Creativity and innovation is critical for business effectiveness, but firms generally struggle with realising it in their business and translating it into everyday life. The likely reason for this is that senior leaders do not have a clear, well developed framework of what it looks like as an organisational capability. And since they don't know what it looks like, they don't know how to build it.

Clusters of creativity and innovation occur in various parts of the world - Silicon Valley and the Bay area of San Francisco, Barcelona and Dublin in Europe, Sydney in Australia and London, where people move because 'that is where the action is.' Each area seems to specialise, for example, Silicon Valley is the preserve of high technology whereas London is known as a centre for advertising and design. These clusters are strong drivers of economy and growth and all use common key principles when managing people, structures and culture.

Creative people work late into the night and constantly think about their endeavour. Entrepreneurs are highly creative and it is not unusual for them to work 90+ hours a week (they usually don't classify it as work - it is just something they tremendously enjoy doing), whereas most people grudgingly work 45+ hours a week. Therefore there are huge productivity and economic gains to be made.

Creative people enjoy what they are doing (they tend to describe themselves as passionate). As a result they tend to behave more positively towards their colleagues, customers, and people they come into contact with. Thus a business reaps benefits in organisational culture and customer service. Business relationships and the network in general are strengthened. Links are created in the value chain, staff turn-over decreases and consistency and sustainability - both requirements for success - increase. The philosophy is not about seeing people as a fixed cost, but of harnessing and maximising human creative potential to add value and create new revenue streams.

Creativity in business can be described as problem solving. By inducing the creative state, the individual and group creative capacity is optimised in order to solve business issues. This involves more than brainstorming, which in many organisations simply involves setting up a flipchart, herding staff into a room and calling it a brainstorming session.

Creative people are intrinsically motivated. This means that they see inherent value in what they are doing, as opposed to extrinsic motivation which causes them to engage in an activity to fulfil ulterior goals. Some extrinsic motivation is useful (adequate financial reward is a form of synergistic extrinsic motivation, up to a point). There is a significant positive correlation between creativity and intrinsic motivation; by managing creativity, it is possible to enhance motivation.

One definition of leadership is that leaders inspire and motivate. They have a vision and their determination to reach it causes those around them to fall in line. Good examples are Stellios Haji-Ioannou of Easyjet and Bill Gates of Microsoft. Creative people tend to have a vision and consequently tend to exhibit leadership qualities.

In a perfect market, competitors mirror rival activities very quickly. Creativity is constantly needed to create competitive advantage, differentiate and value add if a firm expects to survive and grow.

Just as important as coming up with ideas is ensuring that the right ones are selected, developed and commercialised / implemented. Appropriate structures and processes are needed to ensure this; not doing so kills creativity at the root.