Managing Innovation in Spotify Organization

This report explores the application of innovation theory in the context of Spotify organization and how it has implemented the blue ocean strategy for innovation. It provides a description of innovation theory and its application in Spotify, along with the advantages and disadvantages of the blue ocean strategy. The report also discusses the historical development of the blue ocean strategy in Spotify and suggests future innovation methods for the organization.

Managing Innovation

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Description of innovation theory............................................................................................1
2. Application of innovation theory in context of Spotify organisation.....................................5
CONCLUSION................................................................................................................................9
REFERENCES..............................................................................................................................10

INTRODUCTION
Innovation management is a aggregation in which innovation is combined with process of
management so that changes can be implied effectively. Innovation management allows a
business organisation to respond to external and internal opportunities available with business
organisation. Creativity available with businesses are introduced with new ideas, process or
introduction of new products. Managing a innovation involves a process in which traditional
management principals and practices are managed as per changes are made in the business
environment (Aizstrauta, Ginters and Eroles, 2015). In the process of managing innovation focus
of management is created on products, process in business, organisational structure and
marketing innovation opportunities. To provide a detailed information how various organisations
manages their innovation this report is prepared. In this report Spotify Technology organisation
is considered to reflect techniques of managing innovation. This is a European American media-
services provider based in Luxembourg. It was founded in the year 2006 by Daniel Ek and
Martin Lorentzon. Project report will provide description of innovation theory and its application
on organisational context for development of historical, current and future products (Biemans,
2018).
MAIN BODY
1. Description of innovation theory
The process of innovation involves translating an idea or invention into a good or service
that creates value or for which consumers pay more. Innovation is a result of assessing needs and
wants of consumers and applying the new ideas to generate more satisfied consumers. Through
innovation application of better solutions can be made so that new requirements and unsatisfied
needs in the existing market is satisfied. Innovation in long run turns out as a medium for
business organisations to become adaptive to changes. Their are number of theories applied on
business organisations to implement innovation this will help to ensure that value is created for
consumers and more and more amount of revenue is generated (Bruns, 2014). Some of the most
common innovation theories applied by business units are descriptive innovation, effective
brainstorming, diffusion theory and blue ocean strategy for innovation. In Spotify technological
organisation Blue Ocean Strategy is applied for innovation and detailed description of the
strategy is as follows-
1

Blue Ocean Strategy: It is a simultaneous pursuit of creating differentiation and
providing low cost to goods and services provided with a motive to open up a new market
opportunity. In this new market space is created and new demand is fulfilled with providing them
desired goods and services. In blue ocean strategy a uncontested market space is created and
captured and competition is resulted irrelevant (Campbell, Lambright and Wells, 2014). This
strategy is based on the idea that each business organisation can achieve higher profits by
creating new demand in non-competitive market. Ensuring higher amount of profits is much
easier then competing with the rivals in the existing market. Implementing the strategy is right
sequence is one of the most important part to ensure its commercial validity. When blue ocean
strategy is applied in strategic sequence then it reduces risk of business model. The idea must be
passed through a sequence of buyers utility, price, cost and adoption.
2

Buyers Utility- Goods and services that are offered under blue ocean theory must
possess buyers utility. Their must be a compelling reason for the mass people to buy what is
offered to them.
Price- Amount charges as per the strategy needs to be such that they attracts the mass of
targeted buyers. It must be ensured that buyers must have a compelling ability to pay for what is
offered to them (Dibra, 2015).
Cost- At the time of introducing an innovation under blue ocean strategy it must be seen
that business is able to produce its offering at targeted cost and still earning healthy profit
margin.
Adoption- All the hurdles that will become a challenge for targeted consumers for
adopting a product offered to them needs to be assessed at early stage and they are addressed to
resolve the issue.
Formulation of Blue Ocean Strategy is based on six principals and each business
organisation needs to considered these principals while formulation and execution of this
strategy. These principals helps in systematic risk management through minimising it and
maximising more and more opportunities (Gayadeen and Phillips, 2014).
Reconstruct market boundaries- This principal helps managers of business to identify
the path through which they can create uncontested market space across diverse industry.
Through this business organisations make the competition irrelevant through opening up
themselves into blue ocean where no rivalry can compete.
Focusing on big pictures, not numbers- This principals helps business organisations to
design a strategic planning that not only leads to incremental improvements but also helps to
create value innovations. This principal covers planning risk and mangers using visualizing
approach drives focus on the big picture rather than to be submerged in numbers.
Reach beyond existing demand- Blue ocean strategy focuses on creating the greatest
market of new demand (Glisson, 2015). In this managers focuses and aim to provide better goods
and services so that consumers taste and preference can be meet in most appropriate manner.
Size of market is maximised to earn more profits and scale of risk is minimised.
Get the strategic sequence right- As per this strategic principal sequence that company
should follow to implement blue ocean strategy must be correct to maintain profitability growth
in business over a period of time.
3

