Happiness is not in the mere possession of money; it lies in the joy of achievement, in the thrill of creative effort.—Franklin Delano Roosevelt, Inauguration Day, 1933

Creativity, a quality more traditionally associated with artistic endeavors, has been slow to find its acknowledged place in the business world. Yet any entrepreneur can attest to the creative power required to build an organization where none existed before. "Look, I made a hat…/Where there never was a hat," sings Georges Seurat in the musical Sunday in the Park with George, a fictionalized account of the French pointillist painter, and it's easy to imagine Bill Gates or Oprah Winfrey humming the same tune.

But if creativity is integral to business, and to entrepreneurship in particular, how exactly does it occur? Where does this unicorn-like creature come from, and what exotic conditions will help it thrive in captivity?

Three professors in Harvard Business School's Entrepreneurial Management unit who focus on the study of creativity recognize the romantic allure of believing it's a rare quality bestowed on a chosen few, but all agree that notion has been debunked long ago, and rightfully so.

"Creativity does have a reputation for being magical," says HBS professor Teresa Amabile. "One myth is that it's associated with the particular personality or genius of a person—and in fact, creativity does depend to some extent on the intelligence, expertise, talent, and experience of an individual. Of course it does. But it also depends on creative thinking as a skill that involves qualities such as the propensity to take risks and to turn a problem on its head to get a new perspective. That can be learned."

"Our research suggests that most managers are not in tune with the inner work lives of their employees."

—Teresa Amabile

For example, in her course Managing for Creativity, Amabile divides students into brainstorming groups to work on a problem. What they don't know is that the groups have been assembled to create maximum diversity in cultures, disciplines, and backgrounds—the intersection where creativity is most likely to occur, according to The Medici Effect, a book by Frans Johansson (HBS MBA '00) that is used in the course.

Another driver of creativity, motivation, is the locus of Amabile's research. "The desire to do something because you find it deeply satisfying and personally challenging inspires the highest levels of creativity, whether it's in the arts, sciences, or business," she says.

Dear diary

As a way to delve deeper into the link between motivation and creativity, Amabile and her husband, psychologist Steven J. Kramer, conducted a three-year study of 238 professionals from seven companies in the high-tech, consumer products, and chemicals industries. Without revealing the focus of their study, they asked the subjects (all of whom were working on projects requiring creative effort) to fill out a daily electronic diary form that required numerical answers to questions about their work that day, as well as their emotions, motivation, and work environment. They were also asked to describe what they'd done that day and to include a brief description of one event at work that stood out in their minds. (Participants were asked to refrain from discussing the diary content with colleagues.) By the end of the study, Amabile and Kramer had collected nearly 12,000 entries, what she describes as a “wonderful treasure trove of data.”

"We have a window into how concrete events affected knowledge workers' thoughts, perceptions, emotions, and motivations," Amabile says. "We call this 'inner work life,' and we found that it directly influences creativity and other aspects of performance."

Previous laboratory studies have demonstrated the causal relationship between emotion and creativity. Amabile's research in a real-world setting bears this out, with positive emotion tied to higher creativity and negative feelings linked to lower motivation and creativity. (Data for her study are based on diary evidence that a subject actually did creative thinking that day, not on his or her self-evaluation.) The diary findings also showed a positive carry-over effect in creativity and productivity, one day and even two days after a worker reported being in a good mood.

So what can managers and entrepreneurs do to promote a healthy, positive inner work life among employees? A pat on the back or a company Ping-Pong table is always welcome, but what Amabile and Kramer discovered was much simpler: People have their best days and do their best work when they are allowed to make progress.

"Users tend to pick up on needs that folks sitting back in the market research labs don't necessarily see."

—Mary Tripsas

"Big breakthroughs are great, but we found that even incremental progress evokes a powerfully positive inner work life," Amabile notes. "In my Managing for Creativity course, I ask students to consider how they will establish a work environment that will support the creativity and intrinsic motivation of others. Our research suggests that most managers are not in tune with the inner work lives of their employees; nor do they appreciate how pervasive the effects of inner work life can be on performance."

