Why Creativity Is Critical for Emerging and Disruptive Technologies

The adage that suggests that "necessity is the mother of invention" has been around for eons, and is perhaps more relevant today than ever before. The need for reinvention and innovation continues to grow, and today's technology – which has been called the fourth Industrial Revolution – is seeding the evolution of the future through the same explosions of creativity that generated the first three.

Necessity + Creativity = Innovation

History reveals that, in every case, new inventions are devised to meet an unmet need. From the development of primitive tools to the control of fire, the construction of shelters and beyond, humans have always been identifying deficits in their situation, then devising a way to fill them.

The First Industrial Revolution: Mechanization

During the late 18th century's first Industrial Revolution, machines began replacing human labor. Mechanization "disrupted" virtually every aspect of the social order and raised America's Gross Domestic Product (GDP) from $180M in 1790 to over $11B in 1860, driving its economy past that of Great Britain. It also laid the foundation for the second Industrial Revolution – the mastery of mass production.

The Second Industrial Revolution: Mass Production

Late 19th-century industries embraced cotton gin inventor Eli Whitney's innovative concept of interchangeable parts, which resulted in the standardization of manufacturing processes. Henry Ford perfected the process in his assembly line automobile production plants. The resulting web of interconnected industries powered the growth of the GDP per person (per capita), which rose from $2,445 annually in 1870 to $15,030 in 1970. Early and mid-20th-century industries were ripe to embrace the emergence of digital technologies to launch the late 20th century's third Industrial Revolution – the rise of automation.

The Third Industrial Revolution: Automation

Creativity has exploded beyond all traditional horizons since the advent of the first PC. Computing technology has subsumed whole industries, such as telecommunications, manufacturing and international logistics, and most of the world's current economies would collapse without the digital tools they deploy across their industrial bases. Automation of entire industrial sectors has improved safety, reduced costs, and, yes, expanded the American GDP from $543.3B in 1960 to $18,624B in 2016.

The Fourth Industrial Revolution: Emerging and Disruptive Technologies

And while it continues to expand, the third Industrial Revolution has already set the stage for the fourth Industrial Revolution, emerging and disruptive technologies, which is presently unfolding and offers almost unimaginable opportunities for growth and expansion.

Why Humans Rise to Meet the Need for Innovation

Throughout these evolutions, humans have modified their thinking and adapted to new realities by using their creative imagination to either invent whole new concepts or to innovate improvements to their existing tools. In both cases, when presented with a seemingly insurmountable barrier, the human brain has absorbed the challenge and created a response that both eliminates the barrier and resolves the problem. Scientists continue to explore the human brain to identify how that creativity works, and how to harness it more effectively.

The Science of Creativity

Pondering creativity often means asking why some people seem to be more creative than others. What was it that led Eli Whitney but not his competitors to develop a more productive cotton gin? What triggered Steve Jobs but not IBM to combine a phone, stereo and computer into a single device? Researchers have revealed some interesting facts about human creativity that offer insights about why human creativity continues to evolve:

• Being creative often a springs from exposures to new things. The neurotransmitter dopamine facilitates the brain's capacity to "engage flexibly with new things," according to Scott Barry Kaufman and Carolyn Gregoire, authors of the book "Wired to Create: Unraveling the Mysteries of the Creative Mind." "The drive for exploration, in its many forms," they write, "may be the single most important personal factor predicting creative achievement."

• Intuition also plays a role in creativity. People who just "had a hunch" often follow that intuitive thought into a new frontier. Steve Jobs believed "intuition is more powerful than intellect."

• And "spacing out," day-dreaming or reminiscing about good times also facilitates creativity by releasing the brain from its formalized thought structures and allowing it to meander into novel imaginative vistas.

Looking Toward the New Revolution – Emerging and Disruptive Technologies

If the past is any indication, the human capacity to creatively solve existing problems, as well as the new concerns they generate, will not abate any time soon. Many of today's top technologies are already focused on developing new digital avenues to discover as-yet unknown advantages.

• In the healthcare field, the emergence of Electronic Medical Records (EMRs)in 2009 has ignited a creative frenzy that promises an entire healthcare industrial revolution in and of itself. Complex analysis of EMRs identifies mix-ups and miscommunications before patients are harmed, and unobtrusive body sensors inform medical teams of patient concerns often before the patient is aware that there's a problem.

• In the marketing sector, the "rapid escalation of complexity" is demanding a comparable escalation of creativity to find answers to immensely complex quandaries.

• In education, researchers are "increasing educational research to support the importance of creativity in the fields of thinking and learning," based on the notion that creativity is "an important aspect of innovation and change."

In each of these three sectors, innovative technology is solving problems. However, in most of these cases, those resolutions simply reveal more – and more complex – problems that need solving. That reality suggests that creativity will continue to be the bedrock upon which tomorrow's technology industries will be built. As Steve Jobs put it, “The best way to create value in the 21st century is to connect creativity with technology.”

Tangelo holds innovation and creativity as a core company value. As a multi-faceted diverse company, we are evidence on how an organization of diverse minds with various backgrounds underlies true innovation and value. Our diversity has opened up possibilities that don’t exist inside a homogeneous group. As CNET reported, “Study after study has shown that more diverse teams are more creative and innovative. Companies with diverse leadership are more profitable." We enjoy working with partners who share our commitment and are ready to evolve digitally in a highly creative and innovative manner that drives financial performance and measurable market value.

