I recently stumbled upon a blog article titled “Broken Record: Four Mistakes that Killed the Record Industry – before File Sharing” authored by Jeff Balke, an interesting take on the demise of the record industry. The article suggests, “The industry, including radio, made four mistakes that preceded their ignorance of technology”.

Summary of the Four Killer Mistakes:

1. CD Sales are not the same as record sales. The premise is that the CD created substantial profit margins (because of lower production/distribution costs) in contrast to vinyl and tape, and a “gravy train” effect ensued for several years as people converted their collections to the new digital medium.  After people replenished their collections, the off-the-chart CD sales came to an abrupt end.  The author suggests that the “bean counters” failed to see this coming because they lacked creative insight?  This is a convenient scapegoat, but I’m not sure it’s quite that simple..
2. Longevity trumps the flavor of the week. With shrinking revenues, evil corporate budget constraints ensued, and the labels began aggressive cost cutting, consolidating distribution, and mostly, marginalizing artist development.  This isn’t recent news, so if record labels were the only effective way to develop an artist, we should have, in theory, no worthy talent today… Regardless of your musical taste, that is simply not the case.  If anything, we now have more choices than ever, do we not?
3. Destroying the chain of distribution is death. Here, consolidation of distribution channels are also pegged as causal. According to Balke, “What the suits failed to realize was that the chain of people working on selling music for them was key to making sales. Even now in the age of blogs, people still listen to what others suggest when it comes to buying music. Prior to the Internet, those people included DJ’s and record store employees…”  So here’s my question: How would have the retention of traditional distribution channels prevented the author’s acknowledged evolution in consumer behavior brought about by the “age of Blogs and the Internet”?
4. Killing the DJ. The argument here is that the radio DJ was “killed off as the primary link between the listeners and stations”. Centralized programming, again in the interest of profits, ended the variety and the relationship between DJ and listeners. The record industry didn’t cause this per se, but they indirectly benefited because it cut their promotional costs down significantly.  I think the most preferred and sought after relationship has always been between the artist and consumer, no?

I was intrigued by the warm reception of this article, but try as I may, I do not agree that the above were causal to the record industry’s demise. I should preface that I am not an “industry insider”, but I was a partner at a major international consulting firm during the time this supposed blind incompetency was occurring; and many of the marquee record labels were our clients – this experience taught me to honor the words of Arthur Schopenhauer:

All truth passes through three stages: First it is ridiculed; Secondly, it is violently opposed; third, it is accepted as self-evident…

So here’s my take. First, there is a long list of seemingly unaccountable failures in once dominant organizations and industries; this is not a phenomenon unique to the record industry. Sears Roebuck missed the advent of discount retailing and home centers and let Visa and MasterCard usurp the enormous lead it had in retail credit cards; IBM dominated the mainframe market but missed the emergence of minicomputers; DEC then dominated the minicomputer market but missed the personal computer market; Xerox missed the desktop printer/copier market; then there is the American steel and auto industry …

But consider this: Just as with the record industry, the decisions or indecision that lead to these failures were made when the organizations and leaders in question were widely regarded as among the best in the world! So, it’s either the case that these once successful companies and once dominant industries succeeded with very poor management, OR there’s something more to the story, and I believe there is.

In my opinion, this is best understood by studying the “Failure Framework” proposed by Clayton Christensen of the Harvard Business School. The key concept in Christensen’s work (The Innovator’s Dilemma & The Innovator’s Solution) is the distinction between sustaining vs. disruptive technology, and its implications.  Christensen, presents compelling evidence that good managerial practice is, ironically, the reason that sustained growth is so difficult to achieve. Why? Because well-managed companies follow a strict set of rules: They listen to their best customers, invest aggressively to provide these customers improved products and services, carefully study market trends and allocate capital to innovations that promise the best returns.

I like to think of “good management” as being akin to classical music: Wonderfully essential, but stringent.  Managing “disruptive innovation” is more like playing Jazz! It’s more about breaking the rules! And, yes, there are times when you need to break conventional management rules, and NOT listen to your customers! There are times when you need to invest in developing lower-margin, seemingly nascent markets with lower performing products. Christensen’s body of work codifies these ALTERNATIVE RULES and the changing market conditions that mandate their application.

So what happened to the record industry? The record industry viewed its product as MEDIA, not CONTENT. Each successive format (from vinyl, tape, to CD) was all about “sustaining” a business that required the consumer to buy media in order to get content – music.  As computers became more powerful, content such as music and video was no longer confined to physical media, and growth of the Internet spurred new delivery methods. All of these factors were significantly disruptive to the entrenched record industry. Consumers no longer needed to buy a CD to get what they wanted in the first place:  a few good tunes.

As Christensen’s “Failure Framework” suggests, these early adopters did not represent a very profitable segment. They weren’t even customers!  They were “criminals”, reckless kids and teenagers stealing intellectual property! The record industry went on the defensive by treating this as a problem, instead of recognizing it as disruptive innovation. It attempted to do what Christensen labels as defying a slippery slope. But, was this because record industry executives were arrogant and incompetent? Not entirely. They were rightfully following good (conventional) managerial practices by attempting to protect the profitability of their core business.

Christensen presents this paradox: Disruptive technologies enable new markets to emerge, BUT these markets are usually too small, or even non-existent, to satisfy the growth needs of large companies even if logic says they might be big someday.  The investment process in “well managed” companies demands quantification of market size and financial returns before entering a new market, and for this reason, it’s very rare for incumbent leaders to seize a first-mover advantage.

