists may find that another market form, such as oligopoly or monopolistic competition better describes the workings of the markets for expressive works and inventions. This is one reason to prefer the term exclusive rights over monopoly rights.

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(1) http://en.wikipedia.org/wiki/Intellectual_property

Perspectives on creativity - part 2

Innovation, which can mean a new idea, method or invention used in order to improve the current activity or the introduction of new ideas or methods(1), is a concept closely related to creativity. Innovation has become a lot more important to corporate leaders, in the last decade in particular, because of changes in the business environment, brought on by increased technological capabilities, speed, hyper competition, and faster rates of diffusion enabled by greater connectivity. The second part of my paper refers – inter alia – to innovation opportunities. But while many companies say they are making innovation happen, for most of them innovation is based on old ideas, principles and processes. At best, their innovations are incremental-miniscule improvements in products and services. While there is nothing wrong in achieving small gains, this view of innovation shuts out the truly startling cases of leap innovations.

Leap innovations occur when someone discovers an entirely new approach to a problem, an approach that changes life in some significant way. The leap innovation emphasizes the act of moving into the unknown or unexplored rather than just breaking with predictable patterns of innovation.(2)

Creativity and innovation are present at all levels of business from the management of a company to the development, branding and shape of each product.(3) Companies change at a great speed, due to the fact that competition is increasing and they have to maintain their position on the market. The fruits of creativity are what make them more appealing to their clients and partners. Briefly, their future and profitability largely depend on how creative they are.

Despite the fact that arts and creativity are allegedly treated as one and the same concept, not only pieces of art are the result of creative work. Creativity is also present in all other fields, such as sciences (especially in research and development). Both arts and sciences use the same thinking and creating processes, but the difference consists in the reasons why they do so. Also, the way how they protect its economic value differs. So, creativity is common to both arts and sciences, the creative products are different.

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(1) “Dictionary of Contemporary English – The Complete Guide to Written and Spoken English”, Longman 1999

(2) WHITE, Shira P.  with WRIGHT, G.  Patton, “New Ideas About New Ideas”, Pretince Hall, Financial Times, London 2002, p. 8

(3) HOWKINS, John, “The Creative Economy. How people make money from ides”, London Allen Lane, The Penguin Press, London, 2001, p. xi