The Advanced Business Strategy class for the MSc in Innovation Management at FFHS requires us to read the book Contemporary Strategy Analysis by Robert M. Grant and work on different cases from the additional cases-book. The first case we will discuss is about Madonna and the successful strategy she employed to become the star she is today.

By now, everyone involved or just slightly interested in the music business knows that Madonna is a hardworking, disciplined, and successful businesswoman. She got to New York in 1977, at age 19, with only $35 in her pocket, and 31 years later, in 2008, her “Sticky & Sweet” tour brings in $230 million in revenue, making her the biggest moneymaker in the music industry, according to Billboard Magazine. Madonna didn’t become who she is today by simply being lucky. When she started off, she had a vision with long-term goals, a deep knowledge and understanding of the music industry (the competitive environment), she knew exactly how to exploit her strengths and how to protect her weaknesses (objective appraisal of resources), and she knew how to effectively implement her strategy and respond to changes in the music industry.

Madonna’s vision

Dick Clark, American Bandstand’s presenter, asked Madonna at the beginning of her career, “What do you really want to do when you grow up?” “Rule the world,” Madonna replied. That is a rather bold statement, or vision, for a newcomer with basically no connections and financial power. Back then no one would have thought that that grungy mid-twenties rebel would become the Queen of Pop one decade later. Madonna had a clear vision. She wanted to rule the world, or at least the world of entertainment. In order to reach the throne of the Queen of Pop she knew that she had to be disciplined, continuously driven, and other dimensions of her life had to be either subordinate or absorbed into her career goals.

Deep knowledge and understanding of the competitive environment

In order for Madonna to get fished out of the vast pool of new-coming music artists, she had to understand how the music industry works. There was no Internet with MySpace and YouTube in the 1980s and the “Big 5” record companies, namely Sony, Warner EMI, Universal, and BMG, ruled the music business. If an artist wanted to become a popular act, she needed a record deal and it was key to know influential people and being introduced to powerful executives. But that alone would not be enough to persuade major labels to give you shot. A remarkable product was (and still is) a key ingredient for success. After the disco era, flashy and colorful pop artists such as Cyndi Lauper, The Cure, and Culture Club defined the music landscape of the 1980s. Madonna understood the trend and created a grungy, rebellious, and sexy pop singer look with room for adaption. Hence, Madonna was perfect for MTV.

With MTV becoming the heartbeat of the pop culture of the 80s, it was crucial for any artist to be played, liked, and especially talked about on MTV. Madonna pushed the limits of sex and pornography with every video she made. Finally in 1990, enough was enough and MTV banned her video Justify My Love. When artists hope to turn MTV airplay into a small profit, Madonna turned a MTV video ban into a very large profit. Justify My Love was rush-released into retail for fans to buy on VHS right after the ban. Obviously, the ban and the sale of the video was great promotion for the single that topped the charts after that. Another remarkable product was Madonna’s photographic art book Sex that came in an unusual size and packaging, and included her then-latest CD Erotica.

Madonna understood her competitive environment very well and created products that marketing-whiz Seth Godin would call a Purple Cow. Madonna’s products were remarkable and made early adopters stop to get a closer look at them and spread the word. Furthermore, she knew exactly whom to work with to value-up her product.

Objective appraisal of resources and effective implementation

Right from the start, Madonna teamed up with the right musicians and producers and with popular DJs. Steve Bray developed the first demos and dance club singles with Madonna, DJ Mark Kamins introduced her to the Sire Records executives, where she landed her first record deal, and John “Jellybean” Benitez, the hottest DJ in New York in the mid-80s, was central for the promotion plan of Madonna’s music.

Her willingness to make it ‘no-matter-what’ without compromising her ideas, is shown by her ruthless decisions. As soon as Warner Bros. showed interest in her music and character, she dumped Steve Bray and Mark Kamins, and teamed up with Warner Records’ house producer, Reggie Lucas, for further releases. Also, she brought Freddy DeMann, who was managing Michael Jackson, to drop the future King of Pop in favor of managing Madonna.

