Managing Innovation in Spotify: Application of Disruptive and Sustaining Innovation Theories

MANAGING INNOVATION
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Table of Contents.
INTRODUCTION..............................................................................................................3
Innovation theory.......................................................................................................... 3
1. Disruptive innovation theory:................................................................................3
2. Sustaining innovation theory:...............................................................................5
Spotify:..........................................................................................................................7
Business model canvas of Spotify:...............................................................................7
Historical development through Application of the theories:....................................8
Application of disruptive innovation in Spotify:.........................................................9
Application of sustaining innovation in Spotify:........................................................9
Recommending possible future development pathways of Spotify:...............................10
Recommendations using disruption theory:...........................................................10
Reflection....................................................................................................................12
CONCLUSION .............................................................................................................. 13
REFERENCES...............................................................................................................15
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INTRODUCTION
Innovation is process through which a product, service, process or domain
is updated or renewed and brought up to date by applying new processes or new
techniques or implementing successful new ideas to create a new value of the
product or service (Kahn, 2018). Spotify is a media and audio streaming provider
company with over 365 million monthly active users. It offers various restricted
copyright musics, playlists and podcasts (Spotify, 2021). This report will discuss
the disruptive innovation theory, its benefits and limitations. The application of
disruptive theory in innovation process adopted by Spotify and various
recommendations to improve the innovation process in the organization will be
provided.
Innovation theory
Innovation theories explain the methods or techniques through which the
products or services are given new values or the existing products are spread
through a population.
1. Disruptive innovation theory:
Disruptive innovation theory: The disruptive theory states that the
phenomenon through which an innovation transforms an existing market or
segment by introducing convenience, accessibility, simplicity and affordability
where high costs and complications are involved. Initially the disruptive
innovation is created in a niche market segment which may appear unattractive
to industry but the introduction of new idea or product completely transforms the
industry (Aghion and et.al., 2018).
Characteristics :
 The disruptive innovation implies lower margins in the beginning of innovations.
 The theory is highly risky and does not guarantee success.
 Disruption innovations can be introduced in the existing market or in the new
market or segment.
 The disruptive innovations happen slowly in initial stage and when it reaches the
mainstream it grows unexpectedly.
Assumptions of Disruption theory:
 Disruption is not a product or service, it is a process.
 It always arises in the low end and new market footholds (Si and Chen, 2020).
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 New entries cannot catch up with the profitable customers of leading companies
until the quality of their products and services meet their standard.
 A business can use disruption and still fail, it does not guarantee success.
Process of Disruptive innovation:
The process of disruptive innovation is a long process and happens over a
number of steps:
 The leading business of the business innovate and develop their products and
services in order to satisfy the demands of their most profitable customers and
ignore what is demanded by other customers in the market.
 New entries target this ignored segment of customers and captures the market
by meeting the needs at a low price.
 The leading businesses ignore the new entries (Christensen and et.al., 2018).
 The new entries eventually move to the upper segments and offer solutions
which the most profitable customers of leading entries needs.
 When the new entry begins to attract the profitable customers of leading
business the disruption occurs.
Benefits of disruptive theory:
Disruptive theory of innovation can be very beneficial to the organization
as:
Provides start-up opportunities: The new establishments can use the
disruptive theory of innovation to create a foothold in the existing industry. The
establishments can enter the market by introduction of innovation in their product
or the services can establish themselves as the leader of the industry from the
initial stages.
Growth of existing Business: The existing business can use the disruptive
theory of innovation for grabbing the opportunities for growth and development in
the current industry or in the new industry. The companies can enjoy customer
loyalty more as customers will be easily rolling out to adopt new technologies and
products.
Satisfy consumer needs: The main aim of the companies behind introduction of
new technology is to fulfil the needs of the customers so that the consumers do
no shift to the competitors. Thus, the company introduces the products or
innovations solely on the basis of the needs of the consumer (Kivimaa and et.al.,
2021).
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MANAGING INNOVATION
1