Fostering a positive inner work life, then, can be as easy (or difficult) as this, Amabile concludes: Support employees' progress in their work every day. Set clear and meaningful goals for them; provide direct help, versus hindrance; offer adequate resources and time; respond to successes and failures by drawing on the experience as a learning opportunity, not just a moment to praise or reprimand; and establish a culture where people are treated with respect.

Amabile says that the study of creativity at business schools is a relatively new phenomenon, dating back to the 1980s or so. "It's very new in one sense, yet the presence of creativity in entrepreneurship is as old as entrepreneurship itself. At HBS we define entrepreneurship as the pursuit of opportunity beyond the resources you currently control—so, obviously, creativity is a big factor."

The creative entrepreneur

In her new elective course, Leading Innovative Ventures, HBS professor Mary Tripsas introduces conceptual models to help students launch and creatively manage new businesses, including both stand-alone start-ups and ventures operating within an established organization.

"Whenever a firm introduces a truly novel product, it has repercussions beyond the narrowly defined product space," Tripsas says. "Suppliers, complementary producers, distribution channels, and consumers must often develop new capabilities, beliefs, and behaviors for the product to succeed, creating a challenge for the innovator."

Tripsas has developed a number of cases for the course, including one on the Montague Corporation, a company based in Massachusetts that manufactures high-quality folding bicycles. The case illustrates the difficulties faced by a new company introducing innovation within an established industry.

"Montague's creative insight was to develop a folding bicycle with the look and feel of a traditional bike," Tripsas remarks. "But if you mention a folding bicycle, most people conjure up an image of a small-wheeled, oddly shaped vehicle that they wouldn't categorize as a 'real' bicycle. The challenge is to change the beliefs and behaviors of both consumers and the distribution channels so that Montague folding bicycles have legitimacy."

Harry Montague, an avid cyclist, is an example of the sort of "user-entrepreneur" studied by Tripsas. "As a user, you tend to pick up on needs that folks sitting back in the market research labs don't necessarily see," she says. "Montague wanted a real bicycle that would fold—something to use for serious cycling that was sturdier than available folding models. He designed and built a prototype in his spare time (while fully employed as an architect) and discovered that others wanted to buy one." Montague's son David became interested in commercializing the innovation, and they cofounded the company in 1987. Today, Montague is the world's leading producer of full-sized folding bicycles, and its products have proven durable enough to be air-dropped for use by paratroopers in the U.S. military.

"There's a construction of creativity that involves many other actors."

—Mukti Khaire

Radical innovation that creates entirely new industries is another course focus. In a new case about Linear Air, founded by William Herp (MBA '89), Tripsas explores the emergence of "air taxis," a novel service based on a new class of light, economical jet aircraft that have come on the market recently.

"The economics are such that entrepreneurs believe you can have an on-demand jet service, with fares about equal to a business class ticket," Tripsas explains. "Regulatory, security, and infrastructure issues come into play here, aside from the challenges of figuring out approaches to pricing and helping consumers make sense of what you're offering," she continues. "Coordinating all the pieces and players not only for Linear Air, but for the industry to get off the ground, is an interesting creative challenge for the entrepreneur."

The ability to respond quickly to changing market conditions also demands high levels of creativity, whether the organization in question is a fledgling venture or, in the case of Fujifilm, a company approaching its 75th anniversary. In Fujifilm: A Second Foundation, a case coauthored with HBS associate professor Giovanni Gavetti and Yaichi Aoshima of Hitotsubashi University, Tripsas presents the instructive dilemma faced by Fujifilm as its core film business vanishes in the wake of advances made in digital technology.