Madonna knew exactly whom to choose to add value not only to her music but also to her glamorous image as a star. She started very early to develop her look with the help of jewelry designer Maripole. The “Boy Toy” belt buckle she used in her beginning years, was an eye-catcher and a symbol of her grungy, rebellious, and sexy pop singer look. Jean-Paul Gaultier’s metallic, cone-breasted costumes, made exclusively for the 1990 Blonde Ambition tour, became an iconic symbol for the tour and for that whole period of Madonna’s career. In addition, her relationships with actors Warren Beatty and Sean Penn, and director Guy Ritchie gave a heavy touch of glamorous Hollywood to her image.

Another milestone in Madonna’s quest for stardom was her role of Eva Peron in Andrew Lloyd Webber’s 1996 big-screen adaption of the musical Evita. Robert Grant writes, “Madonna achieved a status that was no longer defined by her work. By the 1990s, Madonna was no longer famous as a rock singer or an actress — she was famous for being Madonna.” After her roles in the movies Desperately Seeking Susan, Dick Tracy, and Body of Evidence, where she always incorporated the character she was promoting at that specific point in time with her music, she finally persuaded critics with her singing and acting ability. But most important, she was able to project her own life in the character of Eva Peron. Madonna came from the worker class, like Eva Peron, and had to fight all her life to make it to the top. Both Madonna and Eva made it from rags to riches.

With every new album release and tour, Madonna reinvented herself. If electronic beats were hip, she went dance. If world music was trendy, she used henna temporary tattoos and incorporated world music instruments in her music. And she did it in such an authentic way that not only her old fans would keep following her, but also new ones that were not even around when she released her first album would start following her.

A good hand for business

Madonna is known for being a great entertainer and for having a good hand for interesting and (for her) great business deals. Her remarkable ideas with the banning of the Justify My Love video and her unusual book release with the name Sex are prove that Madonna is not afraid to try new things, and that she can recognize a good deal.

In April 1992, Madonna founded Maverick Records in collaboration with Time Warner. She signs deals with Alanis Morissette, The Prodigy, Michelle Branch, and Sasha Cohen Baron, among others. The roster shows a wide variety of talents from the entertainment business, who were successful thanks to strategic planning from Madonna’s Maverick team.

In 2007, Madonna ditched her record label, Warner Music Company Corp., to sign a $120 million, 10 year deal with concert promoter Live Nation, because, “The paradigm in the music business has shifted and as an artist and a business woman, I have to move with that shift,” she said. She recognized the trend of the changing music business. Artists are not making any money from CD sales anymore. The money is made with experience packages including live concerts, merchandising, and exclusive releases. The old guard of record labels can only offer distribution and traditional marketing and promotion, where as the new breed of live promoters like Live Nation know exactly what music consumers want and how to entice artists and their following to create a unique, so-called 360 degree experience. Madonna’s deal with Live Nation is once again proving her intuition for trends and business opportunities.

And as if all of this wasn’t enough, she published two children’s books, and one of them was printed in 42 languages and distributed through Gap stores.

One of my favorite Swiss blogs, Website Marketing, posted a great article called “The Good Pirates Part 1 – Hyperdistribution.” It discusses how “Hollywood is trying to kill the very thing that it has created.” Read the article in English, here.

Since this is a topic I’m very much interested in, and I discuss this issue with basically all classes I teach to, I’d like to share my thoughts with you:

Very well said, “piracy should not be feared and fought, rather harnessed.” First of all, according to CNN The Screening Room, 2008 was one of the most successful years for Hollywood, ever. And digital movie piracy is at an all-time high. So, why battle those who made production companies big? The music and movie industries work in similar ways and have similar attitudes, so let’s think back to the Napster trial. Metallica’s Lars Ulrich fought Napster and exactly those people, who made him a multi-millionaire. He went on a crusade against the MTV and Internet Generation and as soon as Napster shutdown, eMule, Kazaa, and later on BitTorrent emerged to cause even more damage to the music (and movie) industry. By now, the movie and music industry should have understood that if you cannot beat them, you should definitely join them. Some artists, like Nine In Nails and Hawthorne Heights, understood the situation and became more popular and were able to make better money than ever before.

