Spotify: Innovation Strategies and Frugal Theory Application Report

This report provides a comprehensive analysis of Spotify's innovation strategies, with a particular focus on the application of frugal innovation theory. It begins with an introduction to the concept of innovation, its principles, and the frugal innovation theory, highlighting its significance in the business world. The report then provides an overview of Spotify, its services, and its historical development, emphasizing how the company has leveraged innovation to achieve growth and maintain a competitive edge in the music streaming industry. The core of the report examines Spotify's application of frugal innovation, detailing how the company balances cost efficiency with high-quality services to meet customer demands. The report further discusses the benefits and limitations of using frugal innovation, particularly in the context of Spotify's operations. Finally, the report concludes with insights into Spotify's future planning, emphasizing the importance of adapting to the changing environment and competition. This report aims to provide valuable insights into Spotify's innovative approach and its implications for business development.

SPOTIFY

Contents
INTRODUCTION ..........................................................................................................................3
What is innovation.......................................................................................................................3
Theory of innovation: .....................................................................................................................4
Frugal theory of innovation: .......................................................................................................4
Company overview: .......................................................................................................................6
Application of Frugal Innovation Theory in Spotify in the context of Future:..........................7
CONCLUSION................................................................................................................................9
REFRENCES.................................................................................................................................10
Books and Journal......................................................................................................................10

INTRODUCTION
Innovation is the most important aspect in leading world and its business operations. In
simple words, innovations are the new aspects and criteria in order to perform particular work
with critical knowledge. Performing innovative functions in growing or developing business is
very essential. It drives of new invention and strategies so that market would come up with new
techniques and products. Innovation not only assistance for business success but also contribute
for country development. As much as innovative functions would drive into the country as much
as it took the growth. By adopting innovative idea business will take a turn in terms of
profitability and productivity also set a new brand image for the economy. This report will be
covering significance and principles of innovation for Spotify. It shows how the company
involve innovative thinking and make use of principles and theories to make their services
attractive by comparing past performance in terms of future planning (Bedford, 2019).
What is innovation
Innovation is termed as a procedure under which products and services move through
new criteria and functions which results in something better than old products as it attain new
size, textures and features. Innovation results in gaining competitive advantage and formulating
new plans for the organisation which is beneficial in every functions and for every department
into an organisation. There are various principles of innovation in order to get full knowledge of
this aspect these are described below:
Problems creating new ideas: In an organisation, problems are being hurdles into performing
functions which eventually rises questions for its solution, these questions results in generating
innovative ideas over problem within an organisation. Arising question is a good way to flourish
an organisation with creative ideas through individuals. These ideas take a turn towards
innovating in organisation products and services. Spotify evaluates new ideas in their audio
services by analysing their internal problems and culture (Bichurova and Yordanova-Dinova,
2018).
System based innovation: Innovations take place into systematic manner based on some
researches through formal and informal ways. These innovations drives through guidance and

training via leadership programmes. This system set according into systematic manner which
flows like assistance, targets, internal execution and continuous improvement. Spotify based on
formal systems which work on ethics and appropriate rules which make the company the most
largest music provider.
Innovation require passion: In order to make new and attractive strategies and require
proper management over them, it significantly promotes keen interest and passion over its
execution. Passion lead to some difficulties in order to achieve desirable outcome, whereas
passion is the only factors which make the idea successful as it indulge efforts towards making it
possible (Scozzi, Bellantuono and Pontrandolfo, 2017).
Effective communication: This reflects communicating new concepts and ideas between
people and set consistency between employees and team members. Along with this, it promotes
decision making criteria within team members. From this, exchange of new ideas become
possible in and complexity have neglected. Innovation provide effective communication tools
through which one could develop good interpersonal relations and effective working would be
enhanced together. For example, communicating tool like cell phones, extensions helps in
eliminate gaps between people Interactions.
Encourage comparison: There are a lot of comparison and differences between people culture
and ethics in terms of their age, gender and taste. These differences gives rise to innovations in
terms of products quality and texture as well as its quantity. These elements provide enormous
opportunities for making innovation into man organisation by facilitating with wide range of
products (Blank and Naveh, 2019).
These 5 principles are effectively use for driving innovation into organisation. Spotify
need to make use of these principles in order to make any new changes and innovative music
services.
Theory of innovation:
Frugal theory of innovation:
Customers has several demands and expectations from the organisation in terms of good
quality product but at cheap prices. Because of various similar competitors customer have many
choice to make their purchase who selling it in less prices. Due to these competition

