Department of Business and Management Studies
ICON College of Technology and Management
Faculty of Business and Management Studies
BTEC HND in Business
Coursework
Unit 8 – Innovation and Commercialisation
Tutor:
Submitted by:
ID No:
Session:
Introduction
This report intends to provide an overview of the adoption of innovation as a business model and key feature of company culture at Shazam, a discovery-based application that enables users to identify and find music, movies, and media content through digital fingerprints. The company was included in the list of ‘The Most Innovative Companies of 2016’ by Fast Company and it was this feature of innovation that led Apple to acquire Shazam in September 2018 (Silva, 2020).
The report will cover the concepts of innovation and invention as well as determine the difference between the two. Further, the different types of innovation shall be discussed, as will the subsequent organizational process of commercializing the innovation. Lastly, the various strategies that are available to companies to protect and safeguard their ideas and intellectual property shall be discussed and their merits and merits highlighted to gain an understanding of the best possible strategy.
LO1
Innovation and Invention
Innovation is driver of change and development. They can boost a country’s economic growth as well as enhance the growth and development of any enterprise, thus also enabling it to dominate the market (Alsanad & Abdel-Razek, 2016).
Innovation refers to the series of changes or developments in a complete system such as organizations, products, or services; and extends to market environments and social contexts of firms (Kline & Rosenberg, 2010). It is a complex and uncertain process that is subject to change and various environmental constraints.
Shazam started as a music recognition service and application. With the advent of smartphones and technology, they have moved on from music recognition to image recognition, from an app to an always-on background feature, and from 1 billion tags in 10 years to and then merely 10 months to reach 2 billion (Silva, 2020).
The invention, on the other hand, is the process of association of an effect, product, or service to a business, market, social, or emotional need (Arthur, 2007).
For the music recognition program, one of the founders, Avery Wang, invented a way to create a spectrogram of the “intense” moments of a song to create its digital fingerprint. It was this unique fingerprint of the song that was then matched to those on the Shazam database to give the user the song and artist names and other relevant information (Wang et al., 2014).
Innovation and the Organisation
Philip Inghelbrecht, Avery Wang, Chris Barton, and Dhiraj Mukherjee set up Shazam, and the story behind the app is one of vision, innovation, and friendship.
Barton had the idea for Shazam, to recognize music playing anywhere at any time at a time when most other companies were trying to devise a way to recognize songs that were playing at that moment on specific radio channels. Such an idea required a new invention by Wang to create digital fingerprints for songs and also required an innovative way to create a large digital database of songs, a problem that was solved by Philip approach Entertainment UK to get access to their records to digitalization the vision of the company fosters innovation and requires teamwork. The flat divisional structure that is conducive to innovation ensured that duties taken on by each of the founders were varied and complementary: Wang handled the technical side while managing operations. Barton and Mukherjee also handled the business side, they were the ones who got the ones to join as the co-founder (the other three were already friends) and got investors, vendors, and partners. All four do-founders are tech enthusiasts and their passion for the field served as the driving force efor very innovation, every improvement, and every new venture (Holl, 2014).
Invention and Innovation are two sides of the same coin, sometimes inventions are required to bring to life innovative ideas, such as Wang’s program, and other times, innovations are made by improving or building upon prior inventions.
Sources of Innovation
The development and need for innovation hinges on a multitude of factors. The interactions of science, economic growth, technology, and people contribute to the impediments and successes of innovations (Jewkes et al., 1969).
Peter Drucker (2002) theorized that innovative ideas in business stem from the analysis of 7 opportune areas: the unexpected, incongruities, process needs, industry, and market structures, demographics, change in perception, and new knowledge.
Figure 1 Sources of Innovation (Source: Weebly)
Unexpected: The unseen and surprising successes, failures, and defining events.
While Wang was working on the program to recognize song fingerprints, he had to analyze different features or landmarks to associate with the fingerprint. After various ideas of limited success, he found out that time scatter plots give rise to straight diagonal lines in matching fingerprints, thus serving as a powerful indicator that the fingerprints of two songs match (Wang et al., 2014).