"Fuji experienced the same situation that buggy whip manufacturers confronted when cars were invented," she says. "The difference is that there are dozens of additional applications for the technology that Fuji had developed for the analog film market. So instead of focusing only on digital imaging, the obvious substitute for analog photography, Fuji now has the opportunity to branch out into new markets that exploit its specialty chemical expertise. The challenges then are first, to screen and prioritize the multitude of possible new applications, and second, to shift the mindset of an organization that has held the identity of an ‘imaging' company for decades."

The case details how President and CEO Shigetaka Komori implements a restructuring of the company in 2006 that involves letting go 5,000 employees and managing the transition to a more diversified product line based on the company's proprietary technologies. In one instance, Fuji manufactures protective film for flat panel displays from cellulose triacetate, the same material that is coated with chemicals to make analog film. Sales of materials for flat panel displays were ¥140 billion in 2006 (approximately $1.2 billion), with the market expected to double in size by 2009. The company is also expanding into cosmetics and dietary supplements. As it happens, the technology that prevents film from fading is also effective in skin care. While the success of this particular business is still untested, it's clear that company management is on a transformative course that does not center entirely on the imaging business.

To implement Komori's strategy, Fuji established a centralized R&D lab, increased its mergers and acquisitions of companies that had synergies with the company's businesses, and formed a small venture capital fund for exploratory investments. Komori also initiated a reorganization that created six new divisions within the company while simultaneously streamlining management and infrastructure at the corporate level. Finally, he held numerous meetings and discussions with small groups of middle managers about Fuji's future direction, and asked each of the company's top 1,000 employees to write a two-page memo identifying the opportunities and challenges for Fuji's growth.

"As a manager, you need to create a culture that will convince people to kick off the filters they're used to applying and to think more broadly," Tripsas remarks. "Ironically, while the emphasis in these types of transitions is frequently on developing the capabilities needed to attack new markets, it is the shift in the mindset of employees that can prove most difficult."

It takes an innovative village

Creativity is doubtless a significant force in the Indian fashion business, the focus of research by HBS professor Mukti Khaire.

While the fashion industry is well-established in other areas of the world, in India it has only just emerged over the past twenty years. In her study, which draws on interviews with over forty designers and others associated with the industry, as well as analysis of Indian magazine articles, Khaire finds a coevolution of social, economic, and cultural entities that become essential to the economic success of fashion designers in the marketplace. (Her research on the market for modern and contemporary fine art in India also bears out this phenomenon.)

"One of the most well-accepted axioms of industry emergence is that pioneer-entrepreneurs face a double uncertainty—not just the uncertainty surrounding the survival of their own firm, but that of the industry itself. The implications of this are that pioneer-entrepreneurs have to adopt specific strategies to overcome the uncertainty with which they are perceived," she says.

Khaire's findings jibed with this perspective. While the fashion business was not an unknown concept, it was new to India, and early Indian high-end designers sought legitimacy and acceptance by avoiding avant-garde styles, instead creating luxurious, opulent fabrics that differentiated their work from the tailor-made clothing most middle-class Indians could already afford to buy. The opulence also justified the high prices and created a natural market because these were luxurious garments that could be worn at festive occasions such as weddings, when people spent freely.

Previous research ends at this point; what Khaire found is that around the same time the industry in India was getting off the ground, other entities were being formed, such as fashion magazines, new kinds of retail outlets, and the National Institute of Fashion Technology, an organization established in 1986 under the Indian government's Ministry of Textiles that fosters fashion education, research, and training. The fashion industry did not actively co-opt these organizations for their own means, however; the organizations were self-interested, evolved alongside the industry, and acted as flag bearers to various designers' commercial success.

"For the longest time, creativity was considered the work of a genius operating on her own. The cult of the designer held sway, with little attention being paid to the system that supports the creative genius," Khaire observes. "That's fine as long as a creative genius in a field like fashion design doesn't need to enter the commercial arena. The perception exists that creative businesses can just start up, when in fact it takes a while for an entire ecosystem to actually generate an industry. There's a construction of creativity that involves many other actors."

