Analysis of Blue Ocean Strategy Innovation Theory: Spotify Case

This report provides a comprehensive analysis of the Blue Ocean Strategy, a prominent innovation theory, and its application in the context of Spotify's historical and potential future development. The report begins with definitions, principles, and processes of the Blue Ocean Strategy, emphasizing its focus on creating new market demand through differentiation and low cost. It then delves into the specific principles of the strategy, including reconstructing market boundaries, focusing on the bigger picture, reaching beyond existing market demand, and getting the strategic sequence right. The report evaluates the advantages and disadvantages of the Blue Ocean Strategy, followed by an in-depth examination of Spotify's business model, key activities, and stakeholders. The application of Blue Ocean Strategy is highlighted through Spotify's freemium model and its transformation of music consumption. Finally, the report discusses the application of the Blue Ocean Strategy in both the historical development of Spotify and its potential future applications, emphasizing how Spotify created a new market segment and gained a competitive advantage by offering unlimited music streaming. This report aims to provide a detailed understanding of the Blue Ocean Strategy and its practical implications in the business world, particularly in the context of disruptive innovation.

MANAGING INNOVATION

TABLE OF CONTENTS
Introduction......................................................................................................................................1
MAIN BODY..................................................................................................................................1
Definitions, Principals and Processes of the theory.....................................................................1
Principles and process of Blue Ocean Strategy...........................................................................2
Evaluation of theory....................................................................................................................3
Application of the Blue Ocean Strategy Innovation Theory in the historical development
context..........................................................................................................................................5
Application of the Blue Ocean Strategy Innovation Theory in the future development context 7
Conclusion.......................................................................................................................................8
REFERENCES................................................................................................................................9

Introduction
Innovation is a process though which a new product or service can be developed with
improved efficiency and effectiveness or competitive advantage (Chesbrough, Lettl and Ritter,
2018). In order to grow and expand it is important for organizations to focus upon innovating
something new. It further helps an organization in sustaining within the market in which they
operation. Not only this, it also provides various kinds of opportunities to the company that can
help them in enhancing their customer base, profitability, revenue and expand their business to
other market segment as well. There are various kinds of innovation theories that can be used by
firm s for development of new product. Choosing an appropriate innovation theory helps an
organization to increase chances of their success and become more resilient to changes and
becomes more capable of growing in the market. This report will lay emphasis upon Blue Ocean
innovation theory, applications of this theory in in historical and future development of Spotify.
MAIN BODY
Definitions, Principals and Processes of the theory
Innovation helps an organization from standing out from competition and gain
competitive advantage (Namboodiri, Banerjee and Dasgupta, 2019). There are various different
kinds of innovation theories that can be used for development of new innovative product or
service that can be used by firms for gaining competitive advantage and successfully expand
their business. Blue Ocean strategy is a kind of innovation theory is an action of achieving low
cost and differentiation for opening a new market demand. It helps a company in exporting
potential and wider market space that has not been explored or captured. It helps an organization
in making competition irrelevant by capturing new needs and demands of market that can help
them in breaking value cost trade off. Use of Blue ocean strategy can help a firm in meeting
untold or unmet needs, requirement and demands of customers. It is one of the most commonly
used and well- known strategy that can be used by companies for development of new products
or services that can help them to meet unknown or unmet needs and requirements of their target
customers (Nakamori, 2020)(Agnihotri, 2016). Organizations that focus upon using Blue ocean
strategy focuses upon creating a demand rather than struggling over fulfilling current needs and
demands of customers. Various organizations like Spotify has used this theory f innovation and
created a new market segment and focused upon exporting new opportunities that can help them
to attract new customers and gain competitive advantage. Spotify successfully created and
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capture new demand of customers and offered then unlimited streaming of videos instead of
traditionally downloading music. They completely changed the way people listen music.
Blue ocean strategy can be said as a strategic move that can help organizations in
enhancing overall business values and enhancing abilities of organization for meeting new
unexplored needs of market (Denning, 2017). Like Spotify focused upon meeting unmet needs of
unlimited music streaming application where there is no requirement of downloading music.
This helped Spotify to gain competitive advantage.
Principles and process of Blue Ocean Strategy
Principles:
There are four main principles on the basis of which blue Ocean strategy has been
formulated and other two principles help in addressing execution risk of the strategy. First four
major principles are as follows:
 Reconstruct market Boundaries: It focuses upon identifying path by which organizations can
create untested market space across diverse industry domain (Madsen and Slåtten, 2019).
This principle helps the company in understanding ways in which competition can be made
irrelevant by looking across making competition boundaries so that they can open upon
commercially. Simply in other words, this principle reduces focus upon reducing
characteristics of product so that important characteristics of product can be identified and
enhanced for enhancing its market value.
 Focus upon bigger picture: Organization should focus upon analysing large amount of data in
order to understand wants and neds of customers. This can be done by identifying what
current market is providing to the customers and what is not been provided by the current
market segment. This will help the firm in identifying innovative idea that can further help
them in creating a blue ocean, achieving success and making competition irrelevant. It will
further help in developing a strategy which is currently lost (Karaoulanis, 2018). This
principle also says that organization should not focus upon numbers, instead they should
focus upon development of an appropriate strategy.
 Reaching beyond existing market demand: this principle focuses upon identifying ways in
which future potential customers can be attracted who are currently not purchasing from the
current market due to one or more than one reason. They should work upon identifying ways
in which future potential target customers actually wants and so that size of blue ocean being
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created can be maximized, new demand can be unlocked, risk scale can be minimized and
size of potential customers can be enhanced or increased.
 Getting strategic sequence right: last principle is to check whether the new strategy being
developed is valid or not though four basic steps: first step is to check whether the proposed
product or service has excellent utility at every step of buying process. Second step is to
check whether the price set for the product or service is appropriate and has good value for
the purchaser (Bhargava, 2017). Third step is to check appropriateness of the product or
service cost for the organization i.e. whether it can help the organization in making profit or
not. Lastly step is to check different hurdlers that can organization can face in introducing
new and innovative product or service and ways in which they will be overcoming it.
 Overcoming key organizational hurdles: Fourth principles helps an organization in
identifying hurdles that can be faced by the organization while introducing the new
innovative product or application to their potential customers. This principle focuses upon
identifying ways in which blue ocean strategy can be implemented by that all kinds of
hurdles that can be faced by company can be overcome (Bhargava, 2017). This will help the
organization in reducing risk associated with the new product or service and implement new
strategy with limited time period and resources.
Process of development of Blue Ocean strategy is based on all the above principles. First
step is to construct right place for construction of blue ocean strategy. Second step is to
understand current market offering. Third step is to understand limitations of the market in which
they operate and understand of the market segment (Bhargava, 2017). Fourth is to reconstruct
market boundaries and develop and alternative by identifying opportunities that can help them in
reducing limitations of the market segment and innovate product and services. Last step is to
conduct market test in order to identify ways in which new product or service can be launched in
the market for targeted potential customers.
Evaluation of theory
Blue ocean strategy has its own advantages and disadvantages that can affect the organization.
Advantages of Blue Ocean are as follows:
 One of the main advantages of this theory is that all the products developed from this strategy
are not chosen by the customers on the basis of its value and affordability (Bhargava, 2017).
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In fact, products and services developed though this strategy is chosen by the customers as it
helps in fulfilling their needs and desires in an appropriate manner.
 As this theory helps in fulfilling unfulfilled needs of potential customers, so products
developed under this theory are sold quickly which not only help organization in attracting a
greater number of customers but also help them in increasing their overall revenue and
profitability.
 Companies need not to think of pricing strategy by analysing competition as products and
services developed using this theory are completely new and introduced for the first time. So,
they need not to think much of adopting pricing strategy.
 Another one of the main advantages of Blue ocean strategy is that it helps the organization in
standing out from competition and it helps in making competition irrelevant or the company.
Disadvantages of Blue Ocean strategy are as follows:
 It is difficult for identifying or developing ideas for untapped market for future development
of products and services that can help in fulfilling untapped neds and requirements of people
(Bhargava, 2017).
 Organization need to completely clear about their development idea for innovative product or
services, their potential customers. Not doing so can create different kinds of issues or
hurdles for the company.
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Application of the Blue Ocean Strategy Innovation Theory in the historical development context
Company background
Spotify limited in the company providing the online digital music services established in
the year 2008. The company is offering all the music fans with the access to catalogues of the
licensed music as well as demand access of the songs on devices, computers, mobiles, tablets and
the home entertainment system. Spotify service the customer worldwide. The company is
serving with mission to unlock the potentiality of human creations by giving out million creative
artists with opportunity to live with arts. In addition, it is providing billions of fan following the
opportunity to enjoy and get inspired.
Spotify have actually transformed the listening of music forever after it have been
launched in year 2008. Discovering, managing and sharing over 60 million of tracks with
inclusion of the 1.5 million podcast titles, for free along with upgrading the Spotify premium to
access up all exclusive feature of music. The firm have application of blue ocean strategy
The company have started over to get major improvement in sound quality, demand
supply, offline music along with add free listening experience. Currently the company is among
world most popular audio streaming subscription services with 2999 million users as per June
30 , 20202 including 138 million subscribers across the 92 market around world.
Business model
Key activities
Spotify using the freemium business model strategy and making out the money through
paid subscription and advertisements. The business model of the Spotify isn’t complicated an
work like other services of YouTube, Mailchim etc.
Business canvas model
The business model of Spotify has offering of three types of business subscription for its
user such as free version, premium version and family version.
Free version has the open access with certain limitation on the quality tracks a number of
downloads. the user is often interrupted with a lot of advertisements.
Premium version comes up with cost lowing un interrupted access to all content of
Spotify. A user listens to playlists; share music; create and edit; play any song on-demand;
explore and discover new songs; play music in HD quality; skip tracks; download unlimited
songs. This version is also ad free along with feature to listen songs.