Overcome key organisational hurdles- Manages through this principal uses tipping
point leadership so that business can minimise its key hurdles that blocks implementation of a
blue ocean strategy. Organisation risk is managed by leaders and managers with cognitive,
resource and motivational approach (Kapoor, Dwivedi and Williams, 2014).
Build execution into strategy- A well defined execution strategy is prepared so that
people in organisation become motivated to act and execute a blue ocean strategy. As blue ocean
strategy brings certain changes in the organisation so a strategy is required so that people
voluntarily move towards requirement of blue ocean strategy.
Blue ocean strategy is quite effective and provides desired results that a business
organisation wants to achieve over a period of time. To discover an exclusive Blue ocean, Kim
and Mauborgne recommended that businesses considers Four Actions Framework to reconstruct
buyers value elements in crafting a new value curve. The framework is designed with four key
questions that are as follows-
Illustration 1: Four Action Framework, 2019
Source: Four Action Framework, 2019
Raise: It means factors that a business needs to raise over and above industry standards
needs to be identified. These standards and factors will be accessed to check their viability and
4

when business will find it suitable and viable in relation to all factors then new standards are
raised to enjoy profitability (Four Action Framework, 2019).
Reduce: In this all the factors that leads to low performance of business is identified.
Together with these factors that hinders performance and hampers businesses to achieve their set
objectives are identified so that negative impact can be minimised. Factors that result of
competing against other industries will be reduced and level of competition is improved in the
industry.
Eliminate: Blue ocean strategy while implemented in a business needs to access that
what factors present in the industry that are competed long should be eliminated at very first
stage. Elimination of these factors are required so that business organisation can effectively
implement blue ocean strategy (Karakaya, Hidalgo and Nuur, 2014).
Created: In the last a question is raised regarding what are that factors that are still not
provided in the industry and that will be high in demand if offered. Scope of innovation is
identified at this stage and after making all the research of market, targeted consumers and
viability a specific factor is selected to be introduced in the market. This factor will be created as
a feature of the product and services offered by business organisation and in long run
competitive advantages is enjoyed.
Advantages and Disadvantages of Blue Ocean Strategy:
Advantages-
 It will helps in setting new business standards that leads to satisfy consumers in better
manner.
 High profit margins are achieved in a new market through this strategy.
 Creates brand equity that lasts for decades.
Disadvantages-
 It did not last for long duration and eventually becomes red ocean.
 When not executed properly in leads to promote market complacency.
 It leads to ignore relevant competition.
All the details regarding blue ocean strategy is provided above and for a business
organisation where this strategy will be implemented for innovation all the details needs to be
considered to make it more effective.
5

2. Application of innovation theory in context of Spotify organisation
Spotify is considered as one of the main media-services provider organisation who's
country of origin is Sweden and headquarters are situated in New York city. Business strategy
that leads to innovation for Spotify organisation was based on blue ocean strategy. Establishment
of this organisation was an innovation in itself as it leads to create and capture new demand
(Larsson and Larsson, 2017). Founders of this organisation thought out of the box and started
offering unlimited music streaming, instead of the traditional downloading approach. With
establishment of Spotify organisation it becomes an innovation as it was the first company which
was providing consumers a place where instead of downloading a song online music can be
played by them. Using this application consumers can make their own play list for their favourite
songs and no need to make any downloads.
Before introducing this innovation founders and managers of Spotify needs to access all
the different aspects of the idea by implementing blue ocean strategy for innovation. This
analysis will help them to understand each factor in clear terms and all the elements that creates
an impact on innovation is analysed completely (Mendi and Costamagna, 2017). To assess the
historical development of blue ocean strategy in Spotify organisation description of all the
elements will be made as follows-
Innovation: At this first stage when the organisation was established founders of
business will access or checked how online media services is provided to consumers and how
satisfied these consumers are with services offered to them. While accessing the market it was
noted that media industry is one of the largest and fastest growing industry and serves large
consumer base. Consumers who likes to play songs have to download their play list or need to
make a storage for music in CD's and DVD's. This was quite inconvenient for them to play songs
anywhere they wants and this leads to creation of demand for some innovation which provides
access to music. Spotify organisation identifies this market requirement and provides with a
innovative solution (Minoli, 2015). The strategy of providing facility in which consumers do not
need to download music and can play music without storing become blue ocean strategy of
innovation. As a platform is provided to consumers to make their playlist and easy access to
music and brings one of the best innovation in the music industry. All the competitive
advantages are enjoyed by Spotify because as per blue ocean strategy they make all the
competition irrelevant.
6

