MBUS 3000 1st Edition Lecture 6Outline of Last Lecture I. Occupations II. Success narrative III. GershIV. The survivorship bias V. The narrative fallacy VI. Thriller by MJVII. SuccessVIII. “Success breeds success”IX. The Matthew Effect X. Some jobs in the music industry XI. Road Map XII. The Matthew Effect and the size of the hit Outline of Current Lecture XIII. Disruptive innovation as it applies to the music businessXIV. Disruptive innovationXV. Innovators dilemma XVI. Disruptive innovationXVII. Examples XVIII. R&B/SOUL/DISCO 1979XIX. Rewind back to technology:XX. Flaws in Theory Current LectureA) Disruptive innovation as it applies to the music businessThese notes represent a detailed interpretation of the professor’s lecture. GradeBuddy is best used as a supplement to your own notes, not as a substitute.1. Disruptive innovation = Disruptive Technology 1. Sometimes phrased as innovators dilemma 2. Theory comes from innovative dilemma 3. Example: 2006-state of the art digital video camera, these things were awesome in 2006, these were fantastic if you knew how to use them. The inferior product was the little flip camera that consumers knew how to easily use, they didn’t know how to use the state of the art video camera. The inferior good disrupted the market for the state of the art camera( it put them out of business) B) Disruptive Innovation: a term of art coined by Clayton Christensen, describes a process by which a product or service takes root initially in simple applications at the bottom of a market and then relentlessly moves “up market”, eventually displacing established competitors1. The flip camera was at the bottom of the market but it eventually displaced the products at the top of the market because the other product was too inconvenient for many customers 2. Sony opens the door to disruptive innovation; they open the door for someone to compete with them at the bottom of the market C) Innovators Dilemma 1. Because companies tend to innovate faster than their customers lives change, most organizations eventually end up producing products or services that are too good, too expensive, and too inconvenient for many customers. By only pursuing sustaining “sustaining innovations” that perpetuate what has historically helped succeed, companies unwittingly open the door to “disruptive innovations”.D) Disruptive Innovation1. An innovation that is disruptive allows a whole new population of consumers access to a productor service that was historically only accessible to consumers with a lot of money or a lot of skill. Characteristics of disruptive businesses, at least in their initial stages, can include: lower gross margins, smaller target markets, and simpler products and services that may not appear as attractive as existing solutions when compared against traditional performance metrics.o for instance the flip camera went after consumers who didn’t have that much money,at first seemed like a bad idea and it probably had lower profit margin than what Sony was making off of full size video cameras. E) Examples: Travel Websites vs. Travel Agents1. Travel Websites: you do the work, lower quality customer service, “does less”, more convenient, less expensiveo you do most of the work so by traditional metrics that doesn’t sound good “ why should I do the work?”2. Travel Agents: agent does the work, good customer service, “does more”, less convenient, more expensive, less conveniento You cant do it on your own terms, the airlines paid travel agents for each flight sold and that cost is past down to customer The Organ1. The Hammond B3 Organ is a rock, soul country organ but then the normal synthesizer was created and it weighs maybe 40 pounds and it will stimulate the same sound of the Hammond and in a live concert setting you wouldn’t be able to tell the difference 2. Now there is a nord keyboard and people use that sometimes 3. home project studio (only has 4 tracks) but its more convenient to stay at home4. More examples of disruptive innovation: o Email ---> US Postal Service o MP3s ---> CD’s o Home Recording Software---> Pro Studio Equipmento Voce Hammond B3 simulator---> Hammond B3 Organo Ebook ---> Paperback o Iphone/Android Apps --->Full featured Computer Software o EasyBooks --->Quickbookso Teac 2340 series 4 track--->Studer 24 track recorderso5. Delivery of music constantly getting disrupted o Player piano-> gramophone-> radio->8 track tape->CDs->MP3sF) R&B/SOUL/DISCO 19791. We look at styles as disruptive technologies –2. Example: sister sledge with Nile Rodgers, Bernie Edwards o We are family, big production, polished, dense layered arrangements, best session musicans, latest recording technology which was probably more expensive o This is the stud that will get disrupted: 3. The Sugarhill Gang-Rappers Delight, she is the disruptive innovation, she came in and ruined sister sledgeo Sugarhill Gang’s music was orientated to a niche market-urban African environmento Rappers Delight: low budget, independent label, raw, simplistic arrangements, “samples” instead of session music, mid range or low budget recording technology 4. Hip Hop/Silva Robinson-the consumer doesn’t care that it does less, doesn’t care that arrangements are simpler, doesn’t mind lower production values (to a point) 5. Hip hop moves up markets from niche urban African environments until its everywhere in the world o Record labels embrace hip hopo Greater profit potential with lower recording costs o Re-use of songs as “samples” gave labels a new income source 6. Musical Innovations as “Disruptive Innovations.” This is the main reason that I like to examine disruptive technologies. o Blues displaces Jazz o Rock N Roll replaces Big Bando Rap replaces RB/ Funk/Disco o Punk displaces stadium rock, progressive rock. Grunge/Alternative replaces “hair” metal. o Outlaw country replaces Country. The upstart musical form is often simpler and cruder. Fewer instruments. Lower production values in recording. Lower production value at concerts. The upstart musical form relies less on musicianship and more on emotion and energy.G) Rewind back to technology: 1. Are disruptive innovations “cheaper” or do they rely on hidden expensive subsidies o examples Flip camera relied on you having a 600-1000 dollar computer o “free” filesharing needs broadband connection and laptop or internet enabled device.H) flaws in theory: