Spotify - 4P’s
Product - Product innovation refers to innovation in the product/service that an organisation offers
The radical product innovation lies in its simplicity, speed and easy to use interface, which is a format that is structurally superior to previous streaming services such as Pandora. The product is provided to consumers via an instantaneous streaming service through a ‘Freemium’ and ‘premium’ model.
Product innovation is also demonstrated with its strong integration with Facebook providing consumers with sharing capabilities and an extension of their social network to include music.
Innovation is also seen in the development of an open platform that allows developers to create consumer-centric applications.
Seizing: Spotify has therefore seized upon the market opportunity due to the lack of a fast music streaming services, and have captured value through the creation of a business model that caters to the target market’s differences in willingness to pay. Value is also the creation of a product consisting of appealing features encouraging consumer loyalty and commitment.
Process – process innovation refers to innovation regarding how a product/service is created or delivered.
Radical process innovation is demonstrated by Spotify through how it delivers its services to their users. Instead of downloading, music is enjoyed through the streaming of music over an internet connection. The notion of streaming music is a radical process innovation, although music is available to be streamed on Youtube, software that allows for streaming from a library of tracks is a first.
Seizing: Spotify have seized upon the market opportunity through the creation of a streaming service that delivers music instantaneously to consumers whereas previous streaming services have involved physical downloading of tracks. Value is created through the satisfaction of consumer expectations regarding speed of delivery and the simple-to-use process.
Position – position innovation refers to changes in the context in which the product/services are introduced.
The trend within the industry is shifting from consumers desiring music ownership, they are targeting young consumer market. Spotify has captured value through its success in converting these young users to the paid-for subscription service increasing its revenue sources. Free services and the integration with Facebook were the key strategies that cemented Spotify’s position within a young consumer market. Paradigm – paradigm refers to changes in the underlying models that frame an organisation and its tasks.
In this stance, there has been an alteration in the traditional model that frames the online music industry. Technological changes from CD distribution to a digital music industry were a radical paradigm shift. Conversely, the shift from digital music ownership to music streaming is an incremental paradigm as the channels of music availability remain stable and the product still remains non-physical when comparing digital ownership and streaming.
Seizing: Spotify were able to sense the shift, as a result; disintermediation has occurred whereby Spotify has removed downloading step in the online value chain. The organisation is framed around streaming and instantaneous music availability and has thus eliminated the requirement for downloading.
Majority of the organisations have to be ambidextrous to engage in exploitative and explorative. A recent research done by O’Reilly showed that more than 90% of the ambidextrous organisations achieved their goals and they were significantly more successful than other organisations structures. The research results also found that organisations with functional designs, completely integrated into the regular organisational and management structure, could perform as well as ambidextrous designs. But there were only 25% of these organisations could manage to be successful, and