What Bob Dylan Teaches Us About Digital Strategy
Bob Dylan has decided to sell the rights to his entire music catalog to a major music label. Let’s look at what Bob Dylan teaches us about digital strategy.
A corporation now owns Bob Dylan’s entire life’s work—he no longer owns the underlying property that made him famous in the first place. That’s a big deal. Why did he decide to sell the rights to his music? Was it because of his age? Or, because of the rise of streaming services, did he feel he could get the best price now?
In the past, you had to look at album sales from a record store if you wanted to know which artist was most popular. With the rise of digital technology and the rise of an economy where the barriers to entry have collapsed, we are seeing who the true winners are. A record store arranged its music on the shelves as a function of what was selling the most and because of deals with different record labels. If a record label was running a major promotion for an artist, they would get prime space in the store, so consumers were more likely to buy that album.
But if you took away that barrier and didn’t promote one artist over another, who would sell the most? Most likely, it wouldn’t be the artist heavily promoted by the record label. We’re seeing that with the rise of digital technology. With streaming options like Spotify, it’s easy to find the music you want. It takes the same effort to find a Bob Dylan song on Spotify as it does to find a song by a conventionally popular artist today.
You could argue that Mariah Carey’s “All I Want for Christmas Is You” is not the greatest song in the world—but sales are booming. Streaming has lowered barriers, and the song has risen to the top. The song is timeless, and because there are so few holiday songs, it’s almost always going to be on a holiday playlist. With the rise of digital technology, barriers that protected incumbents are falling away.
Think of a barrier like a tariff. At a record store, there was a tariff on certain record companies and artists who were not part of a promotion. Now, that tariff has fallen away. Here’s the insight: As these barriers start falling away, the most popular artists and songs are going to rise to the top—not necessarily the most recent songs, or the ones that music critics tell you to listen to. You no longer need a music critic telling you what to listen to because it takes minimal effort to find music you enjoy.
The other key thing to consider is: What is a digital strategy? When clients send us copies of digital strategies and ask for our feedback, they typically confuse a digital strategy with a strategy. The goal of strategic planning is to gain sustainable edge over competitors. Its all about competitive advantage.
A strategy is a company choosing its reason for being, where it’s going to play, where in the value chain it’s going to operate, and what is required to have a sustainable competitive advantage over competitors. A digital company that makes those decisions is making a strategy decision. A digital strategy is not the same as corporate strategy.
The most common flaw is that a lot of companies look at VCs and say, “The VC model is to make ten bets, one of which pans out in an incredible way with such big returns that it makes up for the other losses. We should make our own investments in digital in the same way.” Here’s the problem. If you’re a bank and you have ten major initiatives to reinforce and strengthen your digital infrastructure for banking, I’d be horrified as a regulator if your strategy was that nine of them were going to fail and one of them was going to succeed. That would be a disaster.
Many people don’t understand that a VC firm is making an investment strategy. If a bank wants to make investments outside of their core business, that’s fine if the investors are okay with it. But it’s not okay to choose the same investment philosophy if you’re actually investing in your core business because you’re going to create tremendous pain and dislocation. As you think about the impact of digital technology, think about what happens when the barriers and tariffs fall away. Which products succeed? Can your product succeed? How do you make these digital investments?
This is an excerpt from Monday Morning 8 a.m. newsletter, issue #8.