The first innovation that was mentioned in this case was that of an Incremental Innovation. An incremental innovation is a series of small improvements to an existing product or product line that usually helps maintain or improve its competitive position over time. Incremental innovation is regularly used within the high technology business by companies that need to continue to improve their products to include new features increasingly desired by consumers. The case describes that the old way of selling “hard copy” music, movies, and games could shift to providing new ‘e-tailing’ channels through which you can obtain the latest CD of your preference – for example, from Amazon.com or CD-Now or 100 other websites.
These innovations increase the choice and tailoring of the music purchasing service and demonstrate some of the ‘richness/reach’ economic shifts of the new Internet game. This is not a drastic change in marketing to sell hard copies of these products; it is simply a shift from the brick and mortar to an online option. It does not shift the way these products are produced, but is however an incremental change in the way it is distributed. The second innovation which was described was a Discontinuous innovation. Discontinuous innovations cause a paradigm shift in science or technology and/or the market structure of an industry. As they are entirely new-to-the world products, made to perform a function for which no product has previously existed, discontinuous innovation requires a good deal of learning for the incumbent organization and its value network, including the user.
This Discontinuous innovation is described in the ways in which music is created and distributed, and in the business model on which the whole music industry is currently predicated. Discontinuous innovations also disrupt established routine and may even require a very different set of capabilities and new behavior patterns. The notion of novelty is relative so a discontinuous innovation for one organization might be an incremental one for another. As the case describes, aspiring musicians no longer need to depend on being picked up by A&R staff from major companies who can bear the costs of recording and production of a physical CD.
Instead they can use home recording software and either produce a CD themselves or else go straight to MP3 – and then distribute the product globally via newsgroups, chat rooms, etc. In the process they effectively create a parallel and much more direct music industry which leaves existing players and artists on the sidelines. Napster posed a huge threat to the established music business since it involved no payment of royalties. There are now many other sites emulating and extending what Napster started – sites such as Gnutella, Kazaa, Limewire took the P2P idea further and enabled exchange of many different file formats – text, video, etc. In Napster’s own case the phenomenally successful site concluded a deal with entertainment giant Bertelsman which paved the way for subscription-based services which provide some revenue stream to deal with the royalty issue. Apple was another company who saw the need for change, and successfully implemented discontinuous innovation to shake up the music industry.
With the launch of their successful iPod personal MP3 player they opened a site called iTunes which offered users a choice of thousands of tracks for download at 99c each. In its first weeks of operation it recorded 1 million hits and in February 2006. Over 1 billion songs have now been legally purchased and downloaded around the globe, representing a major force against music piracy and the future of music distribution as we move from CDs to the Internet.
discontinuous innovation. (2013, September 7). Retrieved from Lexicon: http://lexicon.ft.com/term?term=discontinuous-innovation Incremental innovation. (2013, September 7). Retrieved from Business Dictionary: http://www.businessdictionary.com/definition/incremental-innovation.html#ixzz2eE7EGEmb
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