Table of Contents.
INTRODUCTION...........................................................................................................................3
Innovation theory.........................................................................................................................3
1. Disruptive innovation theory:........................................................................................3
2. Sustaining innovation theory:........................................................................................6
Spotify:.........................................................................................................................................7
Business model canvas of Spotify:..............................................................................................9
Historical development through Application of the theories:............................................9
Application of disruptive innovation in Spotify:.............................................................10
Application of sustaining innovation in Spotify:.............................................................10
Recommending possible future development pathways of Spotify:..............................................11
Recommendations using disruption theory:....................................................................11
Reflection...................................................................................................................................13
CONCLUSION .............................................................................................................................15
REFERENCES..............................................................................................................................16
2

INTRODUCTION
Innovation is process through which a product, service, process or domain is updated or
renewed and brought up to date by applying new processes or new techniques or implementing
successful new ideas to create a new value of the product or service (Kahn, 2018). Spotify is a
media and audio streaming provider company with over 365 million monthly active users. It
offers various restricted copyright musics, playlists and podcasts. The company entered the
market using disruption innovations and became one of the leading companies of the industry
very soon. It is now the leading company of the industry (Spotify, 2021). This report will discuss
the disruptive innovation theory, its assumptions, benefits and limitations. The application of
disruptive theory in innovation process adopted by Spotify will also e discussed. The report will
provide various recommendations to improve the innovation process in the organization.
Innovation theory
Innovation theories explain the methods or techniques through which the products or
services are given new values or the existing products are spread through a population. The
theory implies how a person will be receiving an idea, service, behaviour or product as a new
one or the innovative one.
1. Disruptive innovation theory:
Disruptive innovation theory: The disruptive theory states that the phenomenon through
which an innovation transforms an existing market or segment by introducing convenience,
accessibility, simplicity and affordability where high costs and complications are involved.
Initially the disruptive innovation is created in a niche market segment which may appear
unattractive to industry but the introduction of new idea or product completely transforms the
industry (Aghion and et.al., 2018).
Characteristics :
 The disruptive innovation implies lower margins in the beginning of innovations.
 The theory is highly risky and does not guarantee success.
 Disruption innovations can be introduced in the existing market or in the new market or
segment.
 Disruptive innovations involve the new technology or the new business model to be
implemented.
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 The disruptive innovations happen slowly in initial stage and when it reaches the
mainstream it grows unexpectedly.
Assumptions of Disruption theory:
 Disruption is not a product or service, it is a process.
 It always arises in the low end and new market footholds (Si and Chen, 2020).
 New entries cannot catch up with the profitable customers of leading companies until the
quality of their products and services meet their standard.
 A business can use disruption and still fail, it does not guarantee success.
 The business model of new entries is different from leading company's business model.
Process of Disruptive innovation:
The process of disruptive innovation is a long process and happens over a number of
steps:
 The leading business of the business innovate and develop their products and services in
order to satisfy the demands of their most profitable customers and ignore what is
demanded by other customers in the market.
 New entries target this ignored segment of customers and captures the market by meeting
the needs at a low price.
 The leading businesses ignore the new entries (Christensen and et.al., 2018).
 The new entries eventually move to the upper segments and offer solutions which the
most profitable customers of leading entries needs.
 When the new entry begins to attract the profitable customers of leading business the
disruption occurs.
Benefits of disruptive theory:
Disruptive theory of innovation can be very beneficial to the organization as:
Provides start-up opportunities: The new establishments can use the disruptive theory of
innovation to create a foothold in the existing industry. The establishments which use disruptive
theory and enter the market by introduction of innovation in their product or the services can
establish themselves as the leader of the industry from the initial stages.
Growth of existing Business: The existing business can use the disruptive theory of innovation
for grabbing the opportunities for growth and development in the current industry or in the new
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