What do the Creative Industries need? - Barriers and Possibilities for Growth in the Creative Industries in Denmark

Transcription

1 What do the Creative Industries need? - Barriers and Possibilities for Growth in the Creative Industries in Denmark Rasmus Wiinstedt Tscherning and Eva Boxenbaum Abstract This research analyses the barriers and possibilities for growth in the creative industries in Denmark. It was conducted by Center for Culture and Experience Economy (CKO) in The study 1) compares the creative industries with the wider industry community in order to evaluate differences, 2) assesses the demand for business support for creative industry companies and 3) uncovers the market for creative services in other industries. This analysis relies on surveys interviews from 1285 companies within the creative industries and 770 companies from other industries and on focus group interviews with creative industry experts. The analysis reveals that, compared to other industries, creative companies more often are, or work to become, internationally oriented; intellectual property rights are more often the mainstay of the company; they have longer planning horizon and similar ambitions for growth. Further, the analysis shows that, within the creative industries, there is a great need for development of support services with a focus on strategy and business development, marketing and consumer understanding, as well as financing of development projects. The analysis finally reveals a large demand for creative services in other industries. The creative services most demanded are related to differentiation from competitors, sales training and development and innovation. Keywords Creative Industries Growth Creative Work Processes Spillover effects Denmark JEL classification: L82, O10 Rasmus Wiinstedt Tscherning, MA in Political Science, the Managing Director for CKO (Center for Culture and Experience Economy), an agency established by the Ministry of Culture and the Ministry of Economy and Business. CKO - Center for culture and Experience Economy, Universitetsparken 7, 4000 Roskilde, Denmark [email protected], phone: Eva Boxenbaum, Professor of Management Science, MinesParisTech and Professor of Organizational Theory and Institutional Innovation, Copenhagen Business School Kilen, Kilevej 14A, 2000 Frederiksberg, Denmark [email protected], phone:

2 1 Introduction Danish analyses suggest that the Creative Industries (CI) have fared better over the past years financial crisis than have other industries (CKO and EBST 2011): CIs generate jobs, create value and exports through their activities (FORA 2011). Furthermore, studies have shown that the CIs provide added value in other industries: The so-called spillover effects include innovation of products or services through creative processes, the strengthening and effectiveness of companies' internal organization or new marketing tools (EC 2010a). Yet, we do not know if the full potential of the creative industries has in fact been achieved in full or whether the potential for growth is much larger than the current achievements. This study is developed with the aim to illuminate these questions. According to Richard Caves (2000), the creative industries are distinguished from other industries in being characterised by the following properties: Nobody knows : There is great uncertainty surrounding the production and consumption of creative products. It is hard to predict both the outcome of the production and consumer demand Art for Art s sake : Artists will choose low-paid creative work over better-paid humdrum labour. Creative entrepreneurs are often strongly interested in their product for subjective, rather than objective and rational, reason Motley Crew : The creative industries are highly diverse and cross disciplinary tasks, which form part of the creative production, put high strains on abilities to coordinate and mediate work A list/b list : In artistic work, a vital worker cannot be replaced with someone with less skills for this position without seriously altering the outcome Infinite variety : The creative industries are characterised by a wealth of differentiated products. Even though many productions are similar, they are never 100% identical Ars Longa : Intellectual property rights and the durability of creative products are of essence within the creative industries 2

