Innovation Management: Analyzing Spotify's Use of Diffusion Theory

This report delves into the management of innovation, using Spotify Technology as a case study. It begins by defining innovation and exploring the diffusion of innovation theory developed by E.M. Rogers, including its key components: innovation, communication channels, the social system, and the time involved in the adoption process. The report outlines the five stages of adoption: seeking knowledge, persuasion, decision-making, implementation, and reinforcement, and discusses the factors influencing adoption such as compatibility, trial-ability, relative advantage, observability, and complexity. It then applies the theory to Spotify's organizational context, analyzing how Spotify, founded in 2006, utilized innovation to revolutionize music streaming. The report examines how Spotify's managers applied the diffusion of innovation theory to launch and develop their business, focusing on innovation, communication channels, and the social system to attract customers. The report highlights Spotify's historical development and competitive advantage within the music industry, providing a comprehensive analysis of its innovative approach.

Managing Innovation

Table of Contents
INTRODUCTION...........................................................................................................................1
MAIN BODY...................................................................................................................................1
1. Description of innovation theory.............................................................................................1
2. Application of the theory in the organisational context...........................................................5
CONCLUSION................................................................................................................................8
REFERENCES..............................................................................................................................10

INTRODUCTION
Managing innovation can be defined as the process of finding new and innovative ideas
for the establishment of a business and then manage it properly so that higher profits could be
generated by fulfilling needs and requirements of customers. In this procedure different elements
are focused by management (Bruns, 2014). These are product, business process, organisational
and marketing innovation. With the help of it an organisation can respond to the internal as well
as external opportunities in creative manner by introducing new processes, ideas and products.
Main aim of this report is to find the ways in which an enterprise can manage all its innovations
in systematic manner. The organisation which is selected for the project is Spotify Technology. It
is a European American media services provided and mainly established in Luxembourg. It was
founded by Daniel Ek and Martin Lorentzon in year 2006. This assignment is mainly focused
with the description of innovation theory. Along with this, application of the same in the in the
organisational context for historical, current and future development of products and services is
also covered under this project.
MAIN BODY
1. Description of innovation theory
Innovation can be defined as the process of finding new and creative ideas and launching
products and services according to them. In other words it could be described as the technique
which is used by business entities to find strategic and better solutions for new and modified
requirements of customers. It is a medium which takes the business towards change and guide to
deliver better products and services to the clients. There are various theories of it, which are
focused by organisations to make sure that value for the business is created by them for which
customers will pay to them (Aizstrauta, Ginters and Eroles, 2015). Some of them are Chocolate,
Technology acceptance, Roger;s Innovation diffusion and Hall's Concerns Based Adoption
Model. One of them which is used by most of the companies is innovation diffusion. Detailed
description of it is as follows:
Innovation diffusion theory: It was developed by E. M. Rogers in year 1962 which is
considered as one of the oldest theories which is used by companies for the purpose of finding
best suitable opportunities in the market place and launch products or services according to them.
It facilitate organisation to get foundation for understanding the process of adopting innovation
1

and the elements which may leave impact upon thoughts of individuals about the ex-cognitive
product or service. It also creates difficulties for the business entities to use it as a process model
while formulating plan for organisational changes because of adoption of an innovative idea.
There are four main components of this theory which are required to be focused by
organisations while planning for innovation. Description of them is provided below:
 Innovation: It is one of the main element which should be focused by the companies
which are planning to launch an innovative product in the market. They have to be sure
that the item which will be introduced is having such qualities that makes it unique as
compare to others (Dibra, 2015).
 Communication channels: When an innovative product is being manufactured by an
organisation then it is very important for it to find best communication channel to aware
customers about it. If an enterprise is not able to communicate message of innovation
with targeted segment then it may affect the future goals.
 The social system: It is the environment where adopters and non adopters are living.
While planning for an innovation it is vital for the companies to make sure that they have
analysed the social system properly so that possibilities of rejecting a new product could
be ignored.
 Time involved in adoption process: It is the last element which also requires higher
attention of management of the company because it is not possible that customers adopt a
new product quickly. They take time to research on the same and then form decision
which could be positive or negative. Therefore the company is required to be patience
because it takes time to attract customers.
From the above description it has been analysed that with the help of all of them
companies can understand the reasons behind the adoption or ignorance of innovation by
individuals. It also leaders towards the rejection or acceptance of the new idea which is being
launched by an organisation in the market. Along with the innovation theory Roger has also
described five different stages which are followed by customers in order to adopt a new product
or service launched by a company (Kapoor, Dwivedi and Williams, 2014). All of them are as
follows:
2

