Managing Innovation: Application of Blue Ocean and Disruptive Innovation Theories in the Context of Spotify

This report explores the application of Blue Ocean and Disruptive Innovation theories in the context of Spotify's historical development and future progress. It discusses the benefits and limitations of these theories and how they can enhance competitiveness and drive innovation in the organization. The report also highlights the importance of managing innovation in today's dynamic market environment.

Managing Innovation
Report

Table of Contents
INTRODUCTION...........................................................................................................................3
Application of Blue ocean strategy in context to the historical development........................3
Historical development of Spotify..........................................................................................5
Disruptive innovation theory..................................................................................................6
Process of disruptive innovation:...........................................................................................6
Principles of Innovative disruption theory.............................................................................7
Benefits to disruptive innovations:.........................................................................................8
Limitations of disruption theory;............................................................................................8
Application of Blue Ocean Strategy Innovation Theory........................................................8
Application of Blue Ocean Innovation theory and Disruptive innovation theory in the context
of future progress of Spotify.................................................................................................10
CONCLUSION..............................................................................................................................12
REFERENCES .............................................................................................................................13

INTRODUCTION
Innovation is a process that is in concern with development of a new idea so that there
can be developments that can be made in existing products in order to enhance the
competitiveness of a particular brand or product in the market. Innovation management is
regarded as a process where there is promotion of a new idea according to the internal and
external environmental factors that are posing a impact on the functioning of the organisation
(Tidd and Bessant, 2020). Present report is based on Spotify that is a Swedish media service
brand and a audio streaming provider which was established in the year 2008. its head office are
present in Stockholm, Sweden. The report is based on the process of historical development that
is taking place in a organisation with application of different innovation models in order to
analyse the future development strategies that can take place in the organisation.
Application of Blue ocean strategy in context to the historical development
COMPANY OVERVIEW:
Spotify is a Swedish brand that is offering a platform for their target segment of
customers who are music lovers. It was launched in the year 2008 and is owned by spotify AB
since 2018. they are offering digital copyright restricted recorded podcast and music that
includes 60 million songs that are from media Companies and record labels. Its basic features are
free from advertisements and posses a limited control. It also includes additional features such as
commercial free listening, offline listening that is via paid subscriptions and users are able to
search for music based on genre, album and artists (Nardelli and Broumels, 2018). There is also
facility of edit, create and share their playlists. This brand is having presence on Europe and
other some of the parts of Asia and Africa. According to data of October 2020 there have been
320 million active users on this platform that also includes 144 million paying subscribers.
VISION:
Spotify has a vision that is to offer a common platform to people that can provide them with a
best experience of music.
MISSION:

Mission is related to transformation of objectives and aims that is aimed to achieve the laid
objectives by enhancing their market share and customer reach.
BUSINESS CANVAS MODEL:
Key Partners:
 Third part
integrators
 Artists
 Record of
companies
Key Activities:
 Web
developm
ent &
maintenan
ce
 Marketing
 Maintaini
ng content
 Maintaini
ng of
music
library
Value
Proposition:
 Listening
to million
of songs
 Instant
access to
music
 Access to
playlists

Customer
Relationships:
 Assistance
with
website,
Facebook,
Audio
streaming
Customer
Segments:
 Free users
 Developer
s
 Subscriber
s
 Advertiser
s
Key Resources:
 Technolog
y
 Brands
 Employee
s
 Algorithm
 Brands
Channels:
 Web
applicatio
ns Mobile
applicatio
n
 Internet
Cost Structure:
 Platform
 Customer service
 Development
Revenue Streams:
 Advertisement revenue
 Revenue from subscription fees

Historical development of Spotify.
Sportfy is a streaming brand that was established in the year 2006 that was a effective solution
developed to deal with piracy that are faced by the music industry (Thornblad, 2018). The
organisation has seen a stable growth after they have launched their services on apple app store.
They have invested 100 million dollars for America expansion and is also available on android
operating system. They have gained 10 million subscribers since 2012. this organisation has been
successfully able to identify the new service requirements and then work according to such
customer needs.

