For and Against

Success depends on creativity.

It’s a paradox. The adoption of management techniques such as Total Quality Management help make companies better at what they do – except they do not necessarily create competitive advantage. More reason, therefore, to ensure creativity flourishes in organisations.

With recession fears, cutting costs appears to be a top priority. This does not mean automatically that companies need to be pursuing a strategy based on cost leadership. Nor is it an excuse for arguing that creativity and innovation are unimportant.

In the words of Michael Porter, an expert on competitive strategy, staying ahead of your competition depends on being different, and the only way to take an advantage is by innovation and upgrading within a consistent strategic direction. The importance of creativity and creative individuals is often underplayed because of the perception of their link only to technological development and science.

Creativity and inventing new products or product breakthroughs is most commonly associated with innovation capability. Hence emerging industries are characterised by intense product innovation. This is misleading.

Creativity can be manifested through product, process or organisational innovations – any of which could be the key avenues to achieve differentiation and hence sustained advantage. Being different involves not only harnessing creativity in those employees in the frontline. It should also involve those who are not directly customer facing but on whom delivering enhanced customer value is also dependent.

Questioning whether harnessing creativity is important is futile. Organisations need to focus on sustaining creativity so as to continually redefine the ways that they are differentiated in the marketplace.

The key to generating good sources of value for customers is unlocking and harnessing the creative potential in organisations.

Creativity is not an excuse to ignore the management of risks. This is a crucial role for finance professionals, as is reporting the value in organisations and their potential for success, which is not fully reflected in the balance sheet. Above all, finance professionals need to understand which managerial and measurement practices foster creativity and which kill it, and how creativity is needed for sustained success.

– Stathis Gould is head of technical issues at CIMA

REALITY IS THE NAME OF THE GAME

CIMA, the management accountants’ body, is to be congratulated on organising its 2001 Global Business Management Week. Sadly the research which came out of the initiative – and the conclusions drawn – did not meet the ambition of the week.

According to the research, shareholder pressure and cultural attitudes are hampering UK companies’ efforts to be creative. Companies’ creativity – says the research – is hampered by the need to generate high returns for shareholders in the short term.

Perhaps a few people with short-term memories need reminding that the turn of the millennium saw a whole host of businesses allowed to be creative with millions of pounds worth of funds from venture capitalists and others.

We were all seduced by the vision held out by the e-entrepreneurs. Now after the collapse of the dotcom boom and the billions of dollars poured down some virtual drain – which has contributed in part to the present lack of business confidence – we are being told what we need now is to allow businesses to be more creative.

If the cry for more creativity was coming from the marketing or PR professionals then perhaps it could be forgiven. But coming from such an eminent body as CIMA it should send a shiver down our spines.

Creativity is an important factor in the commercial success. But creativity does not work in isolation. Creativity only works when it is harnessed with the other business disciplines – such as good financial management – and not left to trample over all other controls as we saw in some of the now defunct e-businesses.

Facing an economic downturn, we don’t want irresponsible spending on ill-thought out business ventures being cheered on by the finance departments.

Instead what we need is the finance department to ensure the financial management of the company is in good shape and that the necessary risks businesses have to take to turn a profit are as well managed and controlled as they can be in difficult economic times.

Businesses – especially quoted companies – are there to make returns for their shareholders. Shareholders don’t want to stifle the entrepreneurial spirit. What they do want to stop is the idea that business people can take big chunks out other people’s pension funds chasing some harebrained scheme which didn’t deserve to get off the ground.

Railing against investors stifling creativity is just a moan against having to deal with business reality.

– Peter Williams is a chartered accountant and freelance journalist.