Virtual Value Chain of the Music Industry
In my previous blog, I made reference to Jeffrey R. Rayport and John J. Slovakia and their discussion of Exploiting the Virtual Value Chain. In their article, they defined three areas in which data can be used to add business value:
- Visibility (better management information about physical processes)
- Mirroring (replacing physical elements of a value chain with virtual ones)
- Creating new customer relationships (provide value to customers through new propositions)
I think the changes in the music industry exemplify the last two: mirroring and creating new customer relationship.
Music was originally recorded and sold on hard copy vinyl or cassette tapes from retail outlets for the customer to play on limited devices. Digital music changed that. Originally sold on CD, music recorded digitally can now be bought online and downloaded to an array of electronic devices. The elements of the value chain are the same; record song, buy song, play song but the value chain has moved from physical to virtual.
New Customer Relationships
With the advent of the Cloud, a new business model for delivering music has emerged. Companies such as Napster provide unlimited-access to millions of songs for a monthly fee. The dynamic of the relationship has changed from one-off purchases to a subscription service.
This illustrates the need for businesses to be aware of the latest technologies. They need to be creative in assessing opportunities and threats to their business. The disappearance of the high-street music retailer is a testament to this, which leaves me wondering; what does the future hold for iTunes and the like?