Disruptive innovation theory
This theory explains about how new start-ups enter the market disrupting traditional
established businesses with their new ways and technologies. The way market functions carried
on from past is significantly affected by this technology of modern companies with new
innovation enter into the industry. This sometimes help other companies to change according to
dynamic environment and negatively impact those old businesses unwilling to adapt to those
changes.
Such innovation can be called a new launch of product, concept or service that introduces
a whole new segment of market or disrupts the existing market industry completely (Biemans,
2018). The main reason behind disruption of old existing market are changes in traditional value
drivers coming up with new business models and technology. Further this theory consist of four
forms of innovations that are sustainable, disruptive, incremental and radical.
Process of disruptive innovation:
Low margin beginning: At first when disruptive innovation enters the existing market, it
does not impact the consumers much as per the existing value metric measures. So the new
innovation is inferior to existing goods and services having good customer value established.
The reason behind when a new technology enters, it starts generally by catering to the small
market initially. Also with a short-term start, earning of profits too are slow as compared to
focused established businesses catering its high end customers with more demanding products.
High risk stage: Even after having more advance features in the new product, many
customers in the mainstream prefer being loyal to a specific brand provided by a established
seller only (Van Lancker, Wauters and Van Huylenbroeck, 2016). That is why, at this time
value of this innovation is still at its minimal point on the S-curve. This adds on to the risk taker
of the new technology to catch up to their focused consumer market before old businesses take
over.
Disruption or new market segment: Once the disruptive innovation is welcomed into
mainstream consumer market, old established firms have only one option to either instantly
adopt to the new technology or respond solely with a redefined model and offerings. This is also
true that catching up to the new entrant sometimes become difficult as product development is a
time taking process with multiple iterations required.

Exponential growth: The new innovation after reaching the mainstream often comes up
with a new business model or innovation. Also the arguments regarding its sales an value are
also simultaneously changed and sorted.
Principles of Innovative disruption theory
Observation of market trends and listening to customers carefully: Today's market is
dynamic in nature and therefore being overconfident or overlooking existing firms potential is a
blind spot for new innovations in industry (Nardelli and Broumels, , 2018). Keeping oneself
updated with current trends can be done through making efforts on getting true customer reviews
and taking follow-up from them on required changes needed if any.
Focus on new business model: Use of just new technology may not benefit much
sometimes. Therefore, reinventing business model can be a solution on hope to capture the
market with meeting good customer value standards.
Don't count on entering too soon:Patience is a key to get successful result many times.
So in order to achieve desired goals and objectives, they are to be approached starting from
iterative small businesses and improvements to be made accordingly.
Every innovation cannot be disruption: Sometimes new players entering the market
are highly engaged into attracting profitable customers only keeping other sectors and factors
aside that may benefit them only in short-run. Long-term goal of many established businesses are
not easily disrupted by new innovations which has to be kept in mind before entering the
industry.
Low-end and new market innovative disruptions: Low-end generally comprise bottom
markets with lower profits for new entrants and then gradually goes upstream focusing on large
profits. These markets get challenge of attracting over-served established consumers. Whereas
new-market disruption focusses mainly on low margin sectors by earning lower priced profits.
These are the underserved consumers of the market industry.
Not a product or service, but a process: Disruptive innovation theory states that it is
not just a new introduction of a product or service but a process of determining how the new
innovation is performing in the market. It also involves evaluation of business model, threats to
the new technology and customers satisfaction after experience.

Battles are to be chosen wisely: Using new technology to fulfil customers needs can be
done by properly understanding the true meaning of innovative disruption theory and creating
products and services accordingly (Janjić and Rađenović, 2019).
Benefits to disruptive innovations:
Established businesses can be analysed with ease: It is possible for new entrants to
analyse its competitor old firms by measuring total market size of companies, know performance
level in terms, selling prices & cost, distribution channels etc. Current demand and supply of
products to consumers makes it easy to figure out what offerings can be created more to attract
them.
Limited competition and large buyout: Starting with an underserved population makes
competition less. Also bringing up innovation to existing competition market may compel large
firms to offer good price buyout to the new player, not letting the competition reach heights.
Familiar with product solutions: Similarity in new and old products sometimes makes
it easy for new entrants to help customers accept their product.
Limitations of disruption theory;
Existing product competition: When a new player has to enter exiting competition, it
means they already have competitors with similar products in market making it hard for
company get success.
High risk of success: It is not necessary that new product innovation or technology will
lead to success only. It may be possible the profits are not fro long-run resulting in no more
attraction of leads (Schultz, André and Sjøvold, 2016). Also Big companies having interest in
preventing new players form entering making the risk factor more obvious.
Application of Blue Ocean Strategy Innovation Theory
Blue ocean strategy is a pursuit of differentiation & low cost that is pen up to new markers for
for creation of new demand. The main objective is to capture and uncaptured market space so
that competition can be made irrelevant. In the present changing external environment the
organisations are operating under high competition (Bahl, Lahiri and Mukherjee, 2020). They
are willing to do anything for the objective of achieving higher market share. This situation
generally arises when the business are operating in a saturated market that is regarded as “Red
ocean”.

