I was working on the Digital Transformation Project as I went for some distraction to Facebook. The Financial Times popped up above with the title ‘Transformation is crucial when digital disruption is the norm’. I began reading and, as the title assumed, I found out that the article was in great way related to what I what was doing for the Digital Transformation Project. Instead of zooming in on one company, as we’re doing for the project, the article zooms out and looks at the bigger picture. In this post I want to share some lines of the article about digital disruption and transformation and talk about why so many established companies have difficulties with digital transformation.
Let’s start, where the article starts:
Memories of the last tech bubble, when big companies worried about being “dotcommed” by internet start-ups that wanted to take their trade, have faded. Instead businesses now fear being “Uber-ed”. From taxi drivers to television networks, from filmmakers to restaurants and banks, the ways in which individuals and companies do business is metamorphosing so quickly that many companies find it hard to keep pace. The obsession with digital disruption has reached a flashpoint with the arrival of the smartphone, which is the platform for an invasion of older companies’ hallowed grounds. The success of online lift-sharing company Uber has become an example for entrepreneurs out to attack industries once thought immune to digital upheaval.
So, as we read, obsession with digital disruption is extremely high at the moment. Incumbents are scared, but what can and should they do? That’s where the middle part is about. Eventually, reaching the most important and toughest question that the businesses face: how quickly should they pull back from their traditional, profitable — but nonetheless shrinking — operations to invest in the digital future?
This is the innovator’s dilemma, as described by Clayton Christensen, a Harvard Business School professor. Incumbents can find it hard to respond to newcomers with a good enough product, since doing so often involves turning away from doing profitable things.
For example, Steve Ballmer, the former Microsoft chief executive, by most standards had one of the most effective runs of any chief executive in his 14 years at the top. Its revenues climbed fourfold and it was the world’s second most valuable tech company, though topped by Apple. Since he stepped down last year, however, Microsoft has raced to rebuild its business around the mobile devices and cloud computing.
The key message is that technology leaders evaluating whether to invest in new and immature technologies must do so with a futuristic frame of reference. The key question is, if these technologies found new customers and new markets which may in themselves be small and insignificant (now and in the future), could they mature enough to make inroads into our playing field and have our lunch? And if so, does investing in them today at the risk of cannibalizing ourselves make sense in the longer term? Hence, the innovator’s dilemma.
I was fascinated and hyped when I saw the promotional video (see below) of Pokémon Go, but at the same time I was skeptical and interested how the actual gameplay will look like. So I decided to look more into which technologies they use, how they make use of it and how they combine the technology with the real world.
You can define Pokémon GO as an augmented reality game that combines virtual and real-world gameplay. The game allows users to explore their own neighbourhoods and cities, powered by GPS, to locate Pokémon or other people to battle or trade with on their phones. For example, maybe you’ll find Bulbasaur at Tokyo’s Shinjuku Station or Pikachu beneath the Eiffel Tower. Judging from the trailer, it looks like users will as well be able to battle and cooperate with large groups to defeat rarer creatures from the game.
It sounds cool and the promotional video looks awesome. But screen captures really do show a game that takes place on your smartphone’s screen alone, so while there may be GPS components and interactivity, you’ll still need decent service and still be staring at a screen most of the time. That was true of co-creator company Niantic’s last gaming experience as well, a niche AR mobile game called Ingress, which asked users to join two sides and use their smartphones to claim territory around portals of energy (actually just real-world buildings and sculptures).
Nintendo is trying to reduce this amount of time that players spend staring at their smart devices in order to play the game by a Bluetooth-powered device called Pokémon Go Plus. Players can wear the device on their wrist or pinned to their clothing. It has a built-in LED light and a vibration function that will notify players that something important is happening in the game, such as a Pokémon appearing nearby.
This is what we know up till now about which technologies are involved in the game and how the gameplay will look like. I’m curious how it will work out when the game is released (2016). Above all, it’s interesting to see what is possible with combining the latest technologies.
Apple Music vs Spotify
With the advance of technology, the world has entered a digital society. The inevitable shift to digital music forced the industry to seek new business models. Legal downloads became available with the launch of iTunes in 2003 and a decade later subscription-based “pay-to-stream” services emerged. The streaming services made a large impact on the industry. With Spotify being the current market leader with 75 million users and Apple Music the latest entrant and a serious competitor, a new battle for market share developed. This article will provide an analysis and future prediction of both companies.
Spotify uses the so called freemium model, which offers free service with additional features that can only be utilized once someone has subscribed to a premium account. In order to also generate revenue from its free users, Spotify occasionally inserts audio advertisements that cannot be skipped. Unlike Spotify’s freemium model, Apple Music uses a free-trial model, meaning that after the free-trial period users are required to pay a monthly subscription fee to make use of the service. Apple Music is trying to offer an all-in-one solution to music lovers and therefore tries to make the monthly cost seem negligible.
SWOT & future prediction
The defining key trend in early 2015 in the global music market is the continued surge in consumer uptake of streaming services. This uptake of streaming services drives subscription to listen to music. On top of this, there is a substantial untapped potential for growth within the paid-for category. So we can say that Spotify and Apple Music are competing in the right market.
At the same time, the streaming market entered a new phase of growth. In a few years a lot of big players entered the market (e.g. Google, Apple, Amazon and Tidal). The near future of this market will cause intense competition between those companies. For Spotify and Apple music to win this fierce battle, a few key trends are extremely important:
– Revenue model and artist royalties. People will choose the service with the most and the best artists. One important factor to attract the most and the best artists is to have a revenue model that is considered to be fair according to the artists. Due to Apple’s subscription model, we expect that they will be more successful in attracting artists than Spotify.
– Partnerships. In order to accelerate the growth of their customer base, they have to form bundled offers with telecom companies and make exclusive deals with artists and labels. It is hard to predict who will be most successful in this area.
– Competition on curation. Surfacing songs and editor recommendations that are tailored to the listener’s taste is key to customer retention. We expect Apple Music to have the best tech team to be able to outperform Spotify in the future on curation.
Another factor that can’t be left unmentioned and can play an important role in gaining market share in this rapidly developing market is the brand community of Apple.
After the analysis of both companies and taking into account their future potential, we believe, that Apple Music will be the most profitable on the long term.
Sjaak Meeuwsen – 437156
Claude Zwicker – 437277
Yinuo Jin – 373227
Hidde van Heijst – 436800
Ruud Schippers – 441698