organisation has to make them ready to face these crises over price and maintain a specified
price. Product price is the biggest factor for a customer, which makes them think of its utility and
worth satisfactory aspect. By setting an affordable price with good product quality, the
organisation would reach to high success in its product distribution and customer satisfaction.
For which, frugal theory is the best supporter which reflects needs of superior quality products
but with minimum amount of cost. According to this theory Spotify could make innovations
and new services by keeping in mind the influence of pricing factor. Spotify uses its own content
of music systems and connectivity with provides free services as per new seasons and occasions.
It derives its features in such a way that enables variety of option which customer could search in
one free app as well as in order to acquire extra ordinary features customer has option to make a
pay towards acquiring premium services which gives ad-free audio and video podcast in such a
minimum cost. Also, the company has the wide range of music series which enables customer to
make choices regarding what they want to listen. Using this theory, the company provide
minimum amount of subscription and a year plan for desired musics and podcast. This has done
through the innovation and its utility by cost managing factor. This thoery depends on companies
size and structure also the ethics it follows in maintaining their standardised product and quality.
(Cox, 2018). Using this theory has its own pros and cons in terms of organisation profits which
are mentioned below:
Benefits of frugal innovation:
There are a lot of benefits of using this theory into consideration. In context with
Spotiffy, they could make their development and customer reach by analysing it benefits towards
success.
 Frugal innovation provides an opportunities to make use of various cost efficient
techniques before beginning of new product or services into the market.
 Cost is the main element for customer satisfaction which differs from country to country.
In order to grow business in most populated country like India, where people are more
focused on money worth satisfaction. Company could make full utilisation of this
advantage.
 This theory enables the most essential function into Spotify, that enable the organisation
to make more innovative aspects with less price and high quality services. It benefits in
creating brand image and high economic development (Faherty and Stephens, 2016).

Limitations:
 Using frugal theory of innovation, the company could not make its standardised service
and set a living standard into society because of cheaper cost.
 Making services at low prices could lead a company towards loss in their profit and
effectiveness into their services. As more than services cost, it require more of
maintenance cost for handling the total innovative management (Ray, 2018).
Company overview:
Spotify is a Swedish company which is known for rendering services of music audio,
videos and live streaming podcast. The company was founded in 2008 in Stockholm, Sweden
which offers varieties in list of music and videos in many forms of old and new streaming, fast
range of internet connectivity with full speed music audio to around 60 million people. It has its
connectivity with all media companies and sources through which it attain right of playing music
of patent companies. Data shows that around 320 million users pays for its services annually.
The company has build up trust and name in very less period of time, customers prefer to use
spotify rather than any other applications (Ferraris, Bresciani and Papa, 2018). People get easily
irritate with regular ads and continuous disturbance of promotions, keeping in mind this scenario,
Spotify gives advertisement but at every short period of time and less time taking. The company
mainly aims at maintaining its quality by being active in market trends in order to launch new
music first on their channel before it going to any other application. These efforts of the
company makes the user more curios to enjoy its durable features. Also, it provide functions of
searching music as per artist, albums, favourite playlist and many other features which make the
service attractive. By indulging innovation theory into their operations it could finalise the results
by providing paid subscription of offline listening music, set next and later wanted songs, set
playlist to be replayed after specified time. Along with this, this provides their connectivity not
only phones but in cars, tablets, windows, IOS, and other application software so that customer
could make it use at any point and any place. By using recentavailable technologies it also build
its Bluetooth and speaker connectivity by launching its own speakers with plays on Alexa mode.
The company is full subscribed with the content creators and third partyagreement by being fair
in terms of their 70% payment for playing music at their sources. The company uses various
model in its past and present operations (Lutz, 2017).

