Bachelor thesis summary
‘Formation of an Export-Oriented Cooperative business model in the Creative Industry of the City of Omsk Based on the Experience of the EU Countries’
The notion that creative industries make a minimum contribution to world economy is still widely spread today. However, the branches demonstrated the highest resistance to crises and run a very small risk of getting work places replaced by robots. Modern economy is based on non-material ideas, which are the specialization of creative industries. Such ideas are developed at their best under diverse points of view and competences. The structures that maximize that effect are referred to as cooperative models, and the work focuses on the research of existing ones and development of a new one.
Business models in creative industries, potentially possible for realization in Omsk City, constitute the object of the work. The subject of the work was set as an export-oriented cooperative business model in creative industry of Omsk City. The goal of the work consisted of choosing and justifying an export-oriented cooperative business model for realization in Omsk City, based on the analysis of foreign experience.
Following tasks were completed:
Defining the place of creative economy in the system of economic sciences; Analyzing the definition and structure of creative industries; Examining the business models existing in the creative industry of the EU; Identifying the main advantages of cooperative business models in creative industries; Considering the tendencies in the development of cooperative models in the EU; Drawing conclusions on problems and perspectives of developing cooperative business models in Germany; Reviewing the peculiarities of business planning in creative industry; Analyzing the organizational structure and activity of Omsk Art Residence – the base for the new business model; Composing the business plan of the chosen model including Commercial idea, Product strategy, Marketing plan, Production and Organization strategy and Financial plan.
The first chapter was dedicated to the definition of creative economy and the content of its elements. It was concluded that creative industries have their own strong specifics, which makes many postulates of classic economic theory inapplicable. Thus, with creative products being ‘experience goods’, it is hard to estimate the demand in advance. The production in the industry can hardly be described with a classical production function with replaceable expenses: instead, the multiplicative function should be used, since the output only happens with all specific factors being present. The problem of ‘symmetrical lack of information’ during the hiring process makes it hard to estimate the contribution of a creative worker. Also, the prevailing role of self-expression and extensive requirements to professionals belong to the important characteristics of the industry.
The peculiarities result into special business organization forms. Most creative enterprises choose from such forms as Home office or Atelier as individual ones, and Office community, Business incubator, Technology and creative center, Coworking community as cooperative ones.
The business processes are subject to the Theory of creative pockets. Since the limitations on the product are known while the definite result and process aren’t, it was concluded that the main difference of the processes is the necessity of a flexible organization. Proactive supply and strong specifics of operations inside every sub-industry make for a wide diversity of business models. Experts of the industry also point at the conscious division between stable processes in a creative organization and processes, oriented at imagination and free thinking.
As for the business models in creative industry, researchers propose to classify them using the 9-component system of Osterwalder and Pigneur and 4-component system of Baden-Fuller. The classification was complemented by the author of this work, where the 2 variants above were added to the methods of S. Seidel and N. Searle. Also, classifications ‘By the form of business organization’, ‘By the type of cooperation’, ‘By the organization of business processes’ and ‘By territorial coverage’ were proposed.
Then, the advantages and characteristics of cooperative models in creative industry were analyzed. Numerous researchers point at cooperative forms as the most justified organization form for a creative enterprise. The forms maximize the potential of innovative ideas, which constitute the base for competitive advantage today. Considering the theory about the necessity of all production factors being present for a successful output, it is possible to conclude that a model involving cooperation has a higher chance to have all the needed components and competences.
Based on the tightness of cooperation and the grade of result-orientation, a cooperative business model can be based on cooperation, collaboration or network. Today, we also see more businesses form other branches entering a cooperation with creative enterprises. 46,6 % of cooperations in creative industries are done with businesses from other sectors. Firstly, it provides them with unexpected solutions. Secondly, we should also take a look at the role of art today. It shifted from the ‘mirror of truth’ to a means of social activism. Thus, by entering a cooperation with creative enterprises, businesses prove to support the actual issues of today and that way are up to date with their audience. Businesses actively use art-based approaches to problem solving, adapt their practices to the concepts of Corporate Cultural Responsibility and Organizational Aesthetics.
Cooperation often occurs not only for the sake of mutual profit, but also with the goal of ‘closing the loop’ in sustainable projects. It may occur in the form of a network, based on cloud technologies.
In the second chapter, the functioning and development of cooperative models in the creative economy of the EU was researched. Starting with the current state of the creative economy of the EU in general, it was concluded that the landscape of today is characterized by changes in intellectual property laws, growth of state support and the acknowledgement of the contribution of creative industry to the economy. The dynamics of the industry were researched on example of Germany – the country having the biggest creative industry in the EU. Based on the calculations executed in the work, it was concluded that from 2011 onwards, we see a rising trend in the share of enterprises, share of employees and share of the creative economy in
the whole economy of the country. Judging on the calculated base and continuous growth rates, the industry has had a stable growth in the 2011-2016 period. The largest growth rate to the level of 2011 was marked by the industry’s gross product, which is a reason to assume that the resources in the industry are distributed equally.
Since the key factor of successful competition today is the ability to create social experiences, we see the role of networks evolving today. Small businesses stay the most important source of innovation, since they are more likely to take risks. Also, participative technologies blur the borders between those who create art and those who consume it.
The main changes occurring inside cooperative business models in creative industry today mostly involve the end of the value chain: the pricing mechanisms and the value proposition. For the product model (classification of Baden-Fuller), new methods of production and distribution are used, which change the value proposition towards a customized and highly adjustable content. Introducing pay-as-you go and freemium pricing mechanisms together with flexible media technologies makes it possible to rapidly react to changes in demand. It reduces the menu costs and makes room for experiment. In such circumstances, we see the content being a marketing instrument itself. For the decisions model, we see new forms of services emerging, like the customized VOD and SVOD technologies enabling a tailored experience.
Further, the problems and perspectives of developing cooperative business models in creative economy were considered through the example of Germany. Based on the key challenges for the enterprises, recommendations were formulated.
One of the key challenges creative businesses struggle with today is the fact that they carry the expenses for digitalization themselves. They face a neglecting view from the side of other businesses, that don’t realize the potential of a strong synergy effect. However, today we can declare a definite success of some state-supported projects, aimed at linking creative and non-creative enterprises together (for example, the Creative Credits realized in the UK). There is a lack of industry specific information considering appropriate sources of capital and business planning. Most enterprises are dependent on their ‘stars’ products and individual talent. Also, intangible assets have no acknowledged carrying value.
Investments in talents and ideas in creative industries don’t fit in the classical R&D concept, both timewise and content-wise, due to the economical specifics of the industry. It makes the investor relations complicated.
With certain new possibilities arising today, it is possible to formulate perspectives for the cooperative business models of the future. Thus, with the trends for disintermediation and shifts of value creation towards the end of the value chain, the production of goods becomes cheaper. Logical consequences are loosened physical and geographical limitations. That way, it is possible to conclude that while choosing partners for cooperation, the ability to contribute on the end stages of the process should be prioritized over geographic position.
Even if large market players like Google and Amazon are dominating, they lack they own network and knowledge of European culture to cover the EU market. Taking this into account, it can be assumed that more intricated business models enabling a tailored experience, realized by small and flexible businesses, are likely to strengthen their positions.
Considering the trends of the democratization of art and development of creativity of other industries’ workers, cooperative forms involving educational programs (cooperations with museums, specialized workshops) seem to be a logical reaction to the situation.
Specialists of several creative industries point at the fact that today the demand is shifting towards customized and regional products. It enables to assume that creative enterprises taking regionally specified goods in their assortment should stress the fact as the base of their unique sale proposition.