As for how to make money with FREE: Advertising is obviously one way to generate some money. Nonetheless, many internet users have become blind for banners. I sure am, and many of my peers as well. One way to generate money that has been proven effective by different artists in the entertainment business is selling merchandising and live events. Take all those reunion tours from Phil Collins with Genesis or Sting with The Police. One can find all the classic songs online on legal and illegal platforms. Music in CD or MP3 format has become a commodity. But experiencing music in a live setting has (almost) become a luxury good. Not everyone has the money to buy two tickets for $90+ each every other week, and I’d consider that a cheap ticket. And once you’re at the gig you might want to buy a T-shirt as a souvenir, for another $30+.

Wong Fu Productions, a young team of Youtubers and filmmakers, create clips that get distributed on Youtube for free. They solely generate money by selling a lot of merchandising and making professional music videos for newcomers. A perfect example of how free leads to money.

I came across a promotional article of Bushmills Irish Whiskey named ‘The Age of Innovation’ in the July 09 issue of Wired Magazine’s UKedition. Especially the statement, ‘But age is no barrier to innovation’ caught my attention. Even though it sounds like an advertisement line, I couldn’t agree more with it.

According to their website, Bushmills 1608 is a unique blend of tradition and innovation. That can also be true for other companies that operate in an industry ruled by traditions, but would like to be innovative. Take educational institutions: They have been teaching the same way for centuries. With the years passing by, they have added OHPs (over-head projectors) and beamers to their classrooms, and they started giving email addresses to their students. These might be considered to be minor innovations, but they gave an additional value and made teaching and studying easier.

With Apple introducing iTunes U, institutions got the chance to blend tradition with innovation. Universities can stick to their old way of teaching, but students can innovate and create a new way of studying. As a student, I obviously still need to be attentive and, especially, awake during classes. But if I miss to write down something, or my notes are too messy to study with, I can get help from video and/or audio podcast created by the institution. And if I would happen to be a very organized and consequent class-goer, those podcasts can only improve my study-habits, which will most probably result in even better grades.

I am not trying to promote iTunes U here. Nonetheless, I feel that institutions can only benefit from that platform. It shows the willingness of that specific school to give more value to its courses and the openness to blend tradition with innovation. I cannot wait to find out if FFHS, the school I will be studying at to get my MSc in Innovation Management, will provide its students with these kind of podcasts.

Posted via web from (MSc) Sebinomics

Lester William Polfuss, also known as Les Paul, is seeing by many as the Father of Modern Music. Besides making the sound of rock and roll possible, Les is also known as the innovator of multitrack recordings and other effects for guitar. The most visible trademark of his legacy are Gibson Les Paul guitars, built after Les’ 1940s The Log model. The Les Paul models have been played by many popular guitarists (i.e. Slash) and stand for the sound of rock and roll, defined by Les himself. 

It is amazing to see what Les has accomplished in his lifetime. Without him music would not be what it is right now. Even though, I love studio-live recordings of rock bands, I’m very happy to listen to bombastic multitrack productions that can only be produced like that thanks to the innovation of Mr. Polfuss. Les was a genuine inventor. He played and lived music and spent hours thinking about how to improve his sound and the productions he was working on. And THAT is a true innovator: Create a tool or process that gives additional value to what you have or do. 

Dear Les, thank you for everything you gave to the world of music. Your genius will be missed.

Posted via web from (MSc) Sebinomics

First of all, a big Thank You! to Namics for choosing my Japanese word description of their brand as one of the three winners, and for giving me a personalized T-shirt with that very description. If you wonder what I entered:

斬新。改新。信頼性。オタク。すごい。ナミックス。
Remarkable. Innovative. Authentic. Geeky. Cool. Namics.

You might wonder, ‘Why is Sebi so excited to get a Namics T-shirt? Isn’t he providing free advertising space on his chest for the company?’ Well, yes. Definitely. But what about you wearing a D&G belt? Or a GAP sweater? And what about Nike’s Swoosh or Adidas’ stripes on your shoes? Ain’t that the same? Sure it is.

Posted via email from (MSc) Sebinomics

Innovation is a keyword I have been coming across a lot lately. Well, that is another reason why I decided to study Innovation Management.