What it Means to be an Entrepreneur in the Venture Building Space

With the rise of entrepreneurs and startups, there has also been a rise of venture studios (aka venture "production" studios) in the the venture-building in the ecosystem. As an entrepreneur (in the broader sense, an individual with a business idea), what is it like to build a partnership with a venture studio? 

Among existing traditional options, such as working with incubators or venture capital firms, what are the benefits and drawbacks in working with venture studios? What does that partnership look like? And what should an entrepreneur look for in a venture partner? 

Here at Tangelo, we compiled points you should know to help better guide the next wave of ventures.

Understanding the Venture "Builder" Ecosystem

The venture-building universe encompasses a number of actors and institutions. We have the following: 

1. Venture Studios, who provide guiding expertise, coveted partnerships, highly skilled talent and/or funding, in order to build a successful scalable business,

2. Startups or emerging companies looking for the formula for their idea to reach success,

3. Private equity, Angel Investors and venture capital firms of all shapes and sizes.

4. Entrepreneurs, who run the full spectrum of roles above, although most commonly falling under the group who has an idea and is searching for a success formula. 

The fundamental takeaway in reviewing the ecosystem is that venture building is simply about creating a business - and if the right mix is applied, a successful one.

Interacting with Venture Studios

So where do entrepreneurs fall within the world of venture builders? Specifically, among venture studios? In the broader sense, entrepreneurs are those who have done their due diligence, identified the gaps and solutions within a market, and simply need the resources to drive their idea into fruition. The partnership often takes the form of providing investment to the entrepreneur in exchange for equity. Venture studios, like many other forms of venture builders, are institutions who are willing to provide services to get products built, shipped, and marketed in a efficient and scalable pattern. For venture studio, this partnership is commonly known as "Sweat Equity" - where the investment is carried through the form of the talent executing the developing systems, business models, projects, and processes. As to what a venture studio does, they are basically a holding company that owns equity in the various corporate entities it helped create.

Intersectionality and End-to-End Venture Building

The opportunity and ability to have a bird's eye view of how something is operating or not operating, and the fluidity to test and solution, is a source of great satisfaction. The ability to sit at all the intersections of all variables that constitute in building a company, and the opportunity to be part of an end-to-end process can be mentally noted and referred to by the entrepreneur during future endeavors. Depending on the venture studio partnered with and term agreements, the potential for other areas such as fund-raising, exits, and IPOs are within the realm of possibilities.  

“Move Fast, Break Things” Mentality and Execution

Unlike consultants where services are set by parameters and scope, or traditional venture capital firms predicated on the fact that failure happens in any given situations, the flexibility to renovate and pivot quickly within a venture studio is within the full extent and capacity of both partners. Breakage and renovation as part of the system, and with an a team working in parallel on multiple fronts, the opportunity to test and solution 

Collaborative Executive Decisions

Although you are a entrepreneur who conceived the idea that is being developed, by commencing a venture partnership, you are no longer unilaterally making executive decisions. Instead, there are collaborative,  executive decisions that require the buy-in of the team and the partners you are working alongside.

What happens if there's a clash between you and the venture builder? Historically, this has been a breaking point for a number of venture partnerships, as in the first months of building, it’s common to feel as if you work diligently for the venture builder and not yourself.

As an entrepreneur in this space, it becomes incredibly important to figure out the goals and objectives of the venture builder to which you apply. Past experience has shown us that founders who are able to view the institutions as much larger than themselves, are often times able to find more success and benefit from venture partnerships. The "trade off" is rapid growth and revenue.

What To Consider when Partnering With a Venture Studio

Full Stack Capabilities

Building a startup these day has never been more accessible. There are a range of venture studios with a wide range of specialization. However, understanding what you need and where you are in the current stage of your venture proves crucial. If you are still at the ideation phase of the venture, it's important to ask yourself what work fundamentals are needed. Aside from development, do you have the bread and butter of legal counsel? What of strategic and implementation management? 

Finding a venture studio that offers core capabilities aligned to your needs will improve your productivity and offer cost-efficiencies. 

Character and Culture

Not all information gathered is quantitative in nature. Both entrepreneurs and venture studios have to make a direct character assessment of the individuals they might potentially work alongside. Unlike incubators or private equity firms/VCs, venture builders touch all facets of the companies they work with. Consequential, the interpersonal relationships you foster not only set the tone and culture of your own inherent company that you are building, but they are also a form of professional investment and should also serve as a form of equity assessment.  

Term Sheet and Equity Agreements

Unlike cash funding where investment allocation is more transparent and comparatively easier to track, venture studios have a range of methods to valuate their services and time investment. Understanding a venture studio's business model and term agreement is critical, especially when it boils down to equity ownership. Having your venture set up in multiple phases, similar to how funding is done in rounds (e.g., seed, Series A, B, C, etc.) within a given parameter, will set scope to the efforts performed by both parties. Other methods include setting Key Performance Indicators (KPIs) and Key Metrics to divvy the ROI.