Historical development:
In past few years, Spotify has achieved unexpected growth and expansion of its services and
varieties of features by engaging professionalindividuals and today’s youth of creative mind and
adaptable thinking that makes the company innovative by launching new and affirmative
programs as per the season and festival occasions. For example at times of Christmas era, it
provides features of making bell ringing in Santa voice and list of Christmas songs so that users
have found the songs already without searching and giving time for choosing the best song for
the eve (Patterson, Bajada and Green, 2017). The company uses this techniques at continuous
basis, the more the festivals, the more they launch new features. It provides innovation in terms
of acknowledging users age and area. Which gives premium subscription to university students
at a half price rate. Also, the company use models like Spotify for Artist and Open music model
So that the music industry could play its services at a point of equilibrium and could continue to
provide their services for user entertainment. It also enables a Spotify play button which facilities
to play the respective content on websites, blogs and other social media platforms It also creates
such a software which does not require any installation process for using the features in
computer. In recent years Spotify took a lead towards artist by launching a feature called secret
Genius, this intuitive makes the artist and the whole music industry a hero in they eyes of users
by reflecting these superior personality who play a big role in creating writing and creating
music, this enables the features when user listens to a song, the name of artist will pop up on tier
screen so that customers could rate their singing and make them their favourite through adding
in favourites (Nicholls, 2018). This initiative is not only beneficial for users but for the whole
industry after that more producers and artist willing to make subscription with the company,
which results in company revenue and brand image (Tidd, Brem and Daim, 2019).
These were the past innovations that the company has made through which several
positive changes has been reflected in companies early growth and lifting up its name and
branding. Frugal theory of innovation has played a crucial role in development of Spotify by
being cost sever and quality enduring quality and effective services over the years.

Application of Frugal Innovation Theory in Spotify in the context of Future:
Every company to work with the dynamics of the changing environment and has to compete with
their competitors and lead them to gain a better position in the market in terms of quality services
and innovation in their way of dealings. As the world is going techno friendly and the consumers
are attracted to the new and innovative changes that the organisation adopts. Such are innovative
theories that Spotify, a digital music streaming company adopts. Spotify has extended its reach to
many countries round the globe and is serving with varied technologies and services through
which the customers are attracted (Nielsen, 2016). The several innovations adopted by respective
firm can be studied as when songs available on this platform are also available on other
platforms and consumers feel less attracted to the firm, spotify brings innovation by providing
the curated playlists and data driven person identification. Along with the innovation company
grabs an opportunity and work harder towards achievement of it. In regards to Spotify's
innovation theory this report will discuss about Frugal Innovation theory, as to how the
organisation applies it and how is Spotify benefited from it. Frugal Innovation also called by the
name of Frugal engineering refers to bringing innovation in terms of less cost of production and
procurement of goods. This reduces the complexity of procedure and makes the process easy. It
has given several new features like live performances given by the musicians and singers. The
application provides free music access for more than 40000 songs and some of them are
exclusive which are not found anywhere else. The podcasts features initiated by spotify provided
a good reach of consumers to them. Spotify supports ad free version even without subscribing for
premium. It provides several new features when upgraded to premium as a innovation that you
can shuffle the songs from your playlists (Obeidat, Al-Suradi and Tarhini, 2016). This
organisation even provides its customers with skipping the songs on free app and when you pay
for subscription you can skip as many as songs you want which is an innovative feature of
spotify which attracts a large number of customers to download their application and enhance
their market reach. An innovative feature which includes playing of songs from different mobiles
by connecting from one phone, which allows to increase the base and volume of the songs when
the user is not using speakers externally. In Spotify, users get free excess to entirely newly
launched albums and single songs. Application has even contracted with some of the popular
artists like Taylor Swift, Kayne West and Lady Gaga. Features like auto tune, recording the
songs or playing any song on loop also makes it different from others and shows innovation of

