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Posts Tagged ‘Organizational Strategy’

The VUCA world and Agility that need HRM support

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The Great Depression of 1929-39, the OPEC oil price shock in 1973, the Asian credit crisis in 1997, and the Great Recession of 2007-08 — these are just some of the most distressing downturns in economic history, and the current pandemic is adding to this list. Apart from these crises, businesses — however small or big — are continuously struggling with the ever-evolving technology. Companies need to deal with disruptive innovations, dynamic consumer likings, pricing, quality, and a high degree of satisfaction in user experience. Such risks arising out of unpredicted conditions coupled with traditional trade risks put a business on tenterhooks with the obvious threat of going into oblivion and give them no choice but to strive for excellence and agility to survive.

The dictionary meaning of agility is quickness, dexterity, alertness, swiftness, responsiveness. While there isn’t a single comprehensive definition vetted by everyone, some authors defined agility as one of the key organizational characteristics that need to be mastered to stay adaptive and competitive in turbulent markets. In the context of the current pandemic and the uncertainty it brings, it calls for an organizational response to the unproductive environment and the ability to convert threats into opportunities. However, the concept of agility was mainly associated with manufacturing industries that too around managing demand-supply variation. 

To cope up with a turbulent environment, organizations should have the ability to anticipate the direction and degree of change in a proactive manner. As such, organizational structures should be designed so that they permit greater agility, through flexible response. Enablers like leadership, strategy, people, and business processes play an important role in developing organizational agility. These enablers need to work in cohesion to enhance the agile components of the organization. 

The prevailing VUCA (volatility, uncertainty, complexity, and ambiguity) conditions trigger dynamic and continuously changing environments, impacting the organizations. As a response, organizations need to develop the ability to innovate and acquire new knowledge so as to achieve agility for survival. The strategy around flexible HRM empowers organizations or firms to respond to external customers, competitive positions, technology selection and dissemination, creativity, and cycle time reduction. The focus in this paper is on the intangible resource (i.e. human resource) and the important flexibility dimensions of human resource management (HRM).

HRM strategy on agility

The HRM strategy should support reactive agility (organization’s responsiveness), proactive agility (organization’s effectiveness), and innovative agility (organization’s resourcefulness). HRM strategy is required to support the ever-dynamic market so that organizations can respond and achieve decent performance. Organizations paying attention to the HR strategy have been proved more profitable than others.  

The key attributes of agility in an organization that HRM should try to focus on and promote in the organization through key leaders are tabulated below. This is not a comprehensive list but can be developed depending upon the organization. As a next step, one should have measures in place around these attributes so that agility can be assessed if not measured. All key frameworks like BEM/EFQM, CMMI, or BSC aim at providing resilience to organizations; therefore, while developing any such framework these attributes can be guiding points.

Image source: The KPI Institute

The challenge to organizations today is how to imbibe and implement agility drivers and later how to judge the organization’s agility. One possible approach is to develop an agility maturity model in line with a capability maturity model in template form. The template itself needs to be dynamic and able to change with environmental factors. The table above is just guidance to look around such agility drivers so that it can be helpful in developing the template. 

Strategic HR plays an important part to ensure that the people in the organization understand and support such agility adoption. In fact, the versatility and the adaptive skills of a person are assessed even as early as the talent acquisition stage as this is an important dimension when recruiting an individual into the organization. The employees’ performance management system (PMS) developed by HR should pay greater attention to agility factors in a person rather than just task accomplishment levels. To conclude, understanding and navigating the complex eco-system in which organizations operate is crucial; at the same time, HR should play a bigger role in developing an agile workforce that can’t be just left to line functions.

How did Spotify become the number one music streaming provider?

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The number one music streaming provider in the world was founded in 2006, by Daniel Ek and Martin Lorentzon, in Stockholm, Sweden. The platform was created as a response to the increasing piracy problems, like Piratebay.

Spotify – from rags, to riches

Spotify was eventually launched in 2008 and its first strategy was to offer a free service with advertisements included, however the founders had hoped that its users would choose for the option to pay a $10 fee per month, in order to receive an ad-free experience.

The platform suffered from negative cash flows in the first couple years and realized that you can never outcompete a website like Piratebay, if the service you offer is not better than piracy. So, how did Spotify beat piracy?

Well, Spotify hosts songs from all genres in one platform, from the newest releases, to old songs. In addition to this, in recent years, it has become more difficult to download music illegally, due to various legislation and several crackdowns.

Therefore, people would rather use one platform that is more efficient than choose to use unverified and illegal sources for downloading music.

However, with the fall of music piracy, heavyweight competitors started to appear, like Apple Music and SoundCloud Go. Apple, of course, always had iTunes, where you were able to pay for a song or an album, but they still had to play catch-up with Spotify, because you can’t keep selling songs for $0.99 each, when there is the option to listen to almost every song on a platform for only $10 a month.

That’s when they created Apple Music, where users have access to music streaming channels, in exchange for a monthly fee. Apple thus competes by offering exclusive