Business people keep telling me, they would like their companies to be more innovative. Obviously, innovation already starts in the corporate culture, employee behavior, and in the mindset of everyone working in a company. Unfortunately, when managers and subordinates are asked what they can offer to change for innovation to happen, many are not ready to compromise the old structures and ways of doing things. What we need to stress out here is that innovation starts with openness to change.

In a business setting, I define innovation as ‘a new way of doing something that gives additional value to that specific procedure.’ Hence, the whole process will gain from one innovation happening in one spot.

Let me give you a real-life example: A small/medium-sized enterprise could innovate by introducing a new CRM (customer relationship management) tool that is connected to different databases and the internet. It is common sense that many people are afraid of what they don’t know. If someone has never worked with a CRM tool before, they might be opposed to that introduction. Even though the tool would make their work more efficient, structured, and therefore, more fun! 

I have experienced situations like the one I just described in different companies and management levels, and have spent hours discussing if a specific innovation should happen or not. My suggestion for a company that decides to innovate is, to first train every employee on what innovation means, and get them committed to change by making it a part of the corporate culture. This sounds like common sense, but in many corporations it would already be considered an innovation.  

Posted via web from (MSc) Sebinomics

I was shocked to read the news that Michael Jackson died yesterday after suffering a heart attack in his home in Los Angeles.

Despite all the controversy in the past decades, Michael Jackson was a true music business phenomenon. Kick starting his career with the Jackson 5 at the young age of five, then moving onto release the most successful album of a solo artist with Thriller and selling out tour after tour, Michael Jackson become The King of Pop, an iconic brand in the business. Whatever he touched turned into gold. The King of Pop didn’t need a big marketing machine behind the brand to sell albums and concert tickets. Michael Jackson was the marketing.

Source: lancedrummondsmusic.wordpress.com

Time Magazine proclaimed Michael Jackson, “A one-man rescue team for the music business.” Okay, that was in 1984. But still, Michael sold 750 million albums throughout his career. His planned tour for July 2009 had set a new record as the fastest selling concert of all time. Tina Kells wrote on NowPublic.com, “Selling at a rate of 11 tickets per second all shows sold out completely at a startling rate prompting Ticketmaster director Chris Edmonds to comment, “this week we have witnessed a live entertainment phenomenon.” 360,000 tickets were sold by pre-sale before buying was opened to the public on Friday morning.  More than 750,000 fans from around the world purchased blocks of seats for the London shows.”

The only time I saw Michael Jackson live was in 1997 on his History Tour in Basel, Switzerland. I remember it was a rainy day and Michael’s gig was in an open air stadium. Right when his show started the sun came out and his 150-minutes show amazed an audience of about 50,000. It was pure A+ entertainment like I had never seen before.

Michael Jackson will be remembered as The King of Pop. The man who did the Moonwalk. The dancing zombie in Thriller. The artist with the funky gloves. The singer who wanted to Heal The World. And the human being who said, If you’re thinking of being my brother it don’t matter if you’re black or white.

Many of you know that I pass through Zurich station many times a week. Since Zurich station is a great place for companies to promote their products, promoters give away different samples on a regular basis. I wrote about Emmi’s Emminent drink and how their promoters did a great job in their remarkable outfits. Coca Cola Zero is another brand that inspired me to write about it, especially since they did kind of a bitter tasting promotion, in my opinion.

Last week, it was the turn of Carpe Diem and the release of its new drink. The company didn’t do anything funky or extravagant. Their promoters simply handed out a 5 deciliters PET bottle like the one that can be purchased in a store. No flyers, no questions, no email address you had to give them in return. Giving away for free the exact product one can buy in a store, gives potential customers the exact feeling of drinking half a liter of Kombucha they would actually buy. This provides the most authentic experience of drinking the Carpe Diem drink.

This was the very first time I tasted Kombucha. I quickly realized that I liked it and told myself that I’m going to have it again. If that is the feeling I get when drinking Kombucha, I’ll be satisfied. That 5 deciliters free PET bottle satisfied my thirst and gave a huge value to the Carpe Diem brand. Ever since I commute to Zurich, Coca Cola Zero has given me a few of samples, but never satisfied my thirst. In addition, the samples were either to small, I was distracted by flyers and games, or the promoters were not friendly.