3 Time Flies : Many creative products have time consuming production processes and the costs of coordinating and producing a creative product are potentially high. Therefore, timing is central to the creative industries These characteristics are not all unique to the CIs, as e.g. the aspect of time is of essence within many different non-creative industries. Also, though the above properties describe several aspects unifying the CI sub-sectors, one should not uncritically speak of them as one entity - the creative outcome and work processes of the individual CI sub-sector companies vary greatly. The property of CI that nobody knows points out that the CI are surrounded by a great level of uncertainty and that investments made in CI companies are more risky : It is impossible to predict the outcome of a creative process and as such, the demand for the products of a CI company. A study conducted by the UK think-tank Demos questions this feature and state that this proposition is a misunderstanding and that CI companies should be seen as just as risky as other enterprises (Demos, 2011). Further, the Arts for art s sake proposition is challenged by the notion that creatives are becoming increasingly entrepreneurial CI companies balance the creative work processes with business management (Eikhof and Haunschild 2006; Bilton 2007) and as such, the focus on subjective and non-commercial preferences in CIs must be questioned. Hence, it is possible to point at several factors unifying the CIs, but the understanding of business prerequisites of the CIs and how these differentiate from other industries is a still limited. The CIs can be a catalyst for growth, but in order to exploit this potential, it becomes paramount to understand possible barriers rooted in the CI characteristics presented above. One barrier could be a lack of business competences and therefore it becomes relevant to investigate the demand within the CIs for public and private business support services. Further, in terms of spillover effects, value may be added when creative businesses collaborate with companies in other industries Creative businesses might provide valuable competences unique to the CIs. At this point is not possible to describe the market for such creative competences; hence it becomes relevant to analyze the demand generated by other businesses on the services offered by CIs. 3

4 Based on the above, this research is developed with the overall aim to: 1. compare the CIs with the wider industry community in order to evaluate the differences 2. assess the demand for business support for CIs 3. uncover the market for creative services in the other industries The following section presents the methods applied, the analysis and ultimately the conclusions of the study conducted by the Center for Culture and Experience Economy (CKO) in Method Within the analysis, the CIs are defined as containing businesses within one of the following areas: - Design and architecture: Businesses having design as a core service - Fashion, furniture and textile: The businesses are included in the research, as they are offering experiences in the form of lifestyle products - Communicative media: Businesses within the film, publishing, computer games etc. - Art, music and arts and crafts: Businesses with artistic creativity as the core of production - Experience communicators: E.g. museums, theme parks and other business selling time-limited experiences This delimitation is chosen with reference to former analysis conducted in Denmark and internationally within the field of CIs. The aim is to include all businesses for which creative skills underlie the production and businesses where the production of experiences is the commercial core. In the analysis, CI companies are compared to other industries. The group of companies representing the wider business community is composed to reflect other Danish business. The companies included in this group are randomly chosen 4

5 and subsequently, in order to generate an even representation, classified and weighted according to segments and size. 2.1 Collection of data Commissioned and guided by CKO, the Danish research institute Epinion collected quantitative data and performed the focus group interviews for both parts of the analysis. The research process is divided into two parts. In the first part, we explore the first of the three above-mentioned research aims. The data used include quantitative telephone interviews with informants in management positions of private companies within the CIs. Simultaneously, 602 interviews have been conducted with companies in other industries. Subsequently, in order to further qualify the results of the questionnaires, CKO have performed a line of focus group interviews with CI professionals as well as interviews with CI experts who have been asked to interpret the quantitative data and provide perspectives on further initiatives that could strengthen the growth potential in the CIs. The second part of the analysis assesses the demand for business support for CIs and the market opportunities for creative services in the other industries. This part of the analysis also relies on quantitative interviews from the main body of empirical data. Among the companies that participated in the first part of the data collection a number of companies agreed to be interview again. Hence, the conclusions of the second part are based upon interviews with 283 companies within the CIs and 168 companies from the wider business community. Also for the second part of the analysis, focus group interviews as well as expert interviews have been performed. We used open coding to identify recurrent themes in the data material. This process revealed, for instance, perceived challenges for the companies in terms of development of businesses and competences, the use of support offers and well as internationalization. 5

6 3 Analysis The analysis of barriers and possibilities for growth in the CIs is divided into two separate parts. Part 1 explores differences between the CI and other industries, whereas part 2 is providing an assessment of the demand for business support in creative industries and the potential market for creative services in other industries. The following section will present the main findings of the analysis. 3.1 The CI and other industries compared The following section focuses on characteristics of companies within the CIs compared to those of other businesses. Figure 1 presents profiles of the interviewed companies as presented in the questionnaire. The company's copyright and intellectual property rights are the mainstay of the business** 2,9 3,4 It is more important for us to do something we are passionate about than to make money** 3,2 3,4 The company is characterized by uncertainty about earnings within the next year** 3,1 3,3 The company has ambitions for commercial growth* 4,0 4,1 2,0 2,5 3,0 3,5 4,0 4,5 Creative Industries Other Industries 5 = totally agree that this characterizes the company. 1 = totally disagree. * The difference is not statistically significant and therefore represents the statistical randomness. ** The difference is significant with a value of Fig. 1 Characteristics of the businesses in the CIs and other industries (CKO 2011a) This analysis shows that the CIs have the same ambitions in terms of growth as do other industries, but that they are characterized by a greater level of uncertainty about earnings within the next year. Also, the figure shows that intellectual copyrights are perceived as being more important for CI-companies than for other companies. 6

