Management shared-services as an acceleration strategy for creative enterprises

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Organisational capacity is one of the main barriers to accessing investment for small cultural and creative businesses. In Puerto Rico, a targeted grant initiative is addressing the problem.

The last decade has brought an exponential increase in knowledge about the potential of the cultural and creative industries throughout the world. Often marginalised by governments, education and even civil society in the past, the culture sector has gained recognition for its vital role in our daily life thanks to the digital revolution. Probably no other industry or economic activity has as many impact dimensions as culture. Both commercial and non-governmental organisations play a key role in preserving tangible and intangible heritage, in the development of communities and their identities, in local economies, in aesthetic appreciation, in leisure, and in innovation in other industries, just to name a few.

The position creative industries have today results from many years of research, training, mentorship and support. The case of Puerto Rico is uniquely interesting because of its particular political, economic and cultural circumstances. As a territory of the United States, Puerto Rico shares a market-oriented legal and trade framework, and the entertainment industry is an important sector. At the same time, our Latin American colonial heritage brings Puerto Rico closer to the experiences of other countries in the region. 

In 2008, Inversión Cultural was created as a non-profit organisation with the initial objective of raising financial capital for the development of the cultural and creative economy in Puerto Rico. However, the lack of industry-specific data, and the prevalence of companies highly dependent on philanthropy and subsidy, made it very difficult to attract investment capital to the fund. For these reasons, the organisation turned towards developing and promoting an investment environment for culture and creativity.

Applying ideas from Chile, Colombia, Mexico and other territories, over the next decade we experimented with the development of satellite accounts for arts and cultural production, industry profiles of both supply and demand, incubation and acceleration programmes, public policies and international collaboration to continue strengthening the ecosystem. This last concept, of ecosystem, is of vital importance: while capital is invested in individual ventures, an important criterion is usually the availability of a robust, diverse and complementary ecosystem in the sector in which entrepreneurs are operating.

However, the advances in these macro components have led us to a new challenge in the development of cultural and creative enterprises: organisational capacity. Many of these companies are nano-enterprises, where the entrepreneur is the subject-expert figure, be it an artist, designer, a cultural agent or a creative. On very few occasions are they able to build the management team that complements the company’s profile and provides knowledge in areas such as finance, production, marketing, technology, law and operations. This can be a substantial hurdle, since without that team it is very difficult for the company to attract investors, while the hiring of employees at a very early stage affects cash flow and the ability to self-finance growth.

Many of these companies are nano-enterprises, where the entrepreneur is the subject-expert figure, be it an artist, designer, a cultural agent or a creative

Recognising this need for creative entrepreneurs, which has already been highlighted in multiple research reports on the difficulty of leverage and efficiency in the cultural and creative industries, Inversión Cultural decided to rescue the concept of management shared-services. This approach seeks to complement the entrepreneurship ecosystem by providing management services grants, which, rather than being used at the entrepreneur’s discretion, are earmarked for spending on management services such as those described above.

The commitment to the management shared-services model aims to strengthen the ecosystem in several ways. On the one hand, it begins to create a culture of responsibility in the identification, valuation and budgeting of these services that are so important for creating a viable investment. On the other, it enables the creation of economies of scale and a learning curve in a pool of resources that begin to specialise in the creative economy. As a result, services that are very expensive for entrepreneurs to contract individually become more accessible. Finally, at the macro level, the model becomes a source of research and data about the ecosystem’s best practices, needs, and opportunities, which can serve investors, support entities and public policy agents.

The relationship starts with an organisational and business assessment, from which a work plan and budget for the grant are co-designed. The work plan promotes careful management of internal and external resources, guided by a coordinator assigned to each company or entity. Companies are encouraged to develop a detailed understanding of the cost and purpose of every resource accessed through the grant, with the goal of creating that culture of responsibility and planning for the future. In addition to the grant model, Inversión Cultural provides these services to other enterprises in the ecosystem at market rates. Alternatively, entities can use a fractional employment approach, where one resource serves several organisations, so that the cost is shared. In its first stage, this initiative is being supported by Andrew W. Mellon Foundation for the organisational support of Inversión Cultural, and by Filantropía PR and the Flamboyán Arts Fund to provide services grants for 36 artists, enterprises and organisations.

Impact investing is the next intersection on the creative and cultural ecosystem’s path to sustainability. It is the vehicle to achieve sustainable growth strategies that allow ventures to increase their economic, social and cultural impact. The creative economy is one of the sectors that will advance the United Nations Sustainable Development Goals by 2030, thanks to its capacity for resilience, innovation, entrepreneurship and solidarity. The arts, heritage, media, design and the digital economy need their own growth path, considering that the rigidity of the traditional investment ecosystem often does not respond to the reality of these ventures. This is where the importance of impact investing lies. However, as an entry strategy, it is important to create these management shared-services structures as allies in the process, ensuring that the creative ecosystem in Latin America and the Caribbean is prepared for innovation and growth.

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