Spotify. As digital streaming platforms are highly popular and many of them needs subscription
for their access, thus partnering with some of these platforms and providing subscriptions in a
pack is an another innovative measure adopted by Spotify where they provide free subscription
of some other apps which is partnered with them when subscribing for Spotify. At present it is
providing free subscription of Hulu app. Another innovation through Frugal Innovation theory
which can be adopted with low cost is bringing feature of digital platform and steaming some
videos and short films to cater the needs and keep listeners engaged. Application is widely used
when it is accessible on every software whether Apple ios, windows , android or any other
(Ottosson, 2019). This will surely increase their number of listeners to download application.
The quality of song, its wavelength, tempo and frequency according to the music category also
attracts their listeners which enhances innovation and let Spotify access good quality songs
which in result increases brand name of it. These days people are more into creating dance
videos and such, for that even a separate feature needs to be updated so that listeners don't switch
to other platforms. One of the existing innovative feature which Spotify is using in its existence
is letting users use another mobile applications whether to chats or click photos with using
Spotify to enhance ease in using application.
CONCLUSION
Spotify is a leading audio streaming application and is using the Frugal Innovation theory aptly
to make its reach with the customers widely. As innovation is a necessity for every organisation
to reach heights, adapt to new behavioural changes of consumers and to lead success, spotify has
widely used Frugal Innovation in implementing these and catering markets. The organisation
itself has adopted many innovative measures and some of those which are not adopted are also
suggested. All in all, it can be concluded from the above studied report is that, for bringing rise
in profit and overall growth new business models with innovative or entrepreneurial features are
a necessity. To attain this and a sustainable future in music streaming industry. The application
is easily accessible through its innovative measures of popularising itself in the eyes of existing
listeners and potential listeners. Being globally expanded, used freely without compulsorily
subscription is very helpful for them. Features provided apart from other applications is really
helpful in its growth.

REFRENCES
Books and Journal
Bedford, M. A., 2019. Managing Open Innovation Challenges—Key Questions for Success.
Bichurova, I. and Yordanova-Dinova, P., 2018. Managing company innovation in the context of
generating new ideas. Knowledge International Journal, 28(5), pp.1539-1544.
Blank, T. H. and Naveh, E., 2019. Managing Creativity and Process Tensions in
Innovation. IEEE Engineering Management Review, 47(4), pp.15-17.
Cox, T., 2018. Managing Successful Organizational Change for Faculty in Higher Education: An
Innovation Study (Doctoral dissertation, University of Southern California).
Faherty, U. and Stephens, S., 2016. Innovation in micro enterprises: reality or fiction?. Journal of
Small Business and Enterprise Development.
Ferraris, A., Bresciani, S. and Papa, A., 2018. Managing open innovation with public
partners. Cybernetics and Systems: Social and Business Decisions, p.143.
Lutz, R. A., 2017. Leadership and management or leading and managing. IEEE Engineering
Management Review, 45(3), pp.6-8.
Nicholls, A., 2018. Managing educational innovations. Routledge.
Nielsen, P., 2016. Managing human resource learning for innovation.
Obeidat, B. Y., Al-Suradi, M. M. and Tarhini, A., 2016. The impact of knowledge management
on innovation. Management Research Review.
Ottosson, S., 2019. Innovation Theory. In Developing and Managing Innovation in a Fast
Changing and Complex World (pp. 11-39). Springer, Cham.
Patterson, E., Bajada, C. and Green, R., 2017. The Role of Digital Standards in Managing
Australian Public Service Innovation.
Ray, N. ed., 2018. Managing Diversity, Innovation, and Infrastructure in Digital Business. IGI
Global.
Scozzi, B., Bellantuono, N. and Pontrandolfo, P., 2017. Managing open innovation in urban
labs. Group Decision and Negotiation, 26(5), pp.857-874.
Tidd, J., Brem, A. and Daim, T., 2019. Introduction: Crowdsourcing challenges. In Managing
Innovation. World Scientific.