7 Further, the analysis has been focusing on the level of and interest in internationalization, as well as the commercial planning horizon of the CIcompanies compared to the other industries. The analysis reveals that noticeably more creative companies either are or work to become internationally oriented, and that CI-companies have a longer planning horizon compared to other industries. The long terms planning of the CI-companies surprises some of the experts interviewed in focus groups - not least because international studies reach opposing conclusions (E.g. EC 2010b, 2010c). The explanation is understood to be rooted in the fundamental propositions of the CI: When timing is essential and novelty is important, a long planning horizon is needed. Other experts point out, that the reason can be the higher education level in the CI. This explanation is supported by previous studies (KEA 2003). The analysis demonstrates several differences in support needs for the CIs compared to other industries. Below figure describes central challenges and the extent to which they were presented, by CI-companies and other companies respectively, as relevant. Administration and planning* The provision of capital* Legislation and regulation* 2,0 1,9 2,0 2,3 2,4 2,6 Protection of intellectual property* 2,2 2,6 Export 2,4 2,2 Valuation of creative skills** To become better at strategy and business* 2,8 2,7 3,2 3,0 0,0 1,0 2,0 3,0 4,0 Creative industries Other industries 5 = totally agree that this characterizes the company. 1 = totally disagree. * The difference is not statistically significant and therefore represents the statistical randomness. ** The difference is significant with a value of Fig. 2 Challenges for the CIs and other industries (CKO 2011a) 7

8 Central to the figure is the conclusion, that strategy and business development is the biggest challenge for both CIs and the wider business community. The greatest challenge is, however, in the CIs. This conclusion is seconded by the experts of the focus groups who argues, that there is a specific need for support offers directed at each specific CI sub-sector, cross sector development with focus on marketing and sales, as well as increased focus on business development in CI education institutions. Further, protection of intellectual property rights and the provision of capital are significantly greater challenges in the CIs compared to other industries. In discussing the later, the expert panel is pointing to the proposition that nobody knows the outcome of creative processes the value of the product and the company is difficult for creditors and investors to predict. The need for capital is understood to be especially great within the CIs, as the process here is long from the expenses are incurred until income is realized e.g. in for a fashion company The demand for business support in CIs In the questionnaire, the CI-companies have been asked to describe the support services they consider the most relevant for the development of their businesses. The following section describes the demand for growth-oriented services for people in creative businesses. Sales technique / pitching Export promotions with industry focus Coaching on business strategy Int. activities for multiple creative industries Export promotion with other companies Marketing and customer understanding Copyright and Intellectual Property Finance for project development Business models with other companies Strengthening of management 0% 10% 20% 30% 40% 50% 60% Allready using Will probably have a positive effect Will with high probability have a positive effect Fig. 3 The market for support services for the CIs (CKO 2011b) 8