 Seeking knowledge: It is the first stage of adoption of innovation in the diffusion theory.
When a new product is launched in the market then individuals are not aware of it so at
this point they try to seek information about it if they find it attractive.
 Persuasion: It is second stage in which customers take interest in the product or services
which is being launched by the company as an innovation. They try to find detailed
information about the innovate items in order to make sure that they are relevant to use or
not (Kapoor, Dwivedi and Williams, 2014).
 Decision making for adoption or rejection: When detailed content is gathered about the
new product then customers make decision regarding adoption or rejection. According to
Roger it is the most difficult stage in the whole process because is the product is rejected
then it stops here and company have to form idea for another product.
 Implementation of innovation: This stage comes after the adoption of innovation. If it is
rejected then the process stops at the point of decision making. Here, individuals analyse
the product properly and then determine usefulness of it.
 Seeking for reinforcement: It is last stage of the process which is also known as
confirmation. Here, customers finalise their decisions regarding continuously using the
innovative product.
The above discussion describes that in order to make sure that customers adopt the new
innovation it is vital for the companies to pay attention towards these stages. There are various
other elements which should also be focused by management of companies while implementing
the Roger's Innovation Diffusion theory. These are compatibility, trial-ability, relative advantage,
observability and complexity. All of them are considered as the qualities of new and innovative
products which are introduced by companies in the market for the purpose of attaining growth,
competitive advantage and generating higher profits (Gayadeen and Phillips, 2014).
Main purpose of diffusion theory is to analyse buyer behaviour about a unique product.
With the help of it companies may get aware of such factors which may motivate customers to
adopt the innovation. It is mainly focused with five main groups of adopters which are as
follows:
3

Illustration 1: Roger's Diffusion of Innovation theory, 2019
(Source: Roger's Diffusion of Innovation theory, 2019)
 Innovators: These the groups of small number of members who are mainly focused with
the development and exploration of new ideas. They want to be the first one who try the
innovation.
 Early adopters: These individuals embrace change opportunities and already aware of
the need of modifications in existing products and service. They are very comfortable to
adopt new ideas and companies are not required to share detailed information with them.
 Early majority: All the individuals who are in such types of groups typically require to
get the evidence that innovation works before they are willing to adapt it. In order to
motivate them to buy innovative products companies are required to share their success
stories with them and provide them evidence for the unique item (Karakaya, Hidalgo and
Nuur, 2014).
 Late majority: The people who are part of this group adopt an innovation when majority
have used it and satisfied with its features. In order to motivate them to adopt the unique
products the companies are required to provide them information about the people who
have already used the products and satisfied with it.
 Laggards: These individuals are very difficult to appeal for the adoption of innovation as
they are very conservative in nature. If a company is willing to sale their innovative
products then management have to provide them statistics.
4