In this case, I learned that not making up  a story when the product is the story is a strategy that works very well for me. Kombucha definitely tells a story, and by letting potential customers experience the story, you might find the right early adaptors that will tell your story in your name. Like me.

Last week, my friend Warren called me to talk about bringing a solo-bass artist to Switzerland for a concert dedicated to bass players. Being a full-fleshed bass player myself, I promised him our help. We at NEO*DMC believe that the smaller a niche is, the more interested and supportive its followers are. A logic consequence is to give followers a reason to meet and share their passion. Like in Warren’s case, a concert by solo-bass artists.

For more than 10 years so-called “bass day” events were organized all around the world with considerable success in regard to the market size of its niche. Bass players seem to be even more eager to visit bass workshops with world class bassists such as Billy Sheehan, Michael Manring, and Markus Setzer, than going to concerts. The bass niche seems small compared to the guitar market. But like all small tribes, bass players are connected through a very unique bond — similar to the ukulele players tribe.

Seth Godin writes in his marketing-classic Purple Cow, “[W]hat’s missing isn’t the ideas, it’s the will to execute them. … [I]t’s safer to be risky.” Very true. This is why NEO*DMC is supporting Warren with his project. There are already many music agencies bringing popular bands and artists to Switzerland to fill large mainstream venues. Hence, there is no need for us to do the same. My friend Theo and I share the opinion that it is rather difficult to make short-term profits with niche concerts, but if set up right, it is more rewarding in the long-run. Why? Because you attract innovators and early adopters in the beginning and they will tell their friends to join next time, and their friends’ friends will join the next-next time, and a sustainable growing tribe will build up.

Sure, this is the best possible scenario and it takes a lot of time and effort to build up such a tribe. Nonetheless, it is the most sustainable way to foster a relationship between a brand and its followers.

Just about six months ago, I wrote a blog post on how Coca Cola Zero was distributing drinks at Zurich station (read here: post 1 and post 2). Yesterday, the company did the same again with a few changes:

1. Cans distributed by promoters got smaller. Yesterday’s promotion included giving away aluminum cans of 0.15 l, when six months ago they were almost twice as big. Most probably, Coca Cola was afraid of pressure from its own customers (Coca Cola sellers) selling Coca Cola Zero in and around Zurich station. I actually like this idea. 0.15 l feels more like a sample than 0.25 l. Nonetheless, I disagree with distributing aluminum cans, since it is not very “green”—a small PET bottle or Tetra pak could be even cooler than a standard aluminum can and more eco-friendly.

2. Coca Cola Zero handed out flyers promoting an online game with the opportunity to winning a Guitar Hero game. I know what a Guitar Hero game is, but do all the others who got that flyer know? This is my wild guess, but most people lining in front of the so-called Coca Cola Zero Swat Team, simply wanted the free 0.15 l sample and couldn’t have cared less for the online game. Many flyers were lying on the ground, which underlines my guess.

3. As mentioned above, a Coca Cola Zero Swat Team was formed and can be met in major Swiss locations—The flyer says, The team is on tour! Unfortunately, I couldn’t really figure out why I should follow the Coca Cola Zero Swat Team on tour. Am I going to get more 0.15 l cans if I meet them again? Or, can I ask for more flyers so that I don’t forget to play online and possibly win a Guitar Hero game?

Wrap-up: The idea of the 0.15 l-sample is okay, but could be better if it was a more eco-friendly container. The flyer promoting the online game should be more specific and catchy. It simply looks like a flyer promoting Coca Cola Zero, not the game. The Coca Cola Zero Swat Team is a good idea as well, but it needs to be clearly branded for customers to understand what it is and what the benefit of following them is.

To be fair, Coca Cola Zero is well positioned and many people drink it. The millions spend on ads and commercials clearly make their point. What I disagree with is that a lot of marketing money is wasted on promotions that make no sense. And handing out a sample after a couple of years of that products introduction will not turn any non-Coca Cola Zero drinker into one.