Incongruities: The perceived reality of how things are and how they should be.
People try tried to develop a way to recognize the song playing on radio by dialing into radio while the idea behind Shazam was to identify the sound of the music and then recognize it(Holl, 2014).
Process need: Innovations that address weaknesses in operation processes to improve them and not work at the mound.
Market Structures: Changes in market environments.
Shazam has moved from extracting information to sustaining user engagement with smart advertising. It has partnered with many companies like Jaguar to boost user experience. Users can Shazam a Jaguar ad to see the inside of a car. Thus the app engages with the eyes now, as well as the ears (Thompson, 2014).
Demographics, Changes in Perception, and New Knowledge refer to the social changes in user trends, preferences, and greater information from the public.
The Auto Shazam feature uses advert listening to function in the background of iPhones to listen to all the sounds in the owner’s environment and recognize them, formulating a list for the owner to see at the end of the day (Thompson, 2014).
Innovation is developed at Shazam as part of its business model and approach. The growth and development of the firm are renovations based: from music to streaming TV shows and events like Grammy’s and Superbowl. They also developed two-way engagements with users (Thompson, 2014). Shazam is an auditory and visual-oriented app, as per their new initiatives. They measure the success of the innovation by the daily tags: 10 years to reach 1 billion tags, 10 months to reach 2 billion, and recently, 3 months to jump from 10 to 12 billion tags. Further, Apple acquired Shazam in 2018 for $400 million.
LO2
Types of Innovation
Innovation determines the success or failure of business in today’s technologically advanced and competitively diverse business environment. The4Ps of innovations outlined by Tidd, Bessant & Pavitt (2015) that enable organizations to rate themselves and broaden in the market (Alsanad & Abdel-Razek, 2016) are as follows:
Product: The continual improvement or better of a product or the process of creating a completely new effect or service (Veza, 2003).
Shazam allows tagged songs to be shared on platforms like FaceBook, Twitter, and Google+ and links users to Amazon MP3 and Apple Music to buy tagged songs (Wang, 2006).
Process: Developing a new pathway for an existing function to increase performance, quality, and experience.
With a greater concentration on developing UX, Shazam allows users to vote for contestants of partnered reality TV shows like X Factor. A new feature allows the app to be used even without network coverage, tagging the match when coverage returns without losing data (Thompson, 201…
Position: Identifying and penetrating new markets with either new or specifically rebranded products and services.
Tie-ups with Faithless, Marshalls, Jaguar, Progressive Insurance and other such companies allowed Shazam to create Shazammable ads that linked to company websites or platforms for interaction allowing them to tap into customer bases of other companies from different industries (Thompson, 2014).
Paradigm: Developments in the very fabric of the organization such as models, visions, and beliefs to improve growth.
The latest technologies and trends developed by Shazam have enabled it to broaden from music identification to the larger area of discovery and digital activation. Here the company faces lesser competition than in the niche music sector, which anyway has giants like Spotify, Soundhound, etc.
The Innovation Funnel
Companies utilize the innovation funnel to navigate the innovative process from generation of new ideas to their successful launch (Wadhwa et al., 2017). The five stages are idea generation, awareness, evaluation, implementation, and assimilation (Peppard & Ward, 2016).
Figure 2 Innovation Funnel (Source: Paul Hobcraft)
Idea Generation: The process of initializing ideas, identifying new technology or opportunities, and creating a vision for the effect or company.
Barton had ideas for music recognition and for developing software to help DJs record the songs that they play (Holl, 2014).
Awareness: Creating prototypes and models, securing proof of concept, and checking the validity of the idea.
To understand if their idea was plausible, they researched and found out about Digital Signal Processing, Interactive Voice Response Systems, Digital Audio Broadcasting systems, etc. to help create the algorithm for Shazam (Wang, 2006).
Evaluation: Business strategies of risk and reward, securing funding and resources, developing actionable business plans, etc.