2. Application of the theory in the organisational context
Spotify Technology is one of the main media service provider company which was
founded in year 2006 in Stockholm, Sweden. It provides access to the customers for millions of
songs which they are willing to listen. The theory of innovation diffusion is applied within the
organisation by the managers. It was established in year 2006 and the concept of business was
based upon innovation. It was the first company which was providing customers a place where
they do not have to download a song they can listen it online and make their won play list. It was
launched with a small monthly subscriptions. All the registered clients can make podcasts of
their own choices which could be liked by other customers (Raynard, 2017).
While planning for the launching of new business different aspects are being analysed by
the management of the organisation with the help of diffusion of innovation theory. All the major
elements of it are assessed by them in detail. With the help of the analysis they have planned for
historical development which was the main idea of business. Description of all the elements in
the context of Spotify is as follows:
Innovation: It if the first and foremost element which was focused by the managers
while launching Spotify in the market. They analyse the situations and the issues which are faced
by customers. Most of the people who like to listen songs have to download them from different
websites and keep them stored in their digital devices and some of individuals were using CDs or
DVDs to listen song. This condition is analysed by them and they launched an innovative
concept in the form of Spotify. It was the one solution for all the challenges which are faced by
individuals who like to listen song. With the help of it they can listen song online and they do not
have to buy CD or DVD for the same purpose. Another issue which is focused by them for
innovation was storage because people have to download songs and save them in their devices
which create issues for them to save other items. Spotify provided them a platform where they
can listen songs online and make their own podcasts. This music service was the best innovation
in the music industry. The organisation has attained competitive advantage because there was no
competition for it in the market due to innovative idea of business (Campbell, Lambright and
Wells, 2014).
Communication channel: It is the second important component which is also required to
be focused by companies which are planning to launch innovative products or services in the
market. Spotify was the first of its kind of businesses so it was very important for it to
5

communicate with targeted customers properly and reach to them quickly so that large number of
individuals could be attracted to adopt the business idea. When it was launched in the market
social media websites such as Facebook and Twitter were in trend. Therefore, management of
the organisation decided to use them as communication channel so that large number of
customers get aware of it. This step of the enterprise has resulted positively and helped it to
attract large number of customers. The way which was used by Spotify to communicate with its
targeted patronages has helped it in historical development.
The social system: Earlier individuals were using CDs or DVDs as the only medium for
listening the songs. As the time passes different online websites were being introduced in the
market which helped people to download songs from them and keep them stored in the memory
of their digital or electric device. After some time most of the individuals faced the issues
regarding the storage, because of end number of songs they were not able to save other elements
in the devices. This situation was analysed by Spotify and the management introduced a new and
innovative solution which has resolved their problem completely. For this purpose social
environment was studied by researchers of the organisation and then they created the idea of
Spotify. It helped music listeners to deal with challenges which are related to storage. With the
help of the innovative idea the company has attained huge success and still running the business
in the market successfully (Glisson, 2015).
Time involved in the adoption process: While formulating the business idea of
historical development of Spotify the management was also required to pay attention towards the
time which is taken by customer adoption process. They have focused on it and gave time to
clients so that they can gather detailed information about the new innovation. This behaviour of
company resulted positively and helped it to attain higher level of success by being adopted by
large number of individuals.
By focusing of all the above elements the historical development was made by Spotify
successfully. With the help of it the organisation attained higher level of competitive advantage
because there was no other company which is providing same services to music listeners. As
time has passed since the business was introduced in the market which has resulted in higher
level of competition in the market (Minoli, 2015). Various new entities have introduced same
services as Spotify which is affecting the business negatively in order to overcome this type of
6

situation the organisation can adopt different innovative pathways for future. Description of all
of them are as follows:
Zero touch provisioning: It is one of the main innovation which could be adopted by
Spotify for the purpose of making future development. With the help of it the company can make
faster network ROI which requires a minimal level of input by human beings. It results in
decreased use of people or their efforts for the purpose of making sure that networks and
provisioned and located properly with all the appropriate settings. The efforts of individuals are
being replaced by data intelligence in this innovation which make all the activities automatic.
Company can reduce the cost of network management and eliminate the the errors which may
take place due to human interventions by adopting this innovation to manage the digital services
which are rendered by it. One of the main benefit of it is that it helps in the faster delivery of all
the facilities (Innovations for digital service providers, 2019).
Allowing customers to record songs in their own voice and provide background
music according to their pitch: This innovation can also be adopted by Spotify in future to
attain higher growth. It will help to provide customers a place where they can sing songs which
are famous or their own songs in their voice. Additionally, the application will provide them
background music according to the level of their vocalisation. It will be the best innovation in the
digital world because it will provide a platform to the individuals who are willing to become
singer in upcoming period. With the help of it, the company can attract large number of
customers who will register themselves on Spotify and record their voice (Orlikowski and Scott,
2015).
Both the above described innovations could be adopted by Spotify as with the help of
them the organisation can attain growth and competitive advantage in the industry. For this
purpose the management within the company can apply diffusion theory which is mainly focused
with four elements which are innovation, communication channel, social system and time
involve in adoption process.
They will have to make sure that the innovative ideas which are formed by them are
unique in order to assure the first element which is innovation. The second component is
communication so the company is required to provide information of the unique features to
customers. For this purpose, their own application can be used and other mediums such as
hoardings, social media etc. can also be selected for communication channel. As most of the
7

