Why The Record Labels Are Still Confused: The Difference Between Transformative And Incremental Change

from the the-innovator's-dilemma dept

A few weeks back, I shared my video on the innovator's dilemma (based on Clayton Christensen's work). The key point could be summarized as noting that legacy industries are fine with incremental improvements, but they run into a huge roadblock when it comes to transformative changes -- such as disruptive innovations that change the very way that business is done. It's just really really difficult for legacy businesses to comprehend, let alone adapt, to true transformative (or disruptive) innovation. Musician Steve Lawson recently had a fantastic writeup discussing the difference between transformative and incremental change in the music industry, and why it's been so difficult for many of the "old guard" to understand what's happening. He discusses how previous innovations that the record labels are used to were incremental changes:

The invention of cassettes, and 8-track cartridges was an incremental change - suddenly there were more ways of selling hard copies of recorded music. More places to play them, new machines needed, new possibilities for the length of music that could be issued in a single entity (90 minute cassettes were pretty standard, and some enterprising labels took to reissuing 2 albums as one on cassette, thus breathing new life into back catalogue.)

The same happened again with CDs - more incremental change - the chance to pretend it was higher resolution than vinyl (a lie) that it was indestructable (a lie) and that you could take it anywhere with you (true). CDs were a breath of life to a fairly static industry - suddenly, all the people who were teenagers in the 70s at the dawn of stadium rock were now successful 30-somethings with disposable cash and a deeply fragile sense of self.

But, of course, what we're seeing now is totally different. The internet presents a disruptive or transformative change.

When you take an industry that has 4 big costs - recording, manufacture, distribution, promotion - and remove 3 of them, that changes everything. All of the assumptions about how much it costs to make a record, what infrastructure is needed to make a sales team effective, who needs to own the trucks and delivery guys who take your product to shops - they all disappear. They are all now choices that you make, not assumptions.

The problem for the industry is that it structured its entire business around the idea that those four big costs are a big problem that any musician needs help with -- and they're willing to sign their lives away to get that help. But the transformative change that occurs with the internet is that much of that becomes significantly less expensive, and the need to sign your life away becomes not a need, but a choice -- and the businesses that were built to only work if musicians signed their lives away suddenly find themselves in trouble.

As in the innovator's dilemma, however, the labels still don't recognize this. They can only think in terms of the incremental change of "how can we sell more units of music." That's the only change they've ever really known. They're not prepared for a situation where the selling of music may not even make sense, and the level of control over an artist has changed dramatically. But they still view -- as is often the case in the innovator's dilemma -- as something to be dismissed. The fact that musicians can record for less money... well, it's not as good as having a record label bankroll you hundreds of thousands of dollars. True, but it's pretty damn good and getting better. The fact that you don't have to go through an expensive processing plant to print CDs? Well, it may not look quite as nice, but the technology again gets better and cheaper everyday. The fact that the music can be distributed and promoted for free online? The labels really still don't quite get that part of it, but it's been working great for musicians who know how to use it to their advantage.

Filed Under: disruptive, incremental change, innovation, record labels, transformative change

Recognizing That Voice Is Just Data (Or How Google Voice Could Be Disruptive)

from the voice-is-data-too dept

Karl Bode, over at Broadband Reports, wrote up a great article a little while back about why Google Voice was more disruptive than anyone (especially the telcos) were willing to give it credit for being. The key underlying point: voice is just a form of data. Once you realize that, you realize that no one needs to be tied to any telco's own dialing system. Your mobile phone service provider really could just be a dumb pipe.

For years, I've always felt that the calls for "triple play" or "quadruple play" was incredibly misleading. All of the different "plays" (voice, video, data) were actually all just data. And when things are all just data, and its on an open network, then anyone can provide the services on top of that data. The telcos recognize this, somewhat -- which is why they've tried to block out others from offering certain telco services (it's why Google Voice was blocked on the iPhone), but it could be really game changing. Imagine if you could just buy a mobile phone that had no calling plan at all -- but it was all in the software? You could even use different dialers (with different numbers?) depending on what made the most sense or was cheapest.

The telcos hate thinking of themselves as dumb pipes, but there's something to be said for focusing on the pipes and making them as strong as possible, while letting everyone else innovate at the service level, and just selling good data plans. The more others innovate, the more valuable those data connections become.

Filed Under: data, disruptive, google voice, voice