The founders secured investment from venture capitalist Ajay Chowdhury through a specific hiring plan, an implemented bridge structure of financing, and a bold, innovative, and promising product (Silva, 2020).
Implementation: The practical work of creating and supporting the product or service, as well as managing its consequent processes.
The founders secured an office in Soho, London, hired three engineers, and, recruited an ex-Apple employee to build their search engine and they had to buy their server farm (Holl, 2014)...assimilation: The final stage of launching the product or service or its adoption within the organization.
Shazam was launched on Monday, 19 August 2002. People had to 2580 and hold their phone up to the music they wanted to identify and 15 seconds later, the call would get terminated and an SMS with the song and artists’ names was sent to them (Holl, 2014).
Frugal Innovations
This refers to the process of removing layered complications of products or services to achieve lower costs. Some common approaches are the deletion of luxurious and non-essential features or elements and sustainability (Albert, 2019). Thus frugal innovations allow for achieving additional goals as well such as entering new markets, creating more affordable rates with a competitive edge, and contributing to holistic improvement.
Shazam is available in three versions: the free version paid Shazam Encore, and Shazam (RED). The free version has a range of features that the user can do, like identify and listen to music as well as access other platforms to do so, save, share, and check lyrics of tagged songs, explore global charts and maps, etc (Holl, 2014). Encore has all the features of the free version, without advertisements, and bonus features like tag charts and information on tours and concerts. Shazam (RED) is the same as Encore with the exception that 20% of the paid amount is directed toward fighting AIDS and HIV in Africa.
LO3
Commercializing Innovation
The commercialization of innovation is a process that translates ideas into products that are fit for the market to possess economic value and the potential to generate revenue (Jolly, 1997). Thus the value or financial worth of an invention can only be understood through firm-based operations that assist in this commercialization & Saren, 2001).
The process begins when a market opportunity is married with a technical breakthrough and continues through stages of design and development, and subsequent manufacturing and marketing (Phaal et al., 2001). Continuous efforts are made thereafter to keep improving the product or service.
The Commercial Funnel
A visual representation of a customer’s journey, the commercial funnel serves to help companies identify and solve customer challenges (Manzini & Lazzarotti, 2016). It often employs tools for sustained customer interaction and engagement.
The commercial funnel enables:
- An understanding or awareness of customer desires and market needs
- The customers’ involvement in the early phases of product or service development (Pellikka & Lauronen, 2007).
- Customer expectations, perceptions, and preferences
- Customer reception in an attractive market that is awaiting the product or service launch.
Figure 3 Commercial Funnel (Source: TechTarget)
New Product Development
The process of introducing or launching a new product or service in the market environment is called New Product Development. The various steps of this process include analyzing volatile factors in the business environment, generating new ideas and their subsequent filtration, improving these ideas and carrying out testing processes, creating appropriate marketing campaigns, and the subsequent launch (Takeuchi & Nonaka, 1986). Funding is a key element that, depending on the size and scope of the organization, is integrated as one of the early stages of the development process.
Access to Funding
Once an actionable business plan has been laid, with appropriate strategies for every function, the company has to secure funding to move forward with the development and operations. The UK government offers access to funding to companies and think tanks through various schemes like collaboration with the government for research or requests for financial aid. Some other individuals or companies can be approached to secure investments.
The founders of Shazam conducted three months of fundraising that ended in August 2000 to raise 1 million dollars as capital for their venture. This was done by angel investors such as the ex-chairpersons of EMI and BMG, the inventor of the 56k modem, ex-CEO of British Telecom, etc. From November 2000 to July 2001, they tried to raise $7.5 million from venture capitalists. The lead investor was Ajay Chowdhury of IDG Ventures Europe (Holl, 2014).
Now that Apple owns Shazam, it will fund the innovation and commercialization processes.
The Business Case
- Employees at Shazam discover a market need or desire based on customer needs or available technology through research and development to expand features. A detailed plan is created outlining the entire process.
