A few days ago, my three-year-old came to tell me a lion was in our living room.
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No, they haven't started selling lions at Harrods again; she's just a toddler with an active imagination. I had to explain to the lion that they weren't to eat her toes anymore. I was happy to talk to the thin air because of the joy it brought her.
When I was five, I had my own radio show. I used to sit in front of our cassette player and record hour-long shows with myself and the additional voices I would do for the guests. I'd then give the finished tape to my parents and request nicely (make) them listen to it. It was a really popular show; all two audience members gave rave reviews.
It's funny how, as children, our whole life revolves around play—inventing games, seeing imaginary animals and creating experiences to avoid boredom. Then we grow up, learn about taxes and spend our time in front of screens all day.
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Play isn't something we should leave in our childhood.
Researcher Brené Brown wrote that "play is at the core of creativity and innovation", and in Stuart Brown's TED Talk, he says, "Nothing lights up the brain like play.” He tells the story of two executives working at Intel. They had to develop a new product line and couldn't think of anything. One day, they decided to do a workshop based on imaginative play and came up with the idea of the microprocessor - which is now Intel's most famous product.
Engaging in play is a natural human instinct for learning; it is still the fastest and most effective method for gaining knowledge. Play is connected to curiosity, experimentation, and tackling challenging problems.
I'm sure by now you're wondering what this all has to do with Web3 and music. Don't worry; we're getting there. Stay with me, friends.
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We get asked a lot about where our product is or what it is. So, today, I wanted to talk about play and innovation because this will answer those questions and get you excited about what's to come. 🔥
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For a long time, the business focus has been more product-centric than ecosystem-centric due to the evolution of market dynamics and tech advancements. Historically, companies concentrated on developing standalone products that could address specific consumer needs. This approach was driven by the traditional business model that emphasised creating unique, competitive products to capture market share. The primary goal was to innovate faster and deliver new products to the market, often overlooking the potential interconnectedness of these products within a broader ecosystem.
This is where the importance of investing in innovation—something we're focused on with the Web3 Music Association—comes into play.
Let's talk about why open innovation is a key step needed - a step that is currently missing within the music industry.
Yes, it's cliche, but I couldn't not include a quote from the innovation legend Steve Jobs.
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So what is open innovation? Open Innovation promotes collaboration with external partners and stakeholders to drive creativity and build value. Unlike the traditional, closed innovation model, where ideas and developments are kept within the organisation, open innovation encourages sharing knowledge, resources, and expertise across different entities. This approach leverages a broader network's collective intelligence and capabilities to solve complex problems, develop new products, and generate innovative ideas.
Why is it important? Essentially, it provides access to a wider pool of knowledge and resources, which can significantly accelerate innovation. Collaborating with external partners makes co-created innovative solutions better aligned with market needs.
IBM's initiative around AI is a prime example. IBM created a collaborative network that included various stakeholder groups. This network allows IBM to leverage its partners' collective expertise and resources to drive AI innovation.
Open innovation setups come in various forms, each designed to harness external creativity and expertise uniquely. Numerous well-known products and startups have emerged from open innovation initiatives. For instance, Slack began as an internal tool for a gaming company and evolved through extensive user feedback and external collaboration. LEGO Ideas has led to successful product lines like the Women of NASA set, created through fan submissions and community participation. The Netflix Prize, a public competition to improve its recommendation algorithm, resulted in a 10% improvement in prediction accuracy, demonstrating the potential of open innovation to solve complex problems effectively. An example of open innovation incorporating platform envelopment is Facebook’s approach, which allows developers to create apps that integrate with its platform. Successful apps are often enveloped by Facebook, which either acquires them or develops similar versions, enhancing its ecosystem.
Let's look at platform envelopment in action. It involves allowing the market to develop and test various functions or applications within an ecosystem, identifying the most popular and valuable ones, and then launching a similar or superior version under the platform's brand with a more competitive business model. This strategy is key in open innovation practices because it lets the platform owner capitalise on proven market successes while maintaining control over the user base.
For example, before Microsoft launched its media player as part of the Windows operating system, an independent company sold it at a high turnover. Microsoft saw the value of this function and decided to offer its own media player for free, thereby increasing the attractiveness of Windows and driving more sales. This effectively enveloped the market and eliminated competitors.
Apple has successfully employed platform envelopment through its open innovation strategies. By opening the App Store to third-party developers, Apple allows a wide range of apps to be created and tested in the market. The most popular and useful apps are then often enveloped by Apple, which either acquires these apps or develops its own versions with enhanced features and seamless integration into the iOS ecosystem. This strengthens Apple's product offerings and ensures a loyal user base that benefits from a cohesive and optimised experience. Open innovation provides Apple with a continuous stream of innovative ideas and market-tested functionalities, which can be enveloped to sustain its competitive edge and drive sustained growth and innovation leadership.
Katy, this is all really interesting. Thank you for this MBA crash course, but how does this relate to the music industry?
That is such a great question.
We provide you with strategic tools that are not available individually but integrated into The Web3 Music Association, which Music Protocol can then support and scale. This integration empowers the music industry to leverage the aggregative force of open innovation and platform envelopment, offering more influence and tools to face ongoing changes and future challenges.
As I've discussed in this newsletter over the past few months, and as Sergio has been talking with our members about, the music industry, like many other sectors, has the opportunity to evolve its traditional business and infrastructure models. By embracing open innovation, the music industry can tap into external creativity and expertise, developing new solutions that cater to growing consumer needs and preferences in the current and future digital landscape. This approach helps keep up with rapid changes and positions the industry to leverage collective innovation for greater success and sustainability. Open innovation plays an important role in this transformation.
We've been working on a full research project looking into what consumers want and where this will continue over the next few years. We'll share this with our members soon (sign up here if you want to get this research).
What could open innovation look like for the music industry? I've listed a few high-level examples below.
Collaboration for Content Creation: By collaborating with artists, labels, startups, and fans, the music industry can co-create new content and experiences that resonate more deeply with audiences. For example, this might include new music formats, interactive experiences, and personalised content delivery.
Leveraging Technology: Integrating technologies such as AI, virtual reality, and blockchain will continue to develop how music is produced, distributed, and consumed. For instance, AI can analyse music trends and preferences, helping artists create hits more likely to resonate with audiences.
New Revenue Streams: Collaboration pathways can explore and establish new revenue streams, allowing the industry to develop new platforms and services that enhance how fans experience music, such as virtual concerts, emotes or immersive avatar integrations.
Improved Consumer Experience: By incorporating feedback from a broad range of stakeholders, the industry can create products and services that better meet the needs and desires of music fans, developing more personalised and engaging music experiences.
Open innovation gives you the permission to play again.
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We're launching our open innovation programme soon. It will bring the music industry together with startups, global brands, and other relevant stakeholders to focus on building the future of gaming, the metaverse, fandom, RWA, and AI.
If you want to come to play with us in building new models, products and ideas, drop me an email and let's talk more about it 👉 katy@web3music.org.
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Until next time - thank you for reading and I hope you do something playful today!
Katy x
Brought to you by the Web3 Music Association (“W3M”) – a non-profit entity with the goal of orchestrating innovation in the music industry. Its mission is to educate music industry professionals, support their digital transformation, and bring them together to collaboratively develop innovative use cases. Created from an extensive three-year collaboration, the association is a lead contributor to the Music Protocol – a dedicated blockchain for intellectual property registration, management and monetisation.
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