Long gone are the days when customers only cared about price and companies only cared about profit. Modern consumers are well informed and more demanding, while companies face increasing scrutiny from shareholders and other stakeholders.
Added to this is the tightening arm of regulation.
The result – against a backdrop of increasing globalisation – is that companies are having to rethink their business strategies.
As globalisation increases, so too does the necessity for creativity.
For companies wanting to attain global or even domestic success, or just keep their head above water, creativity is not a matter to be dealt with lightly.
But whether businesses are dealing with the issue well enough is another question.
As part of CIMA’s global business management week, the management accountants’ body has commissioned research into the role of creativity in business success. The resulting report is called Harnessing Creativity to Improve the Bottom Line.
Professor Amin Rajan, its author and also chief executive at the Centre for Research in Employment and Technology in Europe, unveils what he describes as a creativity-predictability paradox.
What he means by this is that, although standards have improved due to the increasing demands of shareholders, regulators and customers, many companies’ internal processes have become so rigid that there is little space or time for creativity.
‘These factors can stifle the very creativity that can provide breakthrough ideas or innovative ways of working,’ Bruce Epsley, CIMA president, states in the report’s foreword.
And it is in the highly-regulated developed world where creativity has been increasingly pushed into the wilderness.
More organisations in the UK than anywhere else feel that creativity is not important in its own right, irrespective of whether it generates bottom-line benefits, the findings reveal. Less than 50% of UK organisations believe creativity to be important in its own right.
In contrast, more than 70% of organisations in Asia Pacific, the Middle East and Africa view creativity as a long-term investment. However, the worry is that these regions will follow the UK as they become more regulated.
Rajan splits obstacles to creativity into two categories: cultural, those that are embedded in the psyche of the organisation, and structural, those that stem from internal work process.
In the UK, the main cultural obstacles to encouraging and measuring creativity include a lack of a can-do mindset – ‘we tried it years ago and it didn’t work’; the tribalism syndrome – ‘that’s the way we do things around here’; and risk aversion – ‘we’ll think about that at a later date’.
The main structural obstacles have traditionally been pressures on managers to deliver quick results, employees not having enough time or space, and a lack of a coherent vision on creativity.
Rajan lists some of the key business values adopted in the UK to harness creativity as companies that treat change as an opportunity, create a sense of urgency, seek new ideas and have clear business goals.
These values may appear logical, but common sense often slips off the scales when faced with tougher regulation and rigid internal processes.
This is where the accountant’s role in harnessing creativity is crucial insofar as developing ways of being able to measure its benefits in financial terms and in encouraging it within the workplace.
CIMA vice-president Claire Ighodaro understands the accountant’s problem.
Not traditionally associated with creativity, accountants have increasingly become the focal point within companies to encourage employees’ creativity and prove the benefits to their companies.
Ighodaro, also vice-president of finance at BT Open World, explains that BT’s ideas scheme last year saved the company #80m purely from internally-generated ideas.
‘A lot of creativity isn’t about massive investment. It’s about thinking more freely. We encourage employees to approach a finance colleague or use the intranet if they have any new ideas.’
And ideas can vary from the technical to the unconventional, depending on the issue at stake. Last year BT was suffering from chronic rabbit invasion in one of its high-security compounds.
Unfortunately for the rabbits, the way out was not as easy as the way in. And as the rabbit population more than quadrupled in a few weeks, urgent problems began to arise, such as alarms being set off and cables being chewed.
Fortunately, one employee came up with the novel idea of laying ceramic pipes under the perimeter fences and thus providing a humane and cheap way of releasing the rabbits. The employee was warmly rewarded.
To motivate staff to fight through the red tape to come up with solutions, products or services, companies must offer incentives. The research concludes that the most common incentives are a company’s brand that, if successful, makes people feel they are part of the winning team, providing the autonomy and space within a job and rewards.
