E-Magazine
Katherine Ng
The below article is taken from the outcomes of an ideas forum hosted by ACCA as part of ESRC's Festival of Social Science, focusing on communication channels for creative businesses and the role of the accountant. The forum was chaired by Sir George Cox and drew informed contributions from: Sir Chris Powell, chair of NESTA; Tony Silver, media partner, Silver Levene; Dr Joan Burks, CEO of the Centre for Creative Business, London Business School; Helen Brand, CEO, ACCA; and Dr David Guy, (former) Head of Knowledge Transfer, ESRC
How potential can be increased by collaboration was explained by Dr David Guy as: ‘in simple mathematics, I believe that networking collaboration is something like 1+ 1 = 7.5’. Engaging and networking with a variety of sectors and professions is informative and may bring about shared knowledge and new ways of working, yet it can also be problematic; it may be difficult to bring together people from different backgrounds as those within similar circles have a tendency to mix with each other – and niche industries are just that: niche.
Effective networking events need a focused issue and purpose to be successful and to avoid being perceived by participants as purely a business development opportunity for the organisers. Alistair Mitchell, the CEO of the ICT SME Huddle, laid out the key issues for purposeful networking as: being selective, invitation-only for control, and focused on a problem, a need rather than an industry so as to build networking across sectors and involve participants from different backgrounds.
Helen Brand CEO, ACCA underlined the importance of understanding creative businesses:
Understanding the ways in which these businesses create value is crucially important. This is a particular challenge given the sheer diversity of creative industries. In these times of economic uncertainty, helping to strengthen planning and training in these businesses, many of which already lead the way in terms of competitiveness, innovation and entrepreneurship, could be a key factor in helping the UK power its way out of the current downturn.
As a starting point, understanding creative businesses will involve appreciating the ingenuity of the sector and will enable meaningful support to be provided by governments, and by public sector and private sector bodies. Dr Joan Burks, CEO of the Centre for Creative Business, London Business School emphasised that the creative industries continue to be dominated by small businesses, with many sole traders and firms employing fewer than 10 people, and that many of these businesses do not survive beyond two years. Sir Chris Powell, chair of NESTA was of the opinion that creative businesses remain small owing to:
The different reasons why most creative businesses start, and I don’t think those creative businesses start from having a great desire for profit or a wish to conquer the world. Normally, in my experience, it’s because they want to do their own thing. They are normally a breakaway from the larger organisation. They want to practise their craft in their own way and get peer recognition for doing that.
Moreover, he went on to say that the owners of many creative SMEs do not have the time to create business plans because they are busy running their business. Many owner-managers take an ‘organic’ approach to the growth of their business. DCMS have reported that 39% of creative industry firms do not have a business plan, 64% do not have a training plan, while 70% do not have a training budget, all of which can limit their business success.
Numerous research studies have shown that accountants provide the most frequent source of business advice for SMEs. SME owners often do not have the time or resources to address the administrative side of running a business; therefore this advice is not just restricted to compliance work but extends to advice, for example, on employment law and health and safety legislation. David Brady of Silver Levene stressed that it is important for service providers, such as accountants and lawyers, to understand not only the creative sector and its niche industries, but also the links between them, to enable owners to develop the business.
Accountants need to be attuned to creative industries, to understand how these businesses operate, both internally and with other creative industries, so as to communicate business advice in relevant ways, otherwise mistrust could develop owing to a lack of understanding. Communication is a key skill and, if advice is pitched appropriately, it will encourage greater confidence and trust.
Sir Chris Powell emphasised that effective policies and support for creative industries need to be adapted to the sector, in acknowledgement of its differences. For creative industries, structural and technological changes present opportunities and threats, such as distribution issues in the music and film industries or making income from digital content of newspapers.
Support, whether through appropriate policies or advice, or providing access to finance, must be given with an understanding of the issues that creative industries face. The public sector often takes ‘catch all’ approaches to investment in creative industries that do not take account of the opportunities and barriers faced by creative businesses that occupy different parts of a complex value chain. Fleming (2007) recommends that initiatives that ‘build partnerships with intermediaries to connect specific expertise to specific issues flexibly, and introduce free-flowing networks of intermediaries interfacing with investees and investors, will have a far greater impact’.
The UK government currently spends £4.3 billion each year supporting SMEs, in addition to £3.6 billion-worth of tax breaks, so it is critical that this investment is directed to those businesses that are making the most significant contribution to the UK economy.
Creative industries are perceived as carrying a great deal of risk, owing in part to volatility; large resource commitments; and uncertainties in demand, technological or regulatory change. Shelagh Wright from Demos and Laura Gander-Howe of the Arts Council England suggested that the government could play a role in supporting and stimulating demand-side growth of the sector with public procurement, and referred to the New Deal of the 1930s, whereby Roosevelt’s government launched a series of initiatives to kick-start the US economy during the Great Depression.
Public procurement is risk averse, however, and this is not congruous with innovative solutions or the characteristics of the sector. Investment and support in the creative industries need to complement existing, effective initiatives and join them together so that different types of creative business face a coherent ‘landscape’; the public sector all too often adopts a piecemeal approach that lacks clarity and partnership in both focus and form.
A long-term perspective is necessary for understanding how creative businesses create value. Alastair Mitchell supported this opinion anecdotally:
In the early stages of a business, government bodies and investors expect almost immediate profits, whereas they should be focusing on the long term. This is especially true for the creative industries. The people who built Google had no idea what they’d built. It was only when someone gave them a million dollars and said ‘I think this could be very, very big’ that they actually went and did it.
Governments need to consider long-term support, not just what might have short-term impact or be useful in a financial crisis. Graham Hitchen advocated that the government should think about what business models will look like in 10 to 20 years’ time and the kind of interventions and framework that could be developed to support them. Sir George Cox also took a long-term view on the issue of international competitiveness by questioning what will happen when developing countries move from supplying the world with cheap labour to investing in hi-tech industries, research and highly skilled labour forces.
A review group is considering how to sustain investment in UK content in the digital age, stimulate investment in next-generation broadband, create sustainable local media and ensure that there is a skilled workforce.
In light of shrinking public finance, the question has been raised of how the government will identify what works for creative industries, what does not work and what will have an effect. It is necessary to ask the right questions and to be able to provide knowledgeable, innovative solutions.
Dr Joan Burks recommended a joined-up approach for creative industries, government, education and business.
Joined-up thinking is still needed at all levels across government departments regionally and nationally to ensure that policy initiatives have a focused direction. We need to provide, through a consolidated approach, access to information regarding the support services available at all levels, through support agencies, HE, FE, and the public and private provision and we need to keep a consistent focus on business growth and sustainability.
Companies are broadly satisfied with the quality of the graduates they recruit, although there are some mismatches between their needs and the courses offered by some universities. University media studies degrees need to equip graduates with the necessary practical or specialist skills to enter the film, music or television industries. The Sector Skills Councils (SSCs) give employers the opportunity to work together to identify their needs for particular skills, but employers may give up on the process unless the SSCs can have a more direct influence on university
Dr Joan Burks reported that the Lambert Review recommended that education initiatives should not be compartmentalised but should work in tandem with creative expertise, business skills and universities to support new creative businesses. Nick Wilson from Kingston University agreed on the importance of avoiding compartmentalising and drawing distinctions between creatives and business people. It is crucial to be inclusive and engage people from outside creative industries; the focus should be on valuing skills.
The forum participants were in agreement that there needs to be a cultural shift; creatives and business people should have opportunities to collaborate early on. Alastair Mitchell commented on how small creative businesses can become large creative businesses: ‘when you put together someone who’s got a great idea with someone who can see that what they’ve built is 10 times better than the person who built it even thought it was going to be, that’s when you get a great business being formed’. Business knowledge should be fostered among school-age children, and they should also be encouraged to consider how to monetise their creative products and become business-oriented.
Understanding what is needed
‘Creative industries’ is a broad term, and one that is changing as the sector develops. SMEs in the creative sector need business support that is not just about facts and figures, but includes well-communicated advice that is tailored to their sector and the linkages within it. Accountants are in a unique position to engage with and connect niche industries, to identify value and to increase impact through developing information channels and collaboration. Governments need to understand how creative industries operate so that they can create informed policies with a clear focus, giving joined-up support; this, coupled with encouraging and nurturing individuals’ creativity from an early age, will help to equip entrepreneurial businesses now and for the future.
Katherine Ng, Research and Knowledge Transfer Manager, ACCA