With Auto Shazam, the company got on the same trend of advert listening that was used by Microsoft’s Xbox One and Moto X’s ‘OK, Google” feature (Thompson, 2014).
- The report is handed over to senior management who decide whether it must be taken forward to the board and other stakeholders. They explain the plan and put forward the proposal
To explant its database to become the most relevant discovery app, Shazam is planning to partner with several companies. To add a geolocation feature, it proposed to partner with Gimbal, a Geofencing platform (Thompson, 2014).
- Once the plan is approved and the project is given the go-ahead, funds are sourced for manufacturing and production purposes, as well as testing and marketing.
- Once the product or service is tested, assessments and projections are taken into consideration and the product is finally launched in the market.
The processes of testing, improvising, innovating, and iterating can address the challenges of the commercialization process.
Testing: The process of identifying the limitations of the effect and trying to solve those points of malfunction or weakness.
Improvising: The process of continual improvement to better improve quality and performance.
Inside of buying records to start their digital database, Philip Inghelbrecht struck a deal with Entertainment UK to gain access to their records and create fingerprints for their songs. In return, Entertainment UK got to keep a copy of the digital records, thus using this data to expand their online sales (Holl, 2014).
Innovating: Refers to the process of modifying a pre-existing product or service to solve newly identified needs or market opportunities.
Shazam’s interactive map that displays the most shazamed music in each city catches real-time music-based trends and preferences. This has been extremely useful to music companies and studios to enable scouts to discover and then put out unsigned artists.
Iterating: The process of creating and recreating the innovation in new ways to increase production rate and experience company development.
Shazam launched in three versions. Soon after, they went for music identification to bigger second screens, TV, by enabling shazam on TV and media content.
LO4
Protecting Intellectual Property
Intellectual property refers to the intellectual creativity of an individual that takes the form of ideas, inventions, designs, creative works, etc. (Sharma, 2014). Since most intellectual property is intangible, there is a need to express them in discernable ways to ensure its protection, which is done through intellectual property rights. IPR also acts as an incentive for creators and facilitates competitors to result in innovation, and technological development, and so spur economic growth. This is done in the following ways:
Patent
- Legal authorization by the government that no other individual or organization can sell or profit in any way from the patented creation.
- Registered in the government’s patent directory.
- Patents are limited to a duration of 20 years.
- Owners can grant others the right to use the invention in the period when the invention is protected. The owner also has the right to sell the patent for the invention.
- Merit- Complete rights over the invention or innovation
- Demerit- cost for registration is high and the invention must be disclosed.
Shazam owns patents for methods and systems for processing samples of a media stream file, for identification of the content that is distributed and broadcast, for filtering social media content and activity, etc (Wang et al., 2011).
Trademark
- Symbolic, visual, or phrases representing the company; identifiers of a company.
- Right to retain logos and taglines.
- Trademarks are also time bound but can be indefinitely protected by constantly applying.
- Merit- Simple process to register, builds brand image.
- Demerit- Vulnerable to manipulation and change, which is not legally covered.
Apple owns the trademark for Shazam and its logos, design, and other images used across the application, the website, and other services (Apple Inc., 2019).
Figure 4 Shazam Logo and Imagery (Source: Shazam)
Copyright
- Artistic or written works that have been patented with government authorization.
- Authorisation is based on validation by or partnership with famous sources or reputed publishers.
- Symbol is ©
- Merit- blanket legal protection
- Demerit- work that is republished with minor changes is not covered by this legal protection
Article 13 of the EU’s new Copyright law that was passed in March 2019 intends to bring reform by making digital profits more even and limiting the ability of big technology firms to capitalize on the content of other creators. As per the law, Shazam’s attempt to recognize any snippet of a song shall be considered as the use of material protected by copyright. Hence, Shazam has essentially been banned in the EU.
Trade Dress Unfair Competition Regulation/Law
- Unauthorised presentations of a company’s innovations are not permitted.
- Infringement of trademark or copyright counts allows the company to file an unfair practice complaint.
- Merit- authoritative and powerful protection as it is the government-sanctioned legislature.
