A Ratio in the Eye of the Beholder

The Economist reports that Spotify has 6m users of its free, ad-supported service but only a "puny" 40,000 subscribers to its paid, ad-free service.

How puny is this? It's a ratio of 150 non-payers to every paying customer.

Now, if you regard the 150 side of the house as freeloaders who ought to be contributing revenues, then this looks like a poor deal for Spotify. But those 150 ad-listeners are more like folks browsing in a shop than people indulging in shoplifting. In many businesses, a ratio of 150 tyre kickers to every one buyer would look attractive. And those kinds of businesses are big ticket businesses.

So, here's the thing: is Spotify a big ticket business or a small potatoes affair? We're so used to thinking of music in pocket money terms that it's easy to classify Spotify as a small stakes player - one that can't pay for a legion of onlookers and enquirers with the revenues of its customers.

But Spotify is actually in the lifetime value game. Sign someone up for a monthly subscription, and you have a relationship with them. You're their music service, not their record store.

The Creativity Measure that Counts

"96% of business leaders cite creativity as integral to business success and recovery from the recession, yet 44% say they lack the skills and commitment to deliver it."

Marketing Week, 16 July 2009.

Read this: Lost in Navigation

Ovum's Jeremy Green writes insightfully and entertainingly on the state of play in location-based services here.

Or do I mean "location-enabled"...? Possibly not: as Green points out, visitors to London's 2012 Olympics may well spurn location-enabled services, while a location-based service for asthma sufferers is doing rather well. You see, there is a difference...

Quote of the Day

"The perfect [customer] experience is the optimal compromise, because perfection is an illusion."

- Mike Chester, Director of the UK NHS National Refractory Angina Centre, speaking at Henley Business School, 18 June 2009.

The Collaborative Car: Riversimple

Edie Lush writes in The Spectator about Riversimple - the open source hydrogen/electric car. There's innovation in every aspect of Riversimple, not just the engine.

For one thing, you can't buy a Riversimple car, you can only lease one. You pay around £200 per month and 15p per mile, and that covers everything. The company is therefore incentivised to make the car as economical as possible, and to make it run as long as possible. Instead of owning a car that rusts and depreciates, you lease a transportation service.

The open source aspect of Riversimple means that its vehicles can be adapted and evolved by other people. And, in a further marker of the company's commitment to sharing, it's a limited liability partnership rather than a limited company. And to top it all, the company's leaders are relaxed about the need to make a profit any time soon. What would Henry Ford say?

Read this: Hot Tub Technology

Hot Tub Technology

This is a gem of an innovation story. Dr Mark Barrett's idea is simple, elegant, understandable and very, very doable. It's based on a novel view of existing infrastructure, there's a clear business case and, cannily, Dr Barrett has left ample room for other people to refine the implementation plan, thereby building an active constituency for the scheme's promotion.

What is it? Well, Dr Barrett wants to switch your immersion heater on when there's excess capacity in the electricity grid. The UK's preinstalled network of 19 million heaters can then act as storage devices for power generated by "bursty" renewables such as wind and wave. And with plans to roll out smart meters across the UK gathering momentum, now's the time to make this innovation.

Read David Strahan's excellent article for the facts and figures.

Innovation threat, innovation fatigue

from: Alain de Botton, Status Anxiety, 2004

"Employees must in addition worry about the consequences of the pressure put on companies to introduce new and better products into the market place. For long stretches of history, the life cycles of goods and services were longer than those of the human beings who produced and consumed them. In Japan, the kimono and jinbaori went unchanged for 400 years. In China, people were wearing in the eighteenth century exactly what their ancestors had worn in the sixteenth. Between 1300 and 1600, the design of ploughs did not alter across northern Europe - a stability that must have given artisans and workers a reassuring sense that their businesses would outlive them. But product life cycles have sharply accelerated since the middle of the nineteenth century - destroying workers' confidence in the long-term integrity of their careers.

"Rapid defeats at the hands of new products and services are to be found in almost every area of the economy: canals after the invention of the railway, passenger liners after the introduction of the jet engine, horses after the development of the car, typewriters after the birth of the personal computer.

"The market's passion for change has a propensity to involve companies in product development costs so high that their very survival can depend on the successful launch of a single item. Companies can resemble palpitating gamblers who, instead of being allowed to retreat cautiously after a good run, are continually forced at gunpoint to risk their assets and the livelihoods of their employees on the outcome of a few wagers or even a single bet, as a result either amasssing vast but precarious riches or self-destructing."