FROM RAGGED IDEAS TO RICHES

FROM RAGGED IDEAS TO RICHES - Eureka! You've come up with a great idea. Now comes the tricky part: seeing it through to profitable use. Brainwaves need a strong framework of discipline if they are to survive and prosper in the real world. John Howkins pas

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Last Updated: 31 Aug 2010

Eureka! You've come up with a great idea. Now comes the tricky part: seeing it through to profitable use. Brainwaves need a strong framework of discipline if they are to survive and prosper in the real world. John Howkins passes on the key steps to making your million in the 'creative economy'

Ten years ago, the man who brought American football to British television had another bright idea. Iain Bruce said he was tired of going to music stores to buy piano scores for his daughter only to be told they were unavailable, so he came up with the idea of a national network that would make published music available on demand. Music is ideally suited for digital printing; it uses a standard black-and-white format and most pieces are quite short. He also knew that, because of its age, classical music is now almost universally out of copyright.

He began working out the economics but got diverted. So whereas the American football idea made him enough money to drive a Rolls Royce, his music idea brought him nothing. Two years ago, he saw others use the internet to bring 'his idea' to fruition.

Only it wasn't his idea. Having an idea doesn't count. What matters is what you do with it. Several companies now offer online sheet music, including my favourite, sunhawk.com, which plays the piece as you download it. Sunhawk promotes itself as 'first in downloadable interactive sheet music'. It was not the first to have the idea, but it was one of the first to make a business of it.

The number of ideas generated every day is limitless. Inspiration can strike suddenly: 'Sometimes I've believed as many as six impossible things before breakfast,' boasts the Queen in Alice in Wonderland. Jeff Bezos, founder of amazon.com, says he thought of several 'impossible' things before settling on books. But how can we separate the really good ideas from those that seem good at the time but end up as disasters? How do you turn a good idea into a successful business?

It depends upon creativity, management, law and money. Starting at the beginning, the first rule is 'clear the decks'.

Make sure you are free to own and develop your own ideas commercially.

Negotiate your current contractual obligations and organisational responsibilities so that they allow you to have and hold your own ideas. Some companies impose contracts that cover all information produced by an employee during the term of the contract - although it may not be enforceable in law.

Of course, employers should have a right to the ideas generated in their line of business and in company time. But no more.

In the 1660s, John Milton got pounds 10 from a publisher for Paradise Lost. More recently, David Bowie turned some of his copyright into capital, raising pounds 55 million in bonds against the future royalties from his songs. It is big business today. Copyrighted material became the leading export of the US in 1997, and global estimates of copyright theft is put at dollars 20 billion a year.

Second, 'be realistic' about your priorities. What do you really want to do? Do you want to develop a new product, satisfy an apparent demand, run your own company, enjoy a particular lifestyle, make a profit, or get rich? These are all laudable aims, but investors are interested in only one thing - to make an above-average return on capital. If you don't want to do this too, then sell the idea or even give it away and do something else.

Bernie Cornfeld, who launched a pyramid-selling scheme, asked one question of every recruit: 'Do you sincerely want to be rich?' He knew that most people want to be richer, but he was interested only in people who badly wanted to be very rich indeed. Similarly, when I am evaluating a new proposition, I look for owners who sincerely want to make money.

Third, 'treat creativity as a proper job'. Manage your creativity to produce ideas that are not only elegant but will also drive a business.

Too many people who are keen to ensure quality control in other areas think creativity cannot be managed. But being creative is not a casual activity; it must be managed to be effective.

Bob Geldof, the rock-star-turned-entrepreneur who was the thinker behind the massive Band Aid and Live Aid charities against hunger, works alone, armed with a telephone. He told me: 'I have four or five offices I could use ... but I never go to them. I don't have a PA or secretary. If you have staff, you start to get interested in their ideas, and you lose the freedom to think and write.'

So, let's assume we are free to own our ideas, have managed the creative process and produced what we think is a good idea.

Now marshal resources. Treat the project as a military operation and ensure you have the right resources in the right place at the right time.

The list might include contacts, legal advice, market research, skills with spreadsheets and relevant business models, as well as basics such as spare time, money and an office (or a desk in the spare room). Write down what you require to push the idea through. What do you need first?

Do you have to buy it in?

Get help. Few ideas make it to market without outside help. Yet a mix of bravado, secrecy and impatience prevents most entrepreneurs from asking for help. Trevor Bayliss, inventor of the clockwork radio, says: 'You need an ego the size of a truck to be an inventor.' The clever entrepreneur does take advice, however, and manages to get information and help from a wide range of people, often without them knowing. Scavenge around. At EveryIdea Ltd, I collect information from everywhere.

Another important talent in the creative economy is the ability to persuade others to support your ideas. Madonna became outstandingly successful not only because she was a talented performer but also because she was adept at winning support from people who could help her. If people give you long-term advice, reward them with fees or shares. Behave at this stage as you would when you are up and running. Be fair. Exploit no-one.