- Demerit- court proceedings are lengthy and time-consuming
Trade Secret
- Protection for a company’s technology, technique, or inventions from profit-seeking third parties.
- Ideas or intellectual property can be filed as trade secrets.
- Such an organization can reveal what it wants about its operations.
- Merit- The company is granted total authority.
- Demerit- difficult to enforce and have limited remedies.
The exact and detailed method and algorithm for Shazam’s identification process is a trade secret. Members have revealed some aspects and a basic version of the algorithm has been explained but the exact details are legally protected.
As per the business environment and Apple’s ownership, the preferred method for protecting ideas and intellectual property continues to be patented. The company owns many patents, many of which name Wangas one of the creators (Wang et al., 2011;2014). Shazam, as well as Shamzam Player, are trademarks of Apple Inc. and its subsidiaries and the company holds the copyright from all of the visual and design elements of Shazam, across all platforms. The company’s method for digital fingerprint generation and recognition remains a trade secret, an extremely helpful legal protection measure considering that Shazam is further delving into the discovery sector and it’s expanding to visual and camera-based modes of capture and recognition.
Conclusion
Innovation is the process of creating and embracing new ideas and converting them into marketable commercial success (Yencken et al., 2001). Innovation, therefore, constitutes ideas and opportunities, resources and knowledge, and the entrepreneur(s). Innovation sustains a country’s economic growth, ensures that living standards are continually improved, and supervises better overall health and well-being (Herdman, 1995).
This report intended to cover the concepts of innovation and commercialization as integrated into the business organizational framework at Shazam, an identification app for music and movies, shows, and advertisements, that recognized a recorded sample of the content. Thus the report provides an overview of the difference between innovation and invention, illustrating the environment at Shazam that develops and nurtures innovation, as well as the different sources of innovation as identified by Drucker. Further, it extrapolated the different types of innovation by explaining the 4Ps of innovation and also provided brief overviews of the innovation funnel and frugal innovations. The following segment was concerned with the process of commercialization of innovation and further introduced concepts of commercial funnel and new product development. A prospective business case involving Shazam was created. The various steps and strategies also served to illustrate how various challenges could be addressed with suitable strategies. Lastly, the various options available to a company to safeguard and protect its ideas and intellectual property were discussed, with particular emphasis on the steps taken by Shazam to do so.
References
Akgun, A.E., Keskin, H., Ayar, H. and Etlioglu, T., 2017. WHY COMPANIES GO POSITIVE MARKETING INNOVATIONS: A NEW THEORETICAL PROTOTYPE FOR 4PS OF INNOVATION. Journal of Business Economics and Finance, 6(2), pp.70-77.
Albert, M., 2019. Sustainable Frugal Innovation-The connection between frugal innovation and sustainability. Journal of Cleaner Production, p.117747.
Alsanad, D.S. and Abdel-Razek, R., 2016. Mapping technological innovation: methodology and implementation. Review of Business & Finance Studies, 7(1), pp.59-68.
Arthur, W.B., 2007. The structure of invention. Research Policy, 36(2), pp.274-287.
Blake, J., 2016. Television and the second screen: Interactive TV in the age of social participation. Taylor & Francis.
Drucker, P., 2002. Innovation and entrepreneurship. Routledge.
Ford, D. and Saren, M. (2001) ‘Managing and marketing technology’, The Thomson Learning.
Hindle, K. and Yencken, J., 2001. That troublesome’E’word: entrepreneurship in the context of public research commercialisation, technological innovation and the wealth of nations. In Proceedings, Technology Transfer and Innovation (TTI 2001) Conference, Brisbane.
Hindle, K. and Yencken, J., 2004. Public research commercialisation, entrepreneurship and new technology based firms: an integrated model. Technovation, 24(10), pp.793-803.
Holl, K., 2014. Shazam and Its Creators. The Rosen Publishing Group, Inc.
Jewkes, J., 1969. The sources of invention. Springer.
