I have blogged already on the term ‘Innovation’ meaning innovation of your business model, as opposed to trying out a wide range of minor activities around technology that you have not tried before. Well this is a quick topical piece on the innovation of Radiohead this week who broke the accepted mould on how to sell music in form of either CDs or downloads by offering ‘free’ downloads. Rather than describe ‘what’ they have done I suggest a visit to their web site.
My interest is in the impact of their business model innovation and how that is based on increasing the use of multiple technologies to increase what is becoming known as ‘intimacy’, in this case the vastly improved ‘interaction’ between fans and the pop group. There was a massive amount of coverage throughout the industry on the Radiohead innovation, and it really boiled down to two messages:
- 1) its highly destructive of the music industry or,
- 2) its highly innovative in an industry where the value proposition has shifted.
The first point is pretty obvious a cry to maintain the status quo in an industry where falling sales in CDs have not been off set by rising revenues from paid for online downloads. Though there was a great quote from another group that asked if they gave away their music would the plumber give away his time if their house boiler broke down.
It’s the second point that is interesting; because it might be the music industry today, but I am pretty sure it will be a lot of other industries tomorrow. I believe it to be a combination of the ‘long tail’ effect of making more and more specialised markets that appeal to different sections of the potential market, and, the change in what represent value in a world driven more by interactions based around Services, than by distribution of products. However one last comment on the music industry around Prince and his sell out event in London at the O2 centre where he played to bigger grounds for a longer period than would be normal. In the lead up to this a leading British national newspaper gave away free a CD of Prince’s new album. So once again what was considered the product that raised revenue through distribution, became a free item with the goal of encouraging more people to get ‘involved’ with Prince and his music leading to increased sales for a live event. The event was just that, a high value/cost ‘event’ or perhaps we should consider it as a service for one evening only.
If we return to the Radiohead offer of ‘free’ downloads, what is truly innovative and worthy of some real deep thought, is the fact that you are offered the opportunity to pay, in fact to choose how much to pay. This break through that they describe as an ‘honesty box’ is more properly the opportunity for a fan to decide on the value of the offering to them individually. (I suspect that underlying this is the thought that a real fan would not cheat his/her favourite group on the basis that will destroy their future). This is a very advanced version of the low cost airline industry proposition of deciding on the value of a seat on a given flight with a potential customer on line. However its even smarter than that because the music industry is losing the ability to sell copies of the music as user see sharing as a social principle of the new world. Why fight this when you can change your model and your value proposition?
Let’s go back to what is really being sold, or more crucially what people are choosing to buy, and that’s the ultimate example of a ‘long tail’ approach. That’s what I believe should make us all think very very carefully about the Radiohead innovation, and make us keep a very careful eye on what happens next in one of the first industry sectors to really be moved into the new market models.
The link to technology? Actually everything about this is driven by the new technologies and I don’t just mean the distribution of music cheaply on line, I mean the social networking, video, blogging interactive world that creates and unifies entire communities in a shared value model that leads to different behaviours and values. Is your business really thinking about how new technology is changing the market enough? Does it even know enough about this kind of change and the technology that makes it possible to be able to think through what they could do? That’s something to really consider!