“If we are going to grow, I have to move my business from a position of “work to hire” for ever-reducing margins to ownership of rights or IP”

Question: Was this said to me by a Chinese animation company, or a Bristol based digital marketing business?

Answer: Both, if I paraphrase – and therein lies a challenge.

In this post-digital landscape the cost of entry for new service businesses is lower than ever before, and competition is now global - with the result that regardless of whether you promote quality as your USP, there is pressure on price.

But at the same time this technology revolution is knocking down the traditional, aggregated distribution models and creating opportunity in entirely new emerging industries, and in new models of exploitation within rapidly evolving existing business sectors.

The difficulty for small companies (and true whatever your business - digital, design, marketing, publishing, production etc) is however the same as it ever was - how do I create the time away from core business to develop new products or services? And even if I create the time, how do I extract enough margin from existing business to fund this development time?

At a talk at the Pervasive Media Studio recently Evan Grant from interactive agency Seeper described a kind of internal “arms race”, the clients they work with constantly demand “the first” or “the newest” so Seeper is in a permanent state of development – luckily they have 12 year track record behind them so are able to invest to re-sell.

Darius Pocha from Enable explains their approach to the issue, launching a new agency called Moksha to create content and experiences for brands, “With Moksha our aim is to create innovative concepts where clients pay for the value of the idea rather than the number of hours it takes to develop and execute it.”

So is there a solution? – not a simple one, but there are opportunities for you to try to solve the problem in places you might not immediately look. And despite being public funding they do not have the stifling bureaucracy and constricting criteria you’d expect.

The Media Sandbox scheme was set up to tackle exactly this issue. Experimentation requires space and resource, so over the past two years Media Sandbox has made small development investments in everything from mobile services to ARG’s, software development to multiplatform content. The ethos of the Sandbox is about community and collaboration – open innovation – but since when did any idea emerge fully formed?

Simon from Slingshot, who received a Sandbox award in 2008, says “Sandbox was a great catalyst for us. The commission gave us the opportunity to develop a methodology and an aesthetic. The ideas we generated during this process needed further backing to take them from plans to services, which we received in the form of a TSB feasibility award. MSGE, the game system we developed, is now the core of our business and at the heart of the set of products we are commercialising.”

The call for ideas for Media Sandbox 2010 is open now and the scheme will make 7 x £10,000 investments to develop new projects using open data and/or pervasive experiences (link).

As referenced by Simon, another call currently open is with the Technology Strategy Board. Focused on the development of innovative products and services to pre-figure the internet of the future they will invest £18M in collaboration R&D over the next 12 months (link)

Last word to Andy Parkhouse from Team Rubber “we’ve generated real benefit in the past from our involvement with funding schemes like the Media Sandbox. Creating space for innovation has allowed us to develop new ideas for products, over time this has enabled us to diversify our sales pitch and delivered revenues to the bottom line.”

If you are a creative business who needs to find an answer to the question at the top, I’d recommend you take 5 minutes to look at these two schemes – gift horses and all that….

Contact Victoria (victoria@watershed.co.uk) or Mark (mark@markleaver.net) if you need any other information or advice.

Mark Leaver – July 2010