Jolly, V.K. (1997) Commercializing New Technologies: Getting from Mind to Market, Boston, MA: Harward Business School Press.
Kline, S.J. and Rosenberg, N., 2010. An overview of innovation. In Studies On Science And The Innovation Process: Selected Works of Nathan Rosenberg (pp. 173-203).
Lam, A., 2004. Organizational innovation.
Lanjouw, J.O. and Schankerman, M., 2004. Protecting intellectual property rights: are small firms handicapped?. The journal of law and economics, 47(1), pp.45-74.
Luecke, R., 2003. Harvard business essentials: negotiation. Harvard Business Press.
Mahajan, V., 2010. Innovation diffusion. Wiley International Encyclopedia of Marketing.
Manzini, R. and Lazzarotti, V., 2016. Intellectual property protection mechanisms in collaborative new product development. R&D Management, 46(S2), pp.579-595.
Mazzarol, T., 2013. The role of social capital, strategic networking and word of mouth communication in the commercialisation of innovation. In Strategy and Communication for Innovation (pp. 173-193). Springer, Berlin, Heidelberg.
Pellikka, J. and Lauronen, J., 2007. Fostering commercialisation of innovation in small high technology firms. International Journal of Technoentrepreneurship, 1(1), pp.92-108.
Peppard, J. and Ward, J., 2016. The strategic management of information systems: Building a digital strategy. John Wiley & Sons.
Phaal, R., Farrukh, C.J.P. and Probert, D.R. (2001) ‘Technology management process assessment: a case study’, Internetional Journal of Operations and Production Management, Vol. 21, pp.1116–1132.
Popov, V., 2011. Do we need to protect intellectual property rights?. Available at SSRN 1766080.
Reichman, J.H. and Samuelson, P., 1997. Intellectual property rights in data. Vand. L. Rev., 50, p.49.
Rios-Ramirez, A., 2019. Techno Parks, Innovation, and Entrepreneurial Ecosystems. Innovation and Entrepreneurship: A New Mindset for Emerging Markets, Emerald Publishing Limited, pp.231-252.
Serdean, C.V., Tomlinson, M., Wade, J. and Ambroze, A.M., 2002, May. Protecting intellectual rights: digital watermarking in the wavelet domain. In IEEE Int. Workshop Trends and Recent Achievements in IT (pp. 16-18).
Silva, J.P., 2020. Year One of Shazam. In Startups in Action (pp. 13-24). Apress, Berkeley, CA.
Sharma, D.K., 2014. Intellectual Property and the Need to Protect it. Indian J. Sci. Res, 9(1), pp.084-087.
Thompson, D., 2014. The Shazam Effect. The Atlantic.
Takeuchi, H. and Nonaka, I., 1986. The new new product development game. Harvard business review, 64(1), pp.137-146.
Tidd, J., Bessant, J., and Pavitt, K. (2015). Managing Innovation: Integrating Technological, Market and Organizational Change Third Edition, John Wiley & Sons Ltd.
Wadhwa, A., Bodas Freitas, I.M. and Sarkar, M.B., 2017. The paradox of openness and value protection strategies: effect of extramural R&D on innovative performance. Organization Science, 28(5), pp.873-893.
Wang, A., 2006. The Shazam music recognition service. Communications of the ACM, 49(8), pp.44-48.
Wang, A.L.C., Barton, C.J.P., Mukherjee, D.S. and Inghelbrecht, P., Shazam Investments Ltd, 2014. Method and system for identifying sound signals. U.S. Patent 8,725,829.
Wang, A.L.C., Wong, C. and Symons, J., Shazam Entertainment Ltd, 2011. Method for high-throughput identification of distributed broadcast content. U.S. Patent 7,881,657.
Appendix
- 4 P’s of Innovation
Figure 5 4 P’s of Innovation (Source: ResearchGate)
- Commercialisation of Innovation
Figure 6 Commercialisation of Education (Source: Hindle & Yencken, 2001)
- Part of Early Shazam Algorithm
Figure 7 Part of the early Shazam Algorithm (Source: Medium)