Research Paper on Learning from Mistakes: Managing Innovations in Spotify

It is so unfortunate that I have to redo this work. In my previous work, I was not keen enough to notice that we had been given five companies to choose from. So, I went ahead and used my own company, which was not in line with the instructions of this essay. Due to this, I was left with no choice but to redo the entire work. Presently, I have done the work, as stated in the instructions, by choosing Spotify as my company of focus.

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Introduction

Innovation is termed as the incorporating of new ideas within companies purposefully to win customer's loyalty. Indeed, innovation is a critical aspect of any corporation because it helps in evaluating its overtime performance. For companies to survive in competitive markets, there is a need for incorporating effective strategic management policies, which is only achievable through managing innovation. Surviving in the music industry is not easy without opting for innovation. Spotify is one of the most renowned online steaming music networks that are very innovative. In 2008, Spotify had its official launch. For a very long time, it has gained recognition of being a giant music. The marketing strategy of Spotify is not parallel, while its investor's strategy is quite active. There are various types of companies that do the same kind of business, but none of these companies can beat Spotify. Therefore, it continues to soar high and higher. This essay aims at discussing how Spotify company has managed its innovation overtime to gain competitive advantage. Moreover, it assesses the strategies they have undertaken up to date and also the challenges encountered in the process. Also, some background information of the company is provided for a better understanding of its evolution.

Background Information

Daniel Ek and Martin Lorentzon are the founders of the Spotify Company. They began this company in 2006 in Sweden during the time that it was launched. Incentives were provided to their first customers, and this was made possible through the free accounts and the paid subscriptions (Adegoke, 2015). In 2008, Spotify was officially launched, and users enjoyed the advertisements at no cost; they used this as a revenue model. When the subscribers are offline, they can be able to listen to the music without listening to the advertisements hence being an advantage to the Spotify company as it has been able to curb all the illegal types of downloads and pirate activities (Bertoni, 2014).

Piracy and illegal distribution of the digital amenities were facilitated by the first wave based on the internet and music services, and because of this, the music revenue was reduced globally; this made it decline by 40% to around $14.3 billion. This, on the other hand, resulted in not only poor customer experience but also unreliable experience from the customers due to the music that was pirated. This did create a market that affected both the publishers and the consumers because they were very receptive when it came to the new types of solutions. The model of Spotify streaming became a key factor in the industry of music inflection point. The category of streaming was able to grow from 9% to 72% from 2011 to 2017. In the year of 2016, the revenues of the global music did reach the highest rate in a period of 20 years, and an increase of 6% was noted; hence it was able to reach $15.7 billion. The Spotify revenue was represented by 23% of the music market globally in 2016 and 2017; it was able to rise by 30%. Also, it is important to note that as of now, it represents around 42% of the market of streaming in the music industry, and this is the largest and fastest portion that is growing in the market. Spotify is positioned well to enable it to scale the user capture opportunities of the revenue in the music that has been recorded within the industry of music.

Spotify company has gone further to implement four stages, which enables them to explore new ideas and ensure they meet the customer's needs through redefining a clear narrative. The first stage involves encouraging both product and idea to shape each other, promote innovation, and with this, they are in a position to build a minimum viable product so that they can assess the user's interactions with the software. The company usually releases all its products to the consumers, beginning with only 1-5% of consumers to collect data and measure success. This only indicates that the company tailors the final product to meet the user's requirements. In this regard, they may also effectively manage the aspects of operations, such as scalability. Spotify still continues to optimize its products even after release so as to get the highest value products to avail to users.

While the process of Stage-Gate aims at eliminating the weak ideas on time, the company recognizes the fact that failure is learned from the NPD process flexibility, which enables them to look at what might have gone wrong with the process and products. The company also understands the make the release of products easier and faster; this is done through encouraging small and frequent releases. The company chooses trust and failure instead of being fearful; this is purposely to boost their market success. Spotify is guided by the agile engineering culture in its process of product development. The corporation consists of squads and teams that are responsible for long term missions. The process of NPD makes it possible for the employees to tailor the process to their methods of working; this is termed to be liberal. The employees need not constantly seek the approval of management in cases where they want to progress to a different stage hence minimizes handoffs and wait to scale without depending on others.

