Could Myspace have become Spotify? Innovate at the edge, not at the core.

SUMMARY:

An interesting point, which has been splitting opinion, was raised at Civica’s annual expo in Manchester this week: should you innovate the core of your business?

myspaceShould you focus on innovating the core of your business when faced with tech/market disruption? Or should you stick to what you’re good at and just place your innovation efforts at the edges of the business?

This question was raised at Civica’s annual user conference in Manchester this week, which was focused on looking at how technology is impacting the public sector (in particular local government). Although I’m still undecided about where I stand on this, the question of innovation at the core versus at the edge got an interesting response from the crowd on the day (and on Twitter), so I thought I’d put it here for people to mull over and to hopefully get some further feedback.

The idea was raised by Andrew Davies, who was sitting on a panel and was once an employee at Myspace (and is now a consultant). Davies explained that one of the questions he gets asked all the time is: What went wrong at Myspace?

Although Myspace saw huge success as one of the early social networks, it has since lost millions and millions of users and has suffered at the hands of far more successful companies such as Facebook and Twitter.

Davies said:

Lots of people ask me – what happened with MySpace? I joined MySpace in 2006 when Facebook was only available to students. It was a completely different world then. I joined when it was about 30/40 million users and we took it to about 250 million. Then within a year we lost about 200 million. So I kind of know what works and what doesn’t.

What was the thing that went wrong? One of them was about innovation. When we work in tech we hear that word all the time: innovate, innovate, innovate. But the reality is you need to keep the core product the same and innovate around the edges. The problem with MySpace was that we tried to innovate everything.

We were known for music. And the relationship between the customer and the musician. When we noticed that they were building a video company called YouTube, we thought oh let’s do MySpace TV. Then we noticed that there was an image platform called Slides, so let’s do images. Then all of a sudden the big corporates said here’s half a million, can you do comedy? And it was like yeah we could do MySpace comedy. All of a sudden we were doing 50 different things and there was no plan.

Okay that makes sense. Don’t get distracted and try to change your core market. No-one likes a company that doesn’t know what it stands for. It can get messy.

Davies went on to make some big claims. He said:

But if MySpace had stuck to the core and innovated around the edges, MySpace would be Spotify right now. Because one of the hardest things to do in music is copyrights and the issues when it comes to online. One of the things with a lot of tech companies is that it’s easy to get distracted to try and do something else, because there is something you’ve read in the newspaper and a few people are talking about it online.

The key is to keep that core the same. If you look at successful companies, not just tech companies, the core is the same. Google, the core is still search. Amazon is the same, it’s the relationship they have between the product and the customer and that user journey. They will do other things, but that core is the same.

Success lies in keeping that core the same and trying not to be too distracted. Innovate, but around the edges. It’s business as usual, but just look at it through a digital lens. I don’t care what your digital strategy is, I want to know what your business challenge and needs are.

I suppose the question to ask yourself here is: what is the core of your business? Apple is probably the easiest example to use here of a company that has successfully protected the core of its business and taken it through a number of innovations. The idea of beautiful software that is tightly integrated to well-made hardware has found a number of possible scenarios for Apple.

That being said, Nokia started out mining pulp, but later found huge success as a mobile phone manufacturer. That’s a huge swap of the core. But then, of course, Nokia later struggled to innovate at the edges by recognising the impact of cloud and ubiquitous connectivity.

I’ve also noticed lately that large companies are recognising that they can innovate by tapping into start-up creativity, which complements their core business. Maybe this is a useful approach.

And what about the traditional enterprise tech providers that are transitioning to cloud-based products. Is that innovating at the edge? Or the core?

When I posed the question of core versus edge innovation to Twitter, I got a big of a mixed back of responses.

 

As you can see, not a unanimous vote or a chorus of agreement. Equally, a woman in the audience at the expo made a point of speaking up during the session to say that her business (local gov) has many cores, making it hard to know where to focus innovation. I didn’t catch her name or job title, but she said she was from Worcestershire and worked in local government. She said:

I want to make a point about sticking to the core product and reflecting on the fact that in local authorities we have so many products. I work for a district council and we run such a diverse range of enterprises so that sticking to a core product and thinking that our tech strategy is around that is actually quite challenging for us. I just wanted to share that and I guess it’s true for other people.

We are focused on cuts, we are on focused on efficiency. But that’s the wrong lens innovationto be looking through. What we really need to be achieving is the right outcomes for customers. Customers are behaving really differently to the way they were five years ago and we need to meet them in that digital space.

You can see why people find this difficult..

My take

Keen to hear thoughts on this, it’s an interesting idea and should provide those struggling with digital disruption with some focus. Get in touch.

    Comments are closed.

    1. says:

      There are numerous reasons why vendors fail. Saying core or edge is too simplistic. SAP had massive problems because it was complacent and didn’t think that Salesforce could beat it and didn’t see the threat that SFSF represented. It bought its way out of trouble with the SFSF acquisition and has managed that transition well. Less so re: Ariba.

    2. Phil Wainewright says:

      This is completely wrong, you have to innovate at the core. But where people go astray is they define their core as what they’re doing rather than what their customers get out of it – so in that sense the participant from Worcestershire hits the nail bang on the head when she says they should be focused on customer outcomes instead of cuts and efficiency – in fact, if they focus on using frictionless ways to use connected digital tech to deliver better outcomes they’ll achieve savings and efficiency too – search diginomica for my stuff on frictionless enterprise for more on this.

      This article immediately brought to mind the classic essay on Marketing Myopia by Ted Levitt, in which he wrote:

      “The railroads … let others take customers away from them because they assumed themselves to be in the railroad business rather than in the transportation business.

      I’ve often thought of this over the years and in fact looking back I see that I wrote a post in 2003 about this phenomenon in the software industry and its inability to adjust to cloud, which speaks to Den’s comment about SAP. I know I shouldn’t quote myself but I thought this closing paragraph seems prescient:

      “Today [May 2003], the IT industry is led, and has its agenda set, by companies who believe themselves to be in the enterprise-scale software business. What they don’t yet realize (or perhaps are helpless to do anything about — see Disruptive Technologies: Catching the Wave, by Bower and Christensen, HBR January 1995) is that actually they’re in the distributed process automation business. If they and their customers don’t adjust rapidly to their new market environment, their destiny will be to end up as a minor footnote in a future article in HBR about the astonishing decline of the one-time giants of our present-day IT industry.