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Family version have six family members on net using single premium subscription. A
family will be providing with same address and setting of accounts. This will have reduction in
cost premium and allow each ember to have account in library of music.
Stakeholders
Spotify purchase license from artists, publishers, labels, and other right holders to stream
their music on its app. on the other hand pay royalties to shareholder on basis of the currency
location and value of artist. Basis of loyalties is number of times the artist song stream in total
songs.
Revenue generations
Spotify selling premium streaming and subscription to its users. it is also making money
through places to the third parties.
Key partners
the key partner are Record Companies, Independent Musicians, Right Holders, Record Labels,
Rights Holders, Social Media, Subscribers, free users, and advertisers are the value propositions
of the Spotify business model.
Channels
The channels are Web App, Mobile App, PC Software Program and Social Media
Cost structure
This have inclusion of Licensing fees, Music Royalties, Salaries, Platform Maintenance
& Development
Historical Development
In the year 2009, Spotify have open up for public registration for the resale of mobile
services. in July 2011, UK have offer the trail period where user can listen up to unlimited
music’s and later on the streaming hour have been reduced. In the year 2016 company have
launched up its largest campaigned up large billboards in major cities around world. In 2017, the
company have its expansion united states adding up to 1000 new jobs along with resting 32 new
positions. in addition, by year 2018, the company have announced the total 13 market including
the creation of new Arabic and several playlists. In the respective years the company have
acquired seed scientific, Crowd Album, Proact, SONALYTIC, Mightily TV and many more. So,
with the implementation of blue ocean strategy. The company will find out efficiency in the
operational process making up future technological changes. there will be addition in identifying
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market to grow and expand. Hence the firm will be able to compete against rial in effective
manner along gaining competitive advantage.
Application of the Blue Ocean Strategy Innovation Theory in the future development context
Future Development
It’s necessary for the Spotify to implement blue ocean strategy in in better innovation o
product and services. This will be also half to survive against competitors. For mor
technological advancements, blue ocean strategy can be implemented in term of better listening
and viewing experiences. As due to the COVID-19 pandemic, the Spotify should try out the
better innovative product services and subscription pans to share the love in social listening. The
company can try to increase the subscription level for friends using more level of artificial
intelligence. Spotify should pay major level of focus on the technological innovation on the
services. there should be building up the strategy which will have proper rule and regulation
abide by the government regarding data privacy and important concern.
In the blue ocean strategy, the 4 stage are described as below
Raise – the firm should have tried to increase the wide market in more countries looking
at the proper rules and regulation of the different country government regarding data privacy
policy.
Create- Spotify should try out have use of effective design and technology in developing
the apps looking out the outlays and consideration of government due of pandemic of COVID.
Eliminate- The company try to move the concern regarding data privacy in the main
concern for the differ government .
Reduce – Management have need to look into the focus for reduction in the cost of
developing the features and generating up high level of profits.
The company have application blue ocean strategy’s creating up new sign and prototype
of services with hp of technology. this have led growth of Spotify in sooth ways. Beside that’s in
order to increase the production decision as moving unit to other country. On other hand Spotify
haven identified as next step of digital innovation taking up high level of competition from the
Apple's Apple Music, Amazon's Amazon Music, Sirius XM and Pandora in the U.S., and certain
platforms are successful in their local markets. high level of competition on apple music. On the
other hand, Spotify ins trying out hanged the podcast game. There is need to have addition of
Streaming Ad Insertion (SAI) tool dynamically which banally insertion ads into the podcast
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listener on dependency of more graphical individuals of listeners. They should work upon
identifying ways in which future potential target customers actually wants and so that size of
blue ocean being created can be maximized, new demand can be unlocked, risk scale can be
minimized and size of potential customers can be enhanced or increased.
There is need to have more effective, targeting, conversion and effectiveness which means
advertiser sound be willing to pay for this podcast ad on Spotify they have before. As this theory
helps in fulfilling unfulfilled needs of potential customers, so products developed under this
theory are sold quickly which not only help organization in attracting a greater number of
customers but also help them in increasing their overall revenue and profitability. Organization
need to completely clear about their development idea for innovative product or services, their
potential customers. Not doing so can create different kinds of issues or hurdles for the company.
Conclusion
From the above report it has been concluded that innovation is one of the most important
sources of development that can help organizations in gaining competitive advantage, attract
more customers, enhance their profitability, expand business in new market segment and many
times it also helps companies in making competition irrelevant. There are various kinds of
innovation theories that can be used by organizations for development of an innovative products
or services that can help in attracting new potential customers. It has also been concluded that
innovation not only helps in development of new product or service but it also introduces new
procedure, operations or technologies within the organization. It helps in motivating employees
and boost innovation and creativity within the firm. It has also been concluded that Blue ocean
strategy is an appropriate innovation theory that can be used by organizations for meeting unmet
needs and requirements of potential customers that can be used as an opportunity by the
company for development of innovative product or services that not only helps in generating
profit but helps in expansion of the organization by gaining competitive advantage as well.
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Online
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