9 The figure indicates that 50% of the CI-companies perceived business strategy coaching to be relevant for commercial business development. 48% of the companies regarded support services related to the provision of financial resources, both public and private investments and funds for projects, to have a commercial potential for their business. Further, close to half of the creative companies see commercial potential in the development of skills in terms of marketing and customer understanding and about a third of all creative companies see commercial potential in becoming better at dealing with copyright and other intellectual property rights. Still, though the figure reveals that the CI-companies to a very great extend are interested in a number of specific support services, the analysis also shows that very few creative companies actually make use of such support services. Thus one can argue that the existing business deals do not satisfy the needs of business and thus limits the growth potential of the CIs. In discussing these findings, the focus groups and panel of experts suggests that there will always be a gap between those companies who see a potential and those companies who actually end up receiving the support offer - the question is why the gap is so significant. It is suggested that one explanation could be that, though perceived to be relevant, the companies potentially lack the internal ressources needed to engage in the support services. Also, the industry experts argue that it is central to raise the awareness of the support services already offeret to the CIcompanies The market for creative services in Denmark The following section is focusing on "spillover effects" between the CIs and other industries. The concept is suggesting that business development and growth of firms outside the CIs can be enhanced through collaborations on e.g. innovation, staging, communication and leadership. The goal of this section is to determine the demand for a range of creative services, potentially contributing to business development in other industries. Building on the quantitative analysis, the below figure presents the market for different creative services. 9

10 Development of spaces for client meetings Product design Management and organizational development Development and innovation Differentiation Dynamic spaces and interior designs Additional experiences related to existing products Sales training Creative costumer events Export initiatives supported by creatives Leadership training and conflict management New media and marketing 0% 10% 20% 30% 40% 50% 60% Allready using Will probably have a positive effect Will with high probability have a positive effect Fig. 4 The market for creative services (CKO 2011b) The above figure describes how nearly half (48%) of all businesses in the wider business community sees commercial potential in collaborations with the CIs in terms of differentiation from competitors. 5% are already engaged in such a collaboration. More than four out of ten companies in other industries (43%) sees commercial potential in the development of concepts, ideas and innovation with creative. 36% of the companies in other industries see perspectives for sales training with creative companies and around every third in terms of leadership training and organizational development. Still, though, there is a marked difference between how many companies that see a potential in creative services and how many companies that currently use them. Therefore, the market for interaction between CIs and other industries is potentially much larger than realized today. The panel of experts and the informants of the focus group interview sessions suggest different explanations: Again, it is the understanding that there will always be a gap between those companies who see a potential and those companies that actually end up utilizing the creative potential. A central question still is why the difference is so significant. Further, it is the perception among the industry experts, that there is a lack of confidence in the creative business 10

11 development - often companies are more familiar with more traditional services such as LEAN Management. Also, it is understood to be difficult for the creativity providers to specify the services offered. Some creative companies find it difficult to communicate what their products or services are in such a way that their potential customers in other industries understand its value. 4 Discussion The above analysis of the CIs in Denmark has provided new insight into the characteristics and conditions of the CIs. Properties on what characterizes the CIs have been questioned and new knowledge has been generated on the market for creative services. The analysis presents information on the market for creative services and the need for business development in the CIs. But the analysis also provides two new questions: 1. How can the recognized needs for business development in the CIs in practice be translated into offers that generate growth in the CIs? 2. How can the acknowledged potentials of creative services for other industries in practice be translated into business development and growth in the CIs and other industries? The below section engages with potential answers to these questions. 4.1 Growth in the CIs In order for the CIs to act as a more significant growth engine for Denmark, it would be useful to abandon the widespread understanding of creatives as actors without commercial motivation. Instead, increased focus can be placed on the very large group of business-minded creative companies that offer a high growth potential in Denmark. Also, existing and possibly new business support offers could, and should perhaps, be developed to guide the creative companies toward a growth trajectory. The analysis reveals that there is a special need for attention to the areas of finance, marketing and strategy development, where creative companies lack competences. Actions taken could consider both common and specialized sector-specific services for the CIs. Further, although the CIs are 11

