Innovation Process: Developing New Products and Services
Innovation Process: Developing New Products and Services
Introduction and background
This paper analyzes the case of how the music industry has gone through various technological thus forcing the business leaders to rethink of the forward strategies. The transformation from the usage of radio cassettes in the 1960s to the present day MP3 wide usage has seen the music industry and business grow in leaps and bounds. The golden age reached its peak after 1990. This paper uses business models, specifically, the Porters five forces in order to understand how the whole product shifting basis of completion and central role of user experience had made Spotify the live music streaming community it is known as today. In addition, the methods are used in the current use of Spotify as it competes with the Apple Company.
Spotify business model focuses on streaming music, with the end consumer at the center of tis service. The challenge comes in the manner with which the artists benefit from the service. It has been noted that compensation barely streams back to the owner of the song, with many of the artists whose music is on Spotify preferring the consumer to buy the song so that they too can benefit. Spotify’s current focus is on solidifying and growing its consumer base.
When compared with music services from other competitors such as Apple, Spotify has a unique competitive edge through the provision of multiple categories of music that are updated in real time, all cataloged in a manner that enables consumers to discover music easily. Nevertheless, it is difficult for new artists to popularize their music through Spotify, due to the large database of songs that are exposed to the end user at a given time. Due to its streaming capabilities, Spotify provides a legal means of music fans to listen to music as opposed to illegally downloading it.
Analysis
Porters Five Forces
Porter’s five forces include the supplier power, buyer power competitive rivalry, threat substitution, and threat of new entry into the market. The nature of the business in the music industry is the increased number of suppliers of each key input including the artists, the cost of switching from one supplier to another within the market is equally high. As a result, artists are spoilt for choice in selecting the right producer and supplier of distribution services.
At the same time, the buying power of consumers is high such that the producers and the artists are in a position to dictate the prices of the music in place. Spotify uniquely takes advantage of the growing use of the internet to source music from producers and artists and provides it to the consumers. As a means of earning a profit, the service ensures that the clients, or end users, pay a simple fee for every stream they listen to. The provision of a commodity that is always going to be in demand in a cheap and easy to access manner, enables the costs of these streams remain low.
Additionally, the competitive rivalry from Apple Company is pushing Spotify into providing proper and high quality music product. If Spotify is not in a position to provide quality product then the suppliers and buyers look for other opportunities to get good deals. Therefore, the completion has kept the company on their toes to offering quality service at affordable prices. The software across which Spotify does business is secure and unique.
Consequently, the consumers cannot substitute the quality of music from any other platform. It is because Spotify tends to provide unique, original and quality streams that can be accessed anywhere at any time due to the growing ease of access to the internet. It provides a means of providing music at a cheap and affordable cost. It is the main reason as to why pirating music started in the first place. In addition to that, the service boasts of a huge cataloged of songs that are from various genres and is growing in real time. There are no other music service providers, enabling the public to access such a large number of songs, in a legal manner that ensures support for the artists in taken into consideration covering the ethical aspect of doing such business in the relative industry.
The power is also affected by the ability of the people to enter the market. The power to hinder stiff competition is a strategy that every successful organization does. As long as a strategy is legal, then the company can apply it indiscriminately. One way of doing so is using copyrights and signing artists to upload their work on the said website.
Recommendations and Conclusions
It is imperative that Spotify improves the manner through which the artists benefit from online streaming. Some of the recommendations to this effect are inclusive of the maintenance of label and artist buy in; introduce serous advertisement and the securing of the product’s status as a lifestyle brand. The royalty model applied in the service ought to be transparent in order to ensure that an element of trust exists between them and the suppliers of the songs. In addition, compensation to the labels will ensure that their buy in the service is secured. The only detriment to this transparent solution is that artists may question the interests of the music company that they have signed in. Moreover, there will be need to ensure that the solution is profitable in the long run to build the confidence of the investors.
The use of advertisements will also generate income that can go to reducing the insecurity that many artists have concerning Spotify. The use of online advertisements will enable the company customize them to suite and promote the user experience. In this manner, the end consumer will not feel that the advertisements are a nuisance. Some of the resources recently acquired by Spotify can be used to nurture the relationship with the makers of the adverts. It can use Next Big Sound and Echo Nest to provide information on the consumers to the advertisers. The use of the internet will enable the streaming of music to target consumer segments through advertisement that is based on their listening patters or locations. An avid example is the promotion of a concert of a specific band whose music is being streamed. It, however, is important for the means of executing these adverts not to interrupt the music listening experience as well as ensure that they target the correct consumer. A heavy metal themed advert may discourage a folk music enthusiast, for instance.
Such elaboration of the end consumer and consistency in the supply of music would bolster the mission statement found on Spotify’s Facebook page that reads, “Music for every moment. Play, discover, and share free. The Spotify website is a growing online community, with users chatting, socializing and sharing musical experiences in an easily accessible manner, not to forget ethical and legal. Spotify has the potential of exceeding music expectations and growing to become a lifestyle entity through the provision of soundtracks to day to day activities, warming the hearts of many through melody and sound.
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