Presently for spotify the brand has audio content now they are approaching a new market
segment that is customers who are willing to enjoy video content on the same platform. Initially
it will include a option where both audio and video content will be easily accessible soi that they
can get a competitive advantage as compared to other similar brands that are just offering the
audio content.
Blue ocean strategy is based on exploiting a available opportunity that has not been used by nay
other similar competitive brand in the present scenario. So that existing customers are not willing
to shift to other platforms in order to satisfy their demand for live streaming of video content
along with video content that is already part of Spotify.
Blue ocean market is going to offer a first mover advantage and also cost advantage in term of
marketing with no competition. There can be setting up of prices without any type of competitive
constraints that is also offering a opportunity to enhance the profitability.
In Spotify managers have to identify the building up of a value curve is that there can be a
detailed evaluation of the ultimate value that is offered to customers. In this customers data can
be used to analyse their future prospective demands. There is also efforts that is based on four
major factors that includes:
(Source: Blue Ocean – more success with the right strategy, 2018)

 Elimination or removal of the factors that is annoying customers: in spotify the frequent
advertisements are sometimes very annoying for customers is it can be removed complete
or minimized (Ab Rahman, Ismail and Rajiani, 2018). Reduction of features that are not important for the target customer base. Increasing the characteristic that are beyond the industry standard. It is also a effort that
will prevent customers from being overburden.
 Creation: There will have to be more focus on development of new factors for creation
of a new product. In the present case Spotify is focussing on development of a new
feature in terms of video content that will help them in attracting a completely new target
segment of customers.
Application of Blue Ocean Innovation theory and Disruptive innovation theory in the context of
future progress of Spotify
Blue ocean innovation theory puts emphasis on perpetual progress and continuous
product differentiation in order to increase unique qualities of the product. This theory involves
offering new and uniquely build products with superior quality and special features at low cost in
order to gain competitive advantage in newly formed markets. This theory states that barriers and
obstacles produced by an industry can be conquered by the commitment and rigorous handwork
of an individual entity. The application of this theory by competent individuals allow their
organisation to identify and construct markets with minimal competition in order to achieve
strong growth in that market in few time. The low cost strategy adopted by the organisation
along with low business opponents help an organisation expand their power in the market and
eliminate any strong competitive force from gaining strong presence in the market (Gaynor,
2017) . In relation to the Swedish audio streaming service supplier Spotify, for the future
progress of their enterprise the corporation is adding video streaming services in their application
and move forward from audio based content.
The audio based industry presently provides various services in audio format which
allows the users to listen to various musical, informational, educational, entertainment and sports
programmes by installing the audio streaming application on electronic gadgets which includes
mobiles and tablets (Johansson, 2017) . Spotify captured the need for incorporating video based

streaming options in the market and has taken the task of adding video based streaming features
in order to create and exploit market of video and audio based streaming services. This allows
the users to upload their videos and audio shows or enjoy streaming programmes uploaded by
other individuals from any entertainment category or educational or informative format of
shows.
This new service which aims to provide video content to the users is can be easily
accessed through any area with good internet connection or by downloading content to watch or
listen to when offline. The consumers with subscription of Spotify premium gain the advantage
of streaming content for any amount of time without interference in the form of advertisements
or compulsory promotional videos. In this condition Blue ocean strategy has been applied by the
organisation as this investment has helped the organisation create a market which provides video
and audio content on the same platform which has minimal competition and allowed the
establishment to gain huge amount of profits by fulfilling demands of consumers from a newly
build market (Barlow, 2016) .
The video streaming service is useful in attaining large numbers of consumers as video
based content increases the popularity of the streamer to competitively bigger extent than audio
based content. This feature of the service is able to attract talented content creators from all over
the globe, this characteristic of the service is effective in providing the organisation huge amount
of consumers as the presence of content created by talented individuals attracts loyal followers of
the service. As the premium subscription of this service allows the consumers to surf content
without any interference from advertisers, which is not provided by any other organisation, more
amount of consumers are inclined to join the subscription and become loyal consumers of the
company and gain benefits of the subscription model (Kerzner, 2019) . The Disruptive
innovation theory is used in this case as the respective organisation is able to introduce new
service in the industry of audio streaming and through good promotional campaigns which have
attracted the available consumer base towards the new service introduced by the organisation.
The blue ocean innovation theory has alol0owed the organisation to form and achieve growth in
new market and expand their presence at a global level.
Another factor which helps the organisation gain competitive advantage is
diversification of content available at the application and has enabled the company to dominate
foreign markets and gain loyal consumer base from all over the globe (Visentin, 2018) .The