Innovation depends on the design; therefore, there is a dire need for managers in industries to recognize the importance of knowledge to incorporate design as a strategic process. Until recently, Spotify did not have a strong design foundation. After launching the company, it saw rapid growth and expansion hence neglected to define clear principles of design and visual identity. According to the vice president of Spotify, the company recognized that they had inconsistent designs across devices, and there was a fragmentation of the user experience. While they were constantly developing new features that add value, when it came to applying the product, it did not meet the expectations of customers. Therefore, the company saw the need for major design re-haul.

Advancements in technology have shifted the way music is consumed. Ek saw an opportunity of responding to the changing demands of consumers by supporting music and labels while fighting piracy. The radical approach of Spotify to innovations of the business model indicates the innovation within the music industry. The radical or disruptive innovation means discontinuation from the past. This is a definition of new performance compared to the existing offerings; hence can develop new markets through the application of values of a different set. Spotify birth was from the recognition that individuals wanted to consume music digitally, and artists were constantly pirating online services. Spotify is one of the best examples of new market disruptive innovation because they formulated a new business model appropriate for answering musician's and customer's needs. This, in turn, led to the development of their own market for the streaming of online music.

According to Spotify Labs, (2014), though the company disrupted the music industry initially, while more and more companies start to recognize and respond to the relevance of digital, the company currently focuses on innovation sustenance. Through incorporating regular updates of new features via incremental innovations, it is in a position to add value to its produced services. One of the innovation strategies Spotify has adopted is the use of data collected from its users to directly respond to the customer value such that innovations offer simple solutions to the needs of users. The innovation centered on the user has enhanced Spotify's success to avail products that answers the user's requirements. In line with the requirements of the digital generation, Spotify currently encompasses more than streaming of simple music to being a social platform with a competitive edge.

The Spotify market strategy enabled it to build a larger audience, and this was achieved because of scaling it using the geographic region. In Europe, during 2008, and also the United States in the year 2011, they were rolled out, with a system that was invite-only (Dredge, 2013). Through the perceived scarcity, the company did generate buzz, and through this, there was an increase in demand. This kind of strategy was able to equip the Spotify company with a kind of lever that enabled it to control its growth because charges were applied to the new users who wanted to listen to the songs. A service by the name freemium was launched by Spotify, and this, on the other hand, attracted a large audience that had subscribed before.

The company also did leverage its music, inherently social nature in order to be able to drive amongst its user's sharing and discovery. Due to piracy activities, the music industry was destroyed; however, Spotify created a viral loop hence increasing the market value and user network. Social features were oriented by the Spotify Company; these included shared links and also integrations that were aggressive with other social networks such as Facebook, and this boosted the rapid growth of the audience in 2011 (Choi, 2014). Subsequently, the company launched an innovative integration that had platforms such as the PlayStation in the year 2014 and Uber in 2016.

According to Bach (2004), a clear customer proposition value was offered by Spotify, by the introduction of the utility of all you can eat utility type of service through a monthly subscription that is fixed, and this was able to unlock the customer audience of them being willing to pay for the music and this did increase revenue across the ecosystem of music. Spotify was able to expand its utility over time; this is because the growing base of the users, their preferences and tastes hence the company was able to accumulate more data, through this expansion they were also to offer the users with personalization that were data-driven and this, on the other hand, did drive both the discovery and also the engagement. An average of about 25 hours was consumed in a month by MAU in Spotify in the year 2017, and Spotify was accessed by around 44% of MAUs, and this was daily accessed (Nylen & Holmstrom, 2017). The audience of Spotify, which was large, did enable its momentum in the construction of marketplaces that was two-sided, and this was able to benefit not only the creators but also the consumers. The company has been able to provide a platform for its creators so as to be able to monetize the work that they do, be able to come into a connection with their various fans, and also have access to an understanding that is better and through this, they will be able to grow their business. The playlists are considered to be very critical when it comes to the marketplace, hence enables the discovery of the consumers and also the various artists. The listening time for the curated playlist did increase from less than 20% around two years to around 31% in the year of 2017 (Backlander, 2019).

Spotify has been seen to be available in at least 61 countries and also territories around the globe, but around 13%, of the payment, has enabled the smartphones present in those markets to have access to the platform (Rayna & Striukova, 2016). The largest Spotify region is Europe, and it has around 37% of its users. North America...