individuals are fed up of network issues and continuous upgradation so while planning to
introduce innovation it is very important for managers to assure to focus on social system. For
this purpose they can conduct market research to analyse that the customers will adopt the
changes made by the or not. The last element which requires higher attention of top executives is
time involved in adoption process. In order to analyse it they have to pay attention towards all
the elements of it which are seeking knowledge, persuasion, decision making, implementation of
innovation and seeking for reinforcement. A customers go through all these stages to make a
decision of adopting a new innovation (Simin and Janković, 2014).
In order to appeal the different groups of customers it is vital for managers to analyse
their nature which could be innovators, early adopters, early majority, late majority and laggards.
After analysing it they have to go through the adoption process in which first of all knowledge
seeking stage will be determined. All the top level executives are required to assure that detailed
information of new innovation is provided to the customers. Afterwards they persuade it, where
they require more data in depth which will be rendered by the enterprise to appeal them to adopt
new services. Afterwards, clients make decision of adopting or rejecting the innovative facility.
It depends upon the efforts of the company which are made to motivate them to use innovations.
When it is adopted then implementation stage comes where all the patronages determine the
usefulness of service so that they can assess their benefits. Confirmation is the last stage of
procedure of consumer adoption where they finalise to use the facility continuously in future.
Here, customers may take interpersonal or intrapersonal confirmations of groups which may
result in cognitive dissonance of their decision.
With the help of focusing on all the aspects of Roger's Innovation Diffusion Theory
Spotify will be able to develop innovative services for the company for upcoming period. It will
help the company to achieve all its long as well as short term goals.
CONCLUSION
From the above project report it has been concluded that managing innovation is the
concept of introducing a unique product or service in the market and managing it for attaining
success for business with the help of it. There are various theories of innovation but the major
one if Roger's Innovation Diffusion Theory. It guides the companies that are planning launch an
innovative product in the market to focus on four main elements which are innovation,
communication channel, the social system and time taken by customers in adoption process. It
8

also describes five different steps which are followed by individuals while planning to buy a
products. These are seeking knowledge, persuasion, decision making, implementation of
innovation and seeking for reinforcement. There are five different types of adopters according to
the diffusion theory. These are innovators, early adopters, early majority, late majority and
laggards. In order to make sure that innovation which is being launched in the market gets
adopted by the customers it is vital for organisations to focus on all the components of diffusion
theory of innovation.
9

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.
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.
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.
Kapoor, K.K., Dwivedi, Y.K. and Williams, M.D., 2014. Rogers’ innovation adoption attributes:
A systematic review and synthesis of existing research. Information Systems
Management. 31(1). pp.74-91.
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.
Karakaya, E., Hidalgo, A. and Nuur, C., 2014. Diffusion of eco-innovations: A
review. Renewable and Sustainable Energy Reviews. 33. pp.392-399.
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.
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.
Simin, M. T. and Janković, D., 2014. Applicability of diffusion of innovation theory in organic
agriculture. Economics of Agriculture. 61(2). pp.517-529.
Online
Roger's Diffusion of Innovation theory. 2019. [Online]. Available through:
<https://www.smartinsights.com/marketing-planning/marketing-models/diffusion-
innovation-model/>
Innovations for digital service providers. 2019. [Online]. Available through:
<http://www.ecnmag.com/5-innovations-required-for-true-digital-service-providers/>
10