Communication: Innovation will result profitable for organisations when it will be
communicated to targeted consumer group in most effective manner. When Spotify launches
first of its king innovation in the music industry then it become quite important for them to
communicate with the consumers so that they can enjoy benefits through blue ocean industry. As
this is a media service industry online and offline promotions of the brand and its services was
considered profitable (Orlikowski and Scott, 2015). Communication channel which provides
largest reach in minimum time duration will be considered by Spotify to be used to introduced its
innovative idea. Social media plays important role as a channel of communication for innovative
idea of Spotify organisation. Facebook, twitter and advertisement on YouTube shows positive
results for innovative idea of business and more and more consumers gets attracted to the
services offered by Spotify technological organisation.
Traditional system: Before introduction of innovation by Spotify organisation CD's and
DVD's were the most important sources for music storage. This issue of storage was assessed by
various other organisations and to grab market opportunity more and more consumers are
provided with facility of downloading. This services was not enough to resolve the whole issue
and still consumers was facing with a issue to store more and more songs (Poblete and Spulber,
2017). After the complete market research with assessing all the market situation completely
Spotify organisation finds it as an opportunity to introduce a system which provides consumers a
facility to play songs online without downloading them. This resolve the huge issue of storage in
the music industry and termed as one of the most successful innovation.
Acceptation and Time Duration: When innovation was introduced in the market it must
be assessed by the managers of Spotify organisation to generate the time schedule that will be
taken by consumers to adopt with the innovation changes. This time duration will be made on an
approximation basis and all the organisation to become successful with the innovation needs to
provide with appropriate time to consumers to get adaptive to innovation (Prange and
Schlegelmilch, 2018).
All the historical elements of Spotify organisation to be used to implement blue ocean
strategy for their innovation results in best productive results and bring huge success for the
business. Spotify enjoys this massive success because their was no other competition was
available in the industry. In the life span of business organisation there are number of
competitors were introduced in the market and to become competitive Spotify organisation needs
7

to use this innovation strategy over and over in future for innovation. Various innovation
methods that needs to be adopted in future by the organisation are as follows-
Zero Touch provisioning: It is a feature that is available in various devices to be
configuration automatically and eliminating all the manual labour involved with adding them to
a network. Through this local controller are developed to plug and play (Raynard, 2017). The
local controller required information form the network and provisions itself automatically.
Adopting this system in Spotify organisation will help in enhancing its performance. Together
with this when central control is provided and manual involvement is minimised then it leads to
better services and innovation in future.
Providing a platform to consumers for recording their songs and listing them to
Spotify: This feature will be termed as one of the highly recognised innovation in future. As
there are number of individuals who wants to record their own songs and wants a platform to
show their talent. When Spotify organisation will assess this need of the target market then it will
become one of the greatest opportunity to become successful in future and enjoys competitive
advantages (Saunila, 2017). This idea will become blue ocean strategy as no other platform is
available in the present time which gives such mass reach to showcase talent without any cost.
Spotify will take advantage of this as more and more number of consumers will use this
application and profits will be generate of business.
For both the innovative ideas managers of Spotify needs to identify that these ideas will
bring innovation in the music industry. Together with this they will assess buyers utility for the
product or services offered to them. A proper communication channel will be established so that
new innovation will be addressed to targeted consumer group and provide them specific time to
adopt the changes. Price charge for the services must be such that they are affordable for
consumers. All the features that make the services of Soptify organisation above the industry
standards will be raised and all hurdles will be removed (Schoellhammer and Gibb, 2017).
Blue Ocean Strategy when implemented in Spotify organisation will help in achieving
competitive advantage through innovation in future. Implementing this strategy will help in
achieving its goals and objectives again and again through continuous innovation to services.
The impact of Rogers characteristics on consumers adoption of an innovation are
elaborated as follows-
8

Relative Advantage: As per this characteristics potential audience needs to see how
innovation will help in meeting their needs to desires as per current situation. It reflects the
extent to which innovation is more productive, efficient and cost effective to improve existing
practices (Simin and Janković, 2014).
Compatibility: This reflects relationship that an innovation possess with its potential
consumers. Spotify must ensure that innovation that is provided to consumers is supported with
lifestyle of consumers.
Complexity: It leads to down the progress of innovation made by Spotify organisation.
An organisation must needs to access all the complexity involved in adaptation of innovation so
level of complexity can be minimised and chances of success for innovation done by Spotify is
enhanced.
Trialability: This defines the degree to which an innovation can be experienced by an
individual with some limited basis. Users of innovation must be provided a brief look what
innovation can do and how it can be tasted by number of interested individuals.
Observability: It is the degree to which results of innovation are visible to others. When
chances of adoption of innovation is high then it provides certainty to business to get success
through its ideas (Tidd and Bessant, 2018).
Application of this four action framework on Spotisy organisation-
Raise:
 Song sound quality over a period of time.
 Social network integration.
Reduce:
 Undesirable and unwanted music as per preference of targeted consumers.
 Buffering time for songs to ease the use of application.
Eliminate:
 Limited number of skips.
 Need for internet access to use service.
 Listening hour limitations.
Create:
 Ability to generate own play list as per personal taste and preference.
 On demand song choice.
9

