Strategic Performance Management and Creative Industry

By André de Waal, Karima Kourtit and Peter Nijkamp

Abstract: The Creative Industry (CI), in recent years, has drawn much attention from the side of both scientists and policy-makers in the area of urban planning and industrial policy. The question is however, whether the assumed innovative and successful potential offered by firms in the CI is justified on economic and managerial grounds. The present article aims to provide a critical review of the current creativeness fashion by addressing, in particular, the Critical Success Factors and the high performance conditions of firms in this sector. On the basis of general principles from Strategic Performance Management of business firms, a systematic analysis for assessing the performance of creative firms is proposed. Specific attention is paid to the lessons from the Strategic Performance Management literature for measuring the successes (and failures) of creative firms in modern innovative industries. This article aims to offer the basis for a systematic framework for evaluating the competitive performance of firms in the CI.

Keywords: Creative Industries; CI; Strategic Performance Management; SPM.

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1 Creativity as a new departure for scientific research

The past decade has witnessed an avalanche of interest in research and policy on creativity, predominantly as a result of the work of Florida (2002, 2003, 2004) on Creative Industries (CI) and creative classes in creative cities. Creativity has become a strategic signpost for a new orientation regarding economic, technological and social innovation in a modern society. Research on creative behaviour is clearly on the rise. It has prompted new research and policy attention for the institutional, behavioural and attitudinal dimensions of innovation in a dynamic and competitive space-economy. It is noteworthy however, that creativity research already has a long history grounded in behavioural research in social sciences. Already in 1950, Guilford (1950) focussed attention on the driving forces of creative productiveness in his presidential address to the American Psychological Association. In particular, he addressed the impact of education and training on creative routines of people. In subsequent decades, the focus of social science research has mainly been on the development of statistical measurement techniques for creative abilities, largely from the perspective of experimential psychology. Groundbreaking quantitative research was undertaken in particular by Torrance (1963, 1966, 1972, 1981), who has offered the foundation for the solid statistical research tradition on measuring creativity nowadays known as the Torrance Test of Creative Thinking method (see for a review inter alia Fasko, 2001). Modern creativity research is mainly inspired by two sources: innovation research and urban incubation (or urban seedbed) research. Innovation research has become a very topical research issue that is originating from global and local competitiveness challenges, urban industrial dynamics, economic-technological transformations and adaptive management capacity (see inter alia Porter, 1990; Groot, Nijkamp and Stough, 2004; Nijkamp, 2004; Poot, 2004). Incubation research refers to the spatial – often urban-conditions for economic growth and development, such as urban entrepreneurial climate, local ICT facilities, R&D infrastructure and Marshallian districts, etc. (see e.g. Markusen, 1996; Scott, 2000).

In general, creativity is a multidimensional composite concept that comprises three elements: technological creativity (innovation), economic creativity (entrepreneurship) and cultural (or artistic) creativity (see Florida, 2003). All these elements constitute important conditions for local development in global competitive economic system. Consequently, the locational behaviour of creative people and entrepreneurs is critical for the emergence of local wealth. Creativity research in the context of innovation and entrepreneurship issues has mainly focussed on two issues:

1. Which branches of the economy belong to the creative sector?
2. What is the economic significance of firms belonging to the CI?

The first issue has induced many studies on definitional questions. In general, there is a widely shared belief that the creative sector has two components:

1. Specific industrial branches such as the arts sector, the media and communication sector and the cultural sector.
2. Specific parts of all other economic sectors, with the common feature that they specialise in the creation of new ideas, concepts and inventions (e.g. dedicated consultancy services, think tanks of corporate organisations).

The second issue has led to many empirical and case studies in which for a given city or region the economic importance of the creative sector is assessed, often making use of ad hoc statistical data and methods. Far less attention has been given to the success conditions that shape a creative climate in a city or region. Research on creativity conditions has often uncritically resorted to general findings from the innovation literature, but in many cases specificity on local and entrepreneurial drivers was lacking. This is regrettable, as recent changes in the business environment has dramatically changed the scene of entrepreneurship and local or regional development (Bagranoff, Eighme and Kahl, 2002). Factors such as increased competition, changes in the regulatory environment, the impact of technology, growing globalisation or the quality of the organisation became more important, while shifts in customer behaviour and expectations have created a turbulent business environment in which the ability to continuously adapt to change is critical for success (Hoopes and Hale, 1999). There is indeed a need for a profound analysis of the success conditions of creative firms. In order to come to grips with such changing circumstances, innovative business activities and operational performance challenges as well as to develop systematic strategic tools and approaches that build and measure the CI-firm’s capabilities to continuously compete and renew themselves, the need for an efficient Strategic Performance Management (SPM) and Performance Measurement System (PMS) has increased over the past decade. Strategic Performance Management may be defined as:

Strategic Performance Management in practice

To assess in practice Strategic Performance Management, an operational PMS has to be designed. The most popular PMS in practice is the Balanced Scorecard (BSC) method, developed by Kaplan and Norton (1992; 1996a,b; 2001a,b). The BSC is a strategic management system that uses Critical Success Factors (CSFs) and Key Performance Indicators (KPIs) for translating an organisation’s mission and strategy into a balanced and comprehensive set of integrated performance measures (Brignall, 2002; Ho and Chan, 2002). The performance measures should provide a complete picture of a CI-firm’s progress towards the achievement of its mission and goals (Ho and McKay, 2002). The BSC contains a varied, multidimentional set of performance measures, which is essentially a combination of financial and nonfinancial measures organised according to four distinct perspectives, viz., financial performance, customer relations, internal business processes, and the organisation’s learning and growth activities (Kaplan and Norton 1992; Lipe and Salterio, 2000). Basnett (2001) has argued that for each of these BSC perspectives the strategic objectives, measures, targets and initiatives need to be identified and agreed upon…

Read the full paper ‘Strategic Performance Management and Creative Industry’ published in Int. J. Foresight and Innovation Policy, Vol. 5, Nos. 1/2/3, 2009 in PDF.