CIMA’s CEO Charles Tilley says: ‘Companies have to create an environment in which employees have the time and space to be creative while they carry on their day-to-day operations’
Perhaps some good can come out of the imminent global slowdown. It is time accountants and company directors started looking more intently at maximising their existing assets and not just eking out short-term strategies.
As the adage goes, necessity is the mother of all invention.
We just don’t put as much emphasis on fun in Europe
Cultural differences between the developing world and industrialised countries influence the way companies view creativity and their approaches to harnessing it.
Although there are some similarities that reach across cultural barriers in the way companies promote creativity – giving employees autonomy and space, and building reward systems – the CIMA study, Harnessing Creativity to Improve the Bottom Line, shows there are differences in approach.
The report’s author, Professor Amin Rajan, found that the stage of development of the region coupled with the business cultures in its countries were at the heart of the issue.
He says: ‘The way to look at it is that countries that are more economically advanced have more regulation, shareholder pressures, and more demanding consumers, so they have more rigid work processes, which stifle creativity.
The other regions have this freedom to be creative because they have a long way to go to catch up. The further you are from economic development, the more freedom you have to be creative.’
Rajan says that business cultures account for a lot of differences in approaches to encouraging employees to be creative. UK business culture is shareholder-based and, therefore, more geared for quick, short-term results. There is also more regulation, and both of these demands require more structured work-processes that stifle creativity.
Also, consumers in the UK and Europe are more demanding. Rajan comments: ‘Customers have certain standards, you then have to have rigid work-processes, and that can stifle creativity as well.’
On the other hand, in Asia Pacific and Latin America, many companies are family-owned and, therefore, fewer demands and less regulation weigh down their creativity.
‘We find that there’s a more “can-do” attitude in Asia Pacific than in Europe,’ says Rajan, ‘so in Asia Pacific people tend to be more entrepreneurial. Hong Kong is a hotbed of entrepreneurialism, same with Southeast Asia.’
He adds: ‘Latin culture has more emphasis on fun, whereas in European culture we don’t put any emphasis on fun – people are just expected to get on with it.’ This influences the way Latin American businesses incorporate value of creativity into their companies; they make it ‘the fun part’ of the job.
The more pragmatic Middle East and African business cultures require some kind of fallback, so they have created special budgets to provided risk money for evaluating new ideas.
But there are drawbacks to this flexibility, according to Rajan. ‘In the new world there seems to be a very prescriptive leadership style and that works against creativity.’ The US seems to be an exception. It has a very creative business culture but is economically developed. He explains: ‘Americans put a lot of overt emphasis on creativity. Their directors recognise this problem and do something about it.’
Giving tips on how to promote creativity in the workplace, CIMA’s chief executive officer Charles Tilley says that success stories should be given high visibility, reward systems should be built for creative employees, and that they should implement ways to bring new ideas to market quickly.
The study also outlines steps companies could take to enhancing creativity.
Firstly, they ought to recognise that ‘consumerism is a major movement in its own right. It requires innovations in products, services, processes and structures’, and that the processes must not only add, but innovate.
Although it may be difficult for everyone to be creative, most people can be to some extent. The key to encouraging staff creativity is to understand what drives it and what inhibits it, both at the corporate and individual levels.
Among other tips, the study advises companies to seek new business ideas constantly, orienting every employee towards markets and consumers at the same time, and to work closely with suppliers and customers.
Leaders within the company are very important. Directors should ensure that leaders at all levels in the organisation understand the importance of creativity, encourage it, overcome barriers and convert ideas into profit, the study advises.
Tilley says: ‘The issue for accountancy is to present and quantify in a way that is as clear as possible. Accountants have to look at what the company looks like and check the track record.’
The CEO adds that they have to grasp and maximise creativity effectively and then find ways of showing the added value of a company’s creativity in the balance sheet.
More on this at www.globalbusinessmanagementweek.com
For a free technical briefing on intellectual capital, go to www.cimaglobal.com/downloads/Technical_Briefing.pdf
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