Back in August 1995, Microsoft launched its long-awaited, new at that time, operating system, Windows 95, to much industry anticipation. The company had delayed all year long, and eventually Bill Gates announced it to the world at Windows World 95 to the tune of the Rolling Stones’ “Start Me Up”. Media coverage cemented Microsoft’s total grab of all that once differentiated the Apple Mac.
Meanwhile, Netscape had been formed the year before, and was creating a market storm. No sooner had Windows 95 launched, than Gates realised the real war was going to be waged elsewhere – not on the desktop, but on the internet.
What I witnessed between August 1995 when Microsoft, based significantly in Seattle, not Silicon Valley, and 7 December 1995, only four months later, was a complete repositioning in the market of a company which dominated the desktop - a repositioning of that desktop software company to engage with, pursue, and eventually position itself to dominate the internet – a disruptive, new technology of unknown impact. By early December, only four short months later, when Microsoft announced its internet strategy, Windows 95 had been long forgotten, and Microsoft worked feverishly not to become obsolete as the industry move to the next curve, with or without Microsoft, leaping from the inflection point called the internet. Bill Gates released his book, The Road Ahead, which sought to outline what his company would need to do to say ahead of the curve.
The experience of seeing an industry giant such as Microsoft shift into overdrive mode, move all of the deck chairs from one side of the ship to another, in a very large organisation was an experience that has made a permanent impression in my mind. It was the lack of proximity to the ideas brewing and exploding in Silicon Valley which many credited with Microsoft’s missing of the early signs that the internet was going to change our lives and businesses forever. Regardless, even if it was not the first to internalise the widespread change upon us in early 1994, the firm moved swiftly to reposition itself in the game. And due to the enormous advantages it had, Microsoft was able to catch up and lead.
Netscape had come to symbolise the internet as the first browser surged through 1995, but then Microsoft Internet Explorer, a competing browser, dramatically usurped Netscape Navigator’s position as the de facto browser throughout the late 1990s until Netscape was swallowed up by AOL. Nobody talks about Netscape these days at all. Microsoft’s enemies took the battle to court with many lawsuits but Microsoft’s position was that it could not be stopped from innovating its own platform.
Something eerily similar is happening in the music industry today. The gorillas of the old record empire have been smugly running their empires while a new music industry has grown up beside them barely giving them a glance. Can they wake up in time? Or are we witnessing the wholesale destruction of an industry with the emergence of its successor? Can the deck chairs be shifted or has the ship already started to dive? Has Guy Hands’ Terra Firma bought a dinosaur in EMI?
If you were to build the music industry today from a clean sheet of paper, you would build an ecosystem of companies with single propositions and business models rather than a series of oligopoly record labels which dominate the industry. The artists who create music and how they are managed is a different discipline and skillset than what’s required to distribute their creations.
The new power players in the music industry – such as Apple - are those companies who do one or the other, not both. Apple distributes to consumers because it had an insight into how people wanted to listen to music. The early bullseye gave market power – the ability to fix the price of a single as one example.
Companies such as IndependentIP out of Amsterdam are core to the new music industry. You could call them a software asset management company. Basically it connects in a “Linked In”-like fashion someone who creates music with someone who consumes music. In Web 1.0 it would have been called a supply chain company, but today it is a supply matrix company, enabling “many to many” combinations through the FUGA platform. It is agnostic to inputs and outputs, but is the essential “switch” through which music labels and music consumers will deal with each other.
If I’m a new independent artist, I select all of the rules for distribution in the FUGA system, and IndependentIP automates and manages my song. The company offers an entire toolset to handle not just delivery, not just asset management, not just reporting, not just contract management – all of it. And there can’t be incompatibility issues in working with FUGA. Whoever wins in terms of distributors or artists or labels, FUGA wins because of the network-orientation. We live in a world which is no longer an “or” market, but an “and and and” one.
Whereas the internet was the disruptive technology which caught Microsoft unawares, the ecosystem and its implicit network-orientation to business models is what is surprising many established businesses today, particularly in the music and content industries. Witness the following three examples:
Think of TheBizmo – an online store to sell digital and physical products. It just demonstrated the first case ever of a song reaching the charts by digital sales outside of iTunes. The key insight is to enable people to sell the music they love online, or sell on to their friends and other people who like the same music, enabling me to make money as a retailer of my music online. This network-orientation to music - in this case, one to many - will continue grow. What is game-changing about it however, is that the economics shift around the circle for the distribution to include “me”.
Think of Lickerish, which is changing the face of celebrity photography. Whereas a couple of giant media brands dominate celebrity content, publications around the world who can’t necessarily shoot the big stars want to shoot them. Lickerish creates a transaction around the ecosystem of players who come together for a photoshoot. By giving the celebrity a cut of future revenue which is new, or cutting them into the revenue line, they secure the buy-in of the celeb to the cost line in the P&L for that transaction. So he/she takes a cab rather demanding a Rolls Royce to get to the shoot. Lickerish manages the vault of celebrity imagery as well, but what the insight is, is that if you align interests around the goal for everyone, you make the transaction the most profitable.
Think of Monitise, the mobile banking services firm, built out of the City of London, and run by Alastair Lukies, who had the epiphany that there was a problem with every other mobile banking proposition in the market because banks weren’t at the centre of the ecosystem; they were mobile carrier-centric. And yet banks were where people put their money. The clever part of Monitise’s “go to market” strategy was to not create parallel or alternative structures or to try to change banks, but rather to enable them.
Today you can access your current account at HSBC, Royal Bank of Scotland, First Direct, Alliance & Leicester – 60 per cent of the UK banking market, via your mobile phone. In the US, Monitise works with 9,000 banks through Metavente, its US joint venture. You can check your balance, top up your Oyster card, and transfer funds to your daughter’s account. Soon you will be able to make payments from your phone. Monitise is winning because it takes care of all of the players in its ecosystem, and so everyone is aligned in wanting to grow the volume of mobile banking transactions. It sits in the middle taking a cut of everyone which goes through their switch.
In 2008, the network is the disruptive technology. And business models follow where technology wedges open a new battleground. The winners in this next phase will be those who take care of the ecosystem in which they operate. The world has become implicitly “win/win”. I can’t win at your expense. Rather, I have to anticipate your behaviour and align our objectives.
Microsoft jumped to the next curve in 1995, and “caught up”. The music industry is going through its “come to Jesus” moment now. To survive they must downsize and redefine what they are as an industry as they are being redefined by the entrepreneurs who are busting into their space – the IndependentIPs, the Bizmos, the Lickerishes – to name a few.
Never has David and Goliath been such an even match.
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