12 diverse in terms of products and services, value chains, customer groups etc., the analysis shows that many are facing the same challenges in relation to business development and growth. The visibility of the growth-oriented support offers that already exist for creative companies in Denmark may be increased and, at the same time, those who advise companies to see the creative business potentials could be further qualified. 4.2 Cooperation between CIs and other businesses In order to realize the spillover effect between creative skills and the wider business community in terms of innovation and differentiation etc., initiatives could firstly be launched to provide creative businesses with a better understanding of the business community. Secondly, the wider business community could be provided with a better understanding of the growth-related potentials in working with creative businesses. Also it is important to continue the work to make visible the innovation and growth related benefits of the creatives. The services of the CIs could be integrated into existing business support offers so that companies could receive advice from designers, musicians, actors, developers, etc. 5 Conclusions In comparing CI-companies with other industries, the analysis shows that the CIs exhibit the same degree of growth ambitions as companies in other industries. Also, companies in the CIs are more internationally oriented than businesses in other industries; several creative companies have ambitions of internationalization and export. Intellectual property rights are more often the mainstay of the business in the creative industries than in business in general. Further, the analysis reveals that Danish companies in general find it challenging to raise finances for growth and development, yet the challenge is even greater in the creative industries. Despite the often long-term commercial planning horizon of businesses in the CIs, companies in the creative industries still face major challenges with regards to strategy and business development. 12

13 The analysis shows that there is a demand for business support to the CIs. However, the actual use of business support is very low. CI companies primarily demand: Coaching on business strategy (50%) Finance for project development (48%) Marketing and customer understanding (44%) The figures in the parentheses indicate the percentage of CI-companies who perceives the specific support services as relevant for commercial business development. The actual use varies between 1% and 3%. These numbers lead to the conclusion that there is a need for either a new type of business support especially for the creative industries or an improvement of the existing offers so that they are better tailored to the need of companies in the CIs. Further, in analysing the spillover effects, there is a large demand for creative services and competencies in other industries. The challenge is that there is a discrepancy between the perceived potential and the actual use of creative competencies. The creative services most demanded are: Differentiation from competitors (48%) Development and innovation (43%) Sales training (36%) The actual use of creative services varies between 4% and 6%. These numbers bring us to the conclusion that there could be greater visibility of the creative businesses that offer the above services in Denmark and that cooperation between the creative industries and other industries could be further supported. During the last decade, the CIs have been subject to increased political focus within many countries, as they are seen as a driver for social, cultural and economic growth. Therefore, an international focus on the possibilities and barriers for CI companies has arisen at both national and EU levels. Hence, further inspiration for a Danish model for the support and development of the CIs 13

14 can be gathered in recently released reports and initiatives seeking to promote the CIs 1. Likewise, the results of this report, including its analytical frame and methods of analysis, can be relevant in an international CI policy context as they provide a relevant perspective on how to develop knowledge on the needs of CIcompanies in a specific country. Acknowledgements We are grateful to Andreas Linnet Jessen, Andreas Kromphardt Carlsen, Søren Würtz, Margit Frøjk Lind and Dan Hvidtfeldt Larsen at CKO - Center for Culture and Experience Economy, who played a key role in the development of this study. We would also like to thank the research institute Epinion for the comprehensive collection of data. References Bilton, Chris (2007): Management and Creativity: From Creative Industries to Creative Management, Blackwell Publishing Caves, Richard E. (2000): Creative Industries Contracts Between Art and Commerce, Cambridge MA: Harvard University Press CKO (2011a): Behovsanalyse: Kreative erhverv I Danmark 2011 Del I, CKO Center for Culture and Experience Economy CKO (2011b): Behovsanalyse: Kreative erhverv I Danmark 2011 Del II, CKO Center for Culture and Experience Economy CKO and EBST (2011): Vækst via oplevelser, Erhvervsstyrelsen and CKO - Center for Kultur og Oplevelsesøkonomi Demos (2011): Risky Business The lazy assumption that the creative industries are inherently risky is harming Britain s path to growth, Demos EC (2010a): European Competitiveness Report, European Commission, Brussels, See e.g. ECIA European Creative Industries Allicance ( and KreaNord ( 14

15 EC (2010b): The Entrepreneurial Dimension of the Cultural and Creative Industries (European commission DG Culture 2010) and EC (2010c): European Competitiveness Report 2010, (European commission, DG Enterprise and Industry 2010) Eikhof, Doris R. and Haunschild, Axel (2006): Lifestyle Meets Market: Bohemian Entrepreneurs in Creative Industries, Creativity and Innovation Management, 15(3), pp FORA (2011): Det kreative København, The municipality of Copenhagen, 2011 KEA (2003): The Economy of Culture in Europe, KEA, European Commission