Do the sums. There are two stages. You must consolidate your idea's commercial essence as soon as possible. Determine the specific product or service that people will want to buy. This can be difficult but, without it, no business can develop. I am advising a highly inventive person who has found a medical device that undoubtedly assists people and may be patentable, but he doesn't know how to embody the phenomenon in a product, nor whether to sell whatever-it-is to hospitals, or to individuals for use at home.

Until he and I reach agreement on this, we can't move forward.

The second stage, after you have fixed on the product and the market, is to work on the business plan. This involves assessment of likely revenues and costs, as well as cashflow. The business plan is, of course, the basis on which investors will put in their money. These two stages - defining the commercial mechanics and writing the business plan - will often operate together. At all stages, keep calculating your own role: money, time, expertise. Be realistic.

Many people worry about whether to tell others about their idea. This depends on the industry. In some, publicity is a worthwhile currency and fame a solid investment. In the entertainment business, innovators benefit from being talked about. But if you have a great idea for a sandwich shop, it might be foolish to tell Julian Metcalfe, the founder of Pret a Manger.

Own it. Turn your idea into a piece of intellectual real estate. From the viewpoint of the entrepreneur, intellectual property rights can be divided into two kinds: those that arise automatically and those that have to be applied for. Copyright is the former and can happen automatically, whereas you have to apply for patents and trademarks. Designs are a combination.

A new design automatically gets copyright protection but can also be registered.

There is no copyright in an idea, only in the expression of it. So the idea in your head is not copyrighted, but its expression in a qualifying work will be. Copyright law defines what qualifies for protection - broadly speaking, acts of human expression. Expressing something (such as writing an idea on paper) gives no protection against another person writing down the same idea, unless he or she literally copies your work. If no element of copying exists, then no copyright is infringed. Each work merits its own copyright.

Patents are different. They are granted only to ideas that pass three tests: novelty (so it matters to be first); inventiveness; and having a technical effect. For novelty, the Patent Office operates on the basis of a 'priority date', which in the UK is the filing date. You must balance the need to be first to file an application (which will be published) against the need to keep your idea secret. It is usually better to make sure you are first by filing an application early and amending it later, rather than waiting until an invention is fully worked out. The second test of inventiveness requires that the idea be 'non-obvious' to someone who is expert in its area.

The test of technical effect originally involved technology and meant that an idea had to be useful in a technical sense. It still must be useful, but the technology link is dwindling, especially in America. The US Patent Office now awards patents for ideas that have no technical apparatus - such as business methods.

Patent infringement penalties can be enormous. Kodak, found guilty of infringing on Polaroid's instant photo process, paid dollars 295 million in damages, shut a dollars 1.5 billion factory and had to spend almost dollars 500 million to buy back 'illegal' cameras, not to mention dollars 100 million in legal fees and wasted marketing.

Today, patents are being awarded to a widening field of ideas, extending beyond invention to strategy. Dell has more than 70 patents for its methods of selling computers, and amazon.com managed to patent its one-click online ordering system - and then forced rival Barnes & Noble to adopt a two-click system.

In the creative economy, creative people are becoming more businesslike, and business is becoming more dependent on creativity. This crossover may even go some way towards explaining the so-called long boom in the US economy. One possible reason is that current output growth depends less on old-style raw materials - which are subject to diminishing returns and whose prices, if demand rises, also go up - and increasingly on intangible resources, which, if not infinite, are at least indefinitely large.

Tapping into the process is not as difficult as it may seem. John Steinbeck wrote: 'Ideas are like rabbits. You get a couple and learn how to handle them, and pretty soon you have a dozen.'

Howkins' The Creative Economy is published by Allen Lane at pounds 18.99

< MAKING YOUR IDEA PAY CLEAR THE DECKS: Make sure you can legally have and hold your own ideas BE REALISTIC: What do you really want? Investors are interested only in making money. Everything else is secondary TREAT CREATIVITY AS A PROPER JOB: Train for it. Manage it. Monitor the process and evaluate the results against objective criteria MARSHAL RESOURCES: Identify everything you need - the information, expertise, cash, etc. Behave like a general but don't hesitate to be a spy GET HELP: Know when you need help and get it. Don't waste time DO THE SUMS: First, be clear about the core commercial nature of your idea; then prepare a business plan with costs and revenues At this stage, worry more about the revenues than costs OWN IT: Learn about intellectual property. Know about copyright, licensing and patents NATIONS WITH BIG IDEAS Patents registered by the US Patent Office, by country of applicant (1999) Number Percentage of patents of total US 94,049 55.6% (California) (18,865) JAPAN 32,515 19.7% GERMANY 9,896 5.9% TAIWAN 4,526 2.7% FRANCE 4,097 2.4% UK 3,900 2.3% SOUTH KOREA 3,670 2.2% CANADA 3,678 2.2% ITALY 1,686 1.0% SWEDEN 1,542 0.9% OTHERS 9,595 5.7%

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