present content offered by the organisation has expanded due to the introduction of video
streaming service. the decision of the organisation to include a feature which enables any user to
upload their content has impacted the consumer strength of the establishment positively as the
users have cheap alternative for uploading creative content gain popularity among on the global
stage and earn some financial amount from the company. These decisions imply application of
Disruptive innovation theory as these elements have enabled the organisation to gain distinct
position in the industry by attracting specific group of consumers effectively and introducing
their new service to a market at low prices and good quality of various features available at the
application.
The Disruptive innovation theory has allowed the organisation to gain competitive
advantage in the market by providing unique service with effective advertisement strategies and
accessible characteristics of this service (Barlow, 2016) . The main focus of the organisation is to
gain new consumers and enter international markets in developing countries by offering content
according to the cultural preferences of that nation. The ability of this service to give perpetual
progress to the organisation has allowed the company to invest in gathering fresh content and
involve content creators from diverse cultural backgrounds in order to maintain the global
expansion of the organisation and increase consumer base.
CONCLUSION
From the above report it is concluded that efficient innovation and imaginative offers to
new organisation and the most importantly the industry. This report was constituted on
management of innovation with discussion about Blue ocean innovation theory and Disruptive
innovation theory and they were applied to ideas related to history and future progress of the
enterprise for attaining maximum profit for the organisation. The Blue ocean innovation theory
allows an organisation to build and create new market with weak competition to maximise
profits while Disruptive innovation enables an organisation to enter the market with strategy at
gaining strong presence at competitive section of the market. These theories allow the
organisation to progress continuously and expand their consumer base swiftly and effectively.

REFERENCES
Books and Journals
Tidd, J. and Bessant, J.R., 2020. Managing innovation: integrating technological, market and
organizational change. Wiley.
Nardelli, G. and Broumels, M., 2018. Managing innovation processes through value co-creation:
a process case from business-to-business service practise. International Journal of
Innovation Management, 22(03), p.1850030.
Thornblad, D., 2018. Managing Innovation without Managers: Valve Corp. Journal of Case
Studies, 36(2).
Bahl, M., Lahiri, S. and Mukherjee, D., 2020. Managing internationalization and innovation
tradeoffs in entrepreneurial firms: Evidence from transition economies. Journal of World
Business, 56(1), p.101150.
Ab Rahman, Z.N., Ismail, N. and Rajiani, I., 2018. Challenges for managing non-technological
innovation: a case from Malaysian public sector. Polish Journal of Management
Studies, 17.
Biemans, W., 2018. Managing innovation within networks (Vol. 7). Routledge.
Van Lancker, J., Wauters, E. and Van Huylenbroeck, G., 2016. Managing innovation in the
bioeconomy: An open innovation perspective. Biomass and Bioenergy, 90, pp.60-69.
Nardelli, G. and Broumels, M., 2018. Managing innovation processes through value co-creation:
a process case from business-to-business service practise. International Journal of
Innovation Management, 22(03), p.1850030.
Janjić, I. and Rađenović, T., 2019. The importance of managing innovation in modern
enterprises. Ekonomika, 65(3), pp.45-54.
Schultz, J.S., André, B. and Sjøvold, E., 2016. Managing innovation in eldercare: A glimpse into
what and how public organizations are planning to deliver healthcare services for their
future elderly. International Journal of Healthcare Management, 9(3), pp.169-180.
Online:
Blue Ocean – more success with the right strategy, 2018 [online], Available
through<https://www.ionos.com/startupguide/get-started/blue-ocean-strategy/>