Apple was not in the music business at that time, but they understood the principals and application of disruptive innovation.  They also understood (and still understand) the difference between selling media vs. selling content, and they eventually made customers out of these “renegades” – and lots of them!   The overwhelming success of iTunes proves that “illegal downloads” was never the real problem – It also proves something else: businesses are rewarded more so for brilliant execution than fabulous technology!

So rather than playing Monday morning quarterback with the battered record industry, I suggest we recognize what happened as being neither unique nor unprecedented. Scores of outstanding companies that had their competitive radar up, listened to their customers, and aggressively invested in new technologies still lost their dominance.

In my opinion, the best defense for business leaders is to recognize when to play classical and when to play jazz! Embrace creativity as much, if not more so than conformity! It will help you recognize these sorts of conditions, convert threats into opportunities, and give you the gumption to apply alternative rules.

“I can’t give you a surefire formula for success; but I can for failure: try to please everybody all the time” – Herbert Bayard Swope, first winner of the Pulitzer Prize

As for the perceived lack of quality in today’s music? I fail to see how the demise of the record industry can be linked to a supposed degradation of music quality. I think it’s more the case that the Internet has opened the flood gates and we now have so many choices that finding (one’s own definition of) quality has become the “new problem”.

I recently expressed my need for a holiday to a colleague, and he snapped back, “Adrian, your whole life is a holiday!”  Honestly, he could not have paid me a greater compliment!  Indeed, many people, especially business associates, are surprised when they find out how much time and energy I devote to my hobbies.  And yes, I must confess that I have an additional mistress beyond music – Golf.

But when it comes to my music, the second question I’m usually asked is: “What are you intending to do with it?”  Meaning, do I aspire to make money from it.  Answer: No.  You’ll have to forgive my friends for giving my so-called potential far more credit than deserved…  But from these conversations, I grow increasingly concerned about the dismissal of developing and maintaining personal creativity.

So no, my hobbies are not just about enjoyment, and they are definitely not about chasing dreams; nor are they about making more money…  Music and golf, my lifetime mistresses, are my creativity sources – and I wouldn’t trade these pursuits for anything – especially more education.  Besides, academia – the pursuit of knowledge – is highly inflated these days (even a lazy guy like me managed to earn two degrees).  To be clear, I’m not encouraging anyone to abandon education; but I am challenging you to consider its relevancy in the grand scheme.   And yes I believe creativity is equally as important to, if not more so than, literacy for developing long-term success and happiness.

Imagination is more important than knowledge – Albert Einstein…

Creativity requires two things: time and the absence of fear.   Yet, the rhythm of modern society not only robs us of our “free time” (which, by the way, you need in order to think), but moreover instills fear of failure.  So is it any wonder that innovation, the product of creativity, suffers?   I trust you can connect the dots to appreciate the broader social and economic implications…  But just in case, I wanted to share a presentation from one of my favorite authors and cultural visionaries: Sir Ken Robinson.

Thankfully the sponsors of the TED Conference both encourage and permit the sharing of this video.  Highly recommended viewing for over bearing parents and/or stressed-out over achievers…

If ever there was time when creativity was necessary for the survival and growth of humanity, it is now!   So if any of you get similar questions about the time and energy you devote to your craft(s)…  you can either direct them to Sir Ken Robinson for a very dignified explanation, or continue to respond with the most convenient “Verbal Chord Progression” – in the key of F – of course!

One of the things I frequently hear is that musical talent is more a gift than an acquired skill. I have a hard time with this absolutism because it divides people into “capable” vs. “non-capable”, and discourages so many from either considering or continuing with musical training. The same can be said for any number of long-term skills for that matter. No question about it, people abandon their pursuit of a skill more often than not due to fear, frustration, and/or lack of progress; but I believe this has more to do with the “teaching establishment” than a “lack of ability” on the part of the student.

But it’s different for those truly “blessed” with prodigal talent, right? Well, consider the words of Isaac Stern:

“I was enormously lucky to have a teacher who let me learn how to learn. He did not make me play the way he did”. Said to his students: “I am not here to teach you how to play. Learn to think for yourself, to have WOW moments. Joint the art with the mind to move from a possibility to a certainty”.

It has been well documented that self-discovery is the best road to any long-term learning, where firsthand personal experience and learning go hand in hand. Useful instruction is not about giving people the right answers, it is more about helping people learn to ask the right questions.

“Learn the means to education, not things” – Ralph Waldo Emerson

Using a “how to” list is looking outside yourself for answers, where self-discovery looks inward to where long-term learning is born. I’m not suggesting that one can entirely bypass musical theory for this curriculum is non-negotiable; but what can be made more effective is our approach for learning it.

For example, should one Learn to Play or Play to Learn? Numerous studies have shown that during True Play, we exploit the freedom to investigate and interact with our instrument and decode musical theory into a personalized form. Playing is what makes it relevant, and playing the music (genre) you enjoy makes it even more so. Said another way: Honor thy Jam Session – both in music and in life!

The best thing about today’s world is that modern technology can bring the experience of learning music to the masses! There is so much technology now available that promotes self-discovery and at very affordable prices. So any of you that have that desire to take the plunge, by all means there has never been a better time. I’ve been putting my beliefs to the test by having recently started with my first string instrument: the bass guitar. It’s a strangely fascinating experience to have, on one hand, the musical background, but on the other hand, limited skills to play a new instrument… Well actually, I have limited skills in BOTH hands for the moment, but I am pleased to say that I’m DISCOVERING how to play my new instrument little by little. And, I truly believe it is helping me with the piano – an added bonus!

It is indeed a paradox that some things are learnable, but not teachable…