 Ability to rewind and listing songs in fast forward music.
CONCLUSION
From the above project report it has been concluded that innovation is one of the
important tool that helps to bring success for business organisation. Introducing an innovation is
not enough to maintain competitive advantages. As each business organisation needs to manage
its innovation activity to become successful in the changing business environment. Application
of a innovation helps Spotify organisation to implement innovation strategies in the most
effective manner. Through these strategies each element of the innovation process is assessed
completely and together with this it helps in maximising advantages of innovation results. Usage
of blue ocean strategy of innovation in Spotify helps to crate and capture new demand. As
Spotify thought out of the box and this helps in obtaining competitive advantages for a particular
period of time till competition was not merged. Innovation is not a one time process and to
become successful each organisation needs to keep on innovating in future so that competition
can be done with others in the market.
10

REFERENCES
Books and Journals
Aizstrauta, D., Ginters, E. and Eroles, M. A. P., 2015. Applying theory of diffusion of
innovations to evaluate technology acceptance and sustainability. Procedia Computer
Science. 43. pp.69-77.
Biemans, W., 2018. Managing innovation within networks. Routledge.
Bruns, A., 2014. Media innovations, user innovations, societal innovations. The Journal of
Media Innovations. 1(1). pp.13-27.
Campbell, D. A., Lambright, K. T. and Wells, C. J., 2014. Looking for friends, fans, and
followers? Social media use in public and nonprofit human services. Public
Administration Review. 74(5). pp.655-663.
Dibra, M., 2015. Rogers theory on diffusion of innovation-the most appropriate theoretical
model in the study of factors influencing the integration of sustainability in tourism
businesses. Procedia-Social and Behavioral Sciences. 195. pp.1453-1462.
Gayadeen, S. M. and Phillips, S. W., 2014. The innovation of community policing and the COPS
Office: does diffusion of innovation theory hold in a manipulated
environment?. International Journal of Police Science & Management. 16(3). pp.228-
242.
Glisson, C., 2015. The role of organizational culture and climate in innovation and
effectiveness. Human service organizations: management, leadership & governance.
39(4). pp.245-250.
Kapoor, K. K., Dwivedi, Y. K. and Williams, M. D., 2014. Exploring diffusion of innovation
adoption attributes: a cross-disciplinary literature analysis. International Journal of
Indian Culture and Business Management. 8(3). pp.300-328.
Karakaya, E., Hidalgo, A. and Nuur, C., 2014. Diffusion of eco-innovations: A
review. Renewable and Sustainable Energy Reviews. 33. pp.392-399.
Larsson, J. and Larsson, L., 2017. Success factors for managing innovation projects in
production. International Journal of Manufacturing Technology and Management
(IJMTM).
Mendi, P. and Costamagna, R., 2017. Managing innovation under competitive pressure from
informal producers. Technological Forecasting and Social Change. 114. pp.192-202.
Minoli, D., 2015. Innovations in satellite communication and satellite technology. Wiley.
Orlikowski, W. and Scott, S. V., 2015. The algorithm and the crowd: Considering the materiality
of service innovation.
Poblete, J. and Spulber, D., 2017. Managing innovation: Optimal incentive contracts for
delegated R&D with double moral hazard. European Economic Review. 95. pp.38-61.
Prange, C. and Schlegelmilch, B. B., 2018. Managing innovation dilemmas: The cube
solution. Business Horizons. 61(2). pp.309-322.
Raynard, M., 2017. Understanding academic e-books through the diffusion of innovations theory
as a basis for developing effective marketing and educational strategies. The Journal of
Academic Librarianship. 43(1). pp.82-86.
Saunila, M., 2017. Managing continuous innovation through performance
measurement. Competitiveness Review: An International Business Journal. 27(2).
pp.179-190.
11

Schoellhammer, S. and Gibb, S., 2017, November. Enabling rather than managing innovation.
In RENT XXXI: Relevance in Entrepreneurship Research.
Simin, M. T. and Janković, D., 2014. Applicability of diffusion of innovation theory in organic
agriculture. Economics of Agriculture. 61(2). pp.517-529.
Tidd, J. and Bessant, J. R., 2018. Managing innovation: integrating technological, market and
organizational change. John Wiley & Sons.
Online
Four Action Framework. 2019. [Online]. Available through:
<https://www.blueoceanstrategy.com/tools/four-actions-framework/>
12