Getting to the bottom of this and other questions will no doubt generate further investigations regarding the role creativity plays in organizations and how managers can best cultivate and deploy it in the workplace.

"In business, people can go only so far by doing things the way they have always been done," says Amabile. "In entrepreneurship especially, it is essential to perceive opportunities that others have not, and to pursue them in novel yet appropriate ways at every stage of the game. Such creative solutions will be necessary for managers to help solve the socioeconomic challenges of the future—for their own businesses and for the world."

Sharpening Your Skills dives into the HBS Working Knowledge archives to bring together articles on ways to improve your business skills.

Questions to be Answered

• Are global brands effective?


• How should I think about strategy in a flat world?


• Which countries are the most business friendly?


• How can my foreign assests and resources be protected?

Are global brands effective?

Why Global Brands Work

Japanese automakers create single products and brands for worldwide consumption, while Ford customizes products for local markets. You know who won. Why do global brands work? What makes them work? Professor John Quelch provides some answers.

Key concepts include:

• For decades, Ford has created specialized products for different countries while Toyota, Nissan, and Honda sold standard products under a single brand umbrella.



• Ford's strategy resulted in added manufacturing and supply chain costs, a balkanized bureaucracy, and deteriorating market share, financial performance, and stock price.



• There are five characteristics that all top global brands have in common.

How should I think about strategy in a (not so) flat world?

Businesses Beware: The World Is Not Flat

With apologies to Thomas Friedman, managers who believe the hype of a flat world do so at their own risk, says HBS professor Pankaj Ghemawat. National borders still matter a lot for business strategists. While identifying similarities from one place to the next is essential, effective cross-border strategies will take careful stock of differences as well.

Key concepts include:

• Some indicators of globalization aren't increasing as many experts have claimed.



• Toyota and Wal-Mart are examples of companies that understand how to deal with distance in a strategic way.



• Take a broad view of differences, figure out the ones that matter the most in your industry, and look at them not just as difficulties to be overcome but also as potential sources of value creation.

Which countries are the most business friendly?

Handicapping the Best Countries for Business


India? South Africa? Russia? Which are the best countries for a firm to invest in? Although circumstances in some countries have changed since this 2007 interview, Professor Richard Vietor's basic advice for analyzing the business environment of countries remains strong.

Key concepts include:

• Governments create the overall environment for successful competition in the global economy. Bad government can only lead to less competitive businesses.



• To be competitive, countries need to offer businesses sound fiscal and monetary policies, secure property rights, high savings and investment, an absence of corruption, and exports that are competitive in enough areas to eventually balance imports.



• Business people must understand where markets and countries are headed by analyzing the present and then extending current performance trends forward three to five years.



• Although each has issues, Singapore, China, and India are currently the best bets for FDI and, pending political stability.

How can my foreign assests and resources be protected?

Risky Business? Protecting Foreign Investments


After a string of forced nationalizations of private enterprises in the 1960s and 1970s, the pendulum swung back and companies were again encouraged by host countries to build and run major infrastructure projects such as power and water. But a set of new property protections has done little to manage the risk in many of these politically unstable environments. Professor Louis T. Wells, coauthor of a recent book on making foreign investment safe, discusses the current landscape.

Key concepts include:

• Although property rights protections for investors in developing nations have improved since 1980, the new instruments are failing to satisfy the interests of either host countries or their business partners.



• Protections can be improved by developing a real consensus on the part of investors' home countries, host countries, and investors themselves.



• Business managers must take a significant role in pushing for a multilateral agreement on foreign direct investment, or at least become active in promoting lesser changes that will lead to more balance and security in the current system. Otherwise businesses will lose profitable opportunities and find themselves in the middle of disputes that hurt their future prospects. And poor countries will fail to benefit from what investors can bring them.



• Absent strong protections, managers must ask themselves a series of questions before investing in developing countries, such as: Is my investment project politically sensitive? If so, will the country continue to need my participation in the project?