Coming from a region where music plays a big role in our lives – think about ABBA, Roxette, and Avicii – it seems inevitable that we became intrigued by the swift pace of innovation within the music industry. In a couple of decades, music production and consumption have moved from LPs to cassettes and CDs, to music piracy and digital files, and most recently to streaming services. The Swedish company Spotify is a prime example of how streaming services have become an established part of the music industry. This quick pace of change and the establishment of new industry actors inspired us to ask: what is driving service innovation and digitalization in the Swedish music market and how can we understand service in this context?
We found that service innovation is driven by the co-evolution of value cocreation practices (VCPs), i.e., activities that create value. Different, interconnected actors, such as industry players and consumers, engage in VCPs based on how highly they valance them, which directs money and other resources to the whole system, shaping the general understandings of how things are, or should be done. The music industry was further shaped by innovations from other fields, particularly technology, supported by governmental investments and legislative regulations. For established, non-technology-oriented industry actors, such as record companies, the pace of service innovation was often too much- they lacked the know-how and found it difficult to give up their old business models, until they were forced to do so by other actors’ activities.
We uncovered four generic VCPs: producing, distributing, exchanging, and consuming. These practices have embedded elements in the form of understandings (i.e., know-how or competencies), engagements (i.e., emotionally-charged goals), procedures (i.e., rules), and materials (such as technologies, artifacts, and natural resources). Innovation becomes into being when VCPs and/or their embedded elements change. The embedded elements also guide the activities that actors engage in. On the one hand, consumers may become a driving force of market change by withdrawing or adding resources, or they may gain competencies that reduce their reliance on service providers. On the other hand, consumers may still value their routines (established ways of doings), but end up modifying their consumption because industry players withdraw their services. These examples show how the interconnected VCPs evolve into service innovation.
Through our study of the the Swedish music market, we show that service innovation can be viewed as the creation of VCPs and that services denote bundles of inter-connected VCPs. We thus contribute by offering a novel conceptualization of both services and service innovation from a practice theory perspective. We offer practical insights into how managers may broaden their focus to include the shared VCPs of the markets to secure a competitive advantage. For example, managers may focus on how their offerings are used and valanced by different industry actors to identify eventual signs of danger, such as consumers wishing to move away from current ways of consuming, or new VCP elements extant in other industries that may threaten their business.
Per Skålén, professor in Business Administration at CTF, and Johanna Gummerus, associate professor of Marketing at CERS at Hanken School of Economics in Finland.
This blog post is republished from the Social Science Spare. Read the original article.
