Here is a brief excerpt from an article written by Marc Brodherson, Jason Heller, Jesko Perrey, and David Remley for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out other resources, learn more about the firm, obtain subscription information, and register to receive email alerts, please click here.

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Top-performing companies use four key management practices to turn creativity into value.

Most of us can remember a couple of favorite ads. They’re funny, clever, thoughtful. Creativity can delight, even inspire. But does it generate business value?

The short answer is yes. That conclusion came through clearly in McKinsey’s analysis of one widely recognized proxy for creativity. To have a quantitative measure that could be used to examine the linkage between creativity and business performance, we developed the Award Creativity Score (ACS), an index based on the prestigious Cannes Lions awards given annually for advertising and marketing excellence.

The ACS index weighs three factors: the total number of Lions won by each company between 2001 and 2016, with more points assigned for the most prestigious awards; the breadth of categories represented; and consistency over time, based on the number of years a company has been recognized.

We found that the most creative companies, based on their ACS, did better than peer firms on two key business metrics: financial performance and McKinsey’s Innovation Score. This doesn’t mean there’s a straight-line path between climbing the podium at Cannes and besting market indices or out-innovating competitors. But when we dug more deeply, we found that the most creative companies did certain things differently. Specifically, they exhibited a set of four business practices that we believe drive their marketing creativity, their ability to innovate, and their capacity to translate those virtues into business value.

While measuring creativity remains an inexact science, our analysis provides evidence to support the notion that creativity matters for the bottom line and identifies the practices that differentiate the most creative companies from the rest.

Creativity is associated with superior performance

There are many reasons why companies perform well, such as market position or technology leadership. But it’s also true that creativity is at the heart of business innovation, and innovation is the engine of growth. With an increasing focus on the science of marketing—including performance marketing, marketing AI, and advanced analytics—it’s important not to forget about the art of marketing.

Creative leaders outperform their peers on key financial metrics

When we looked at the financial results of companies whose ACS scores were in the top quartile, we found they performed better than peer firms on three key measures:

• 67 percent had above-average organic revenue growth.
• 70 percent had above-average total return to shareholders (TRS).
• 74 percent had above-average net enterprise value or NEV/forward EBITDA (See Exhibit 1).

Firms that scored lower on ACS were far less likely to post above-average financial results.

We have further confidence in the linkage between ACS and superior financial performance, given other McKinsey research that has shown the value of distinctive creative work. In almost 90 percent of categories, consumers are not loyal to their chosen brands, and almost 60 percent will switch when considering a new purchase. This means the moment of initial consideration can be decisive in a consumer’s decision journey—and great creative can be a key to winning the battle for initial consideration.

Creative leaders are also more innovative

Firms in the ACS top quartile also scored 16 percent higher than the average consumer-facing company on another key measure: McKinsey’s Innovation Performance Score, which is based on a set of indicators that our research has shown are linked to innovation outcomes (See Exhibit 2).

These insights are corroborated by other McKinsey research, which has shown that the fastest-growing companies—the ones we call Creators—are particularly strong at developing new products, services, or business models.

The four practices associated with creativity and innovation

Although creativity is strongly correlated with superior business performance, senior executives can hardly expect better results simply by exhorting their people to “be more creative.” To determine what executives can do, we used data from two surveys to identify the distinctive practices of firms with top ACS scores.

The first was a new, dedicated survey explicitly designed to identify practices associated with creativity. The second was our Innovation Diagnostic, which tests for 104 practices associated with innovation. The combined data show the firms that consistently do well at Cannes are distinguished by four key practices. These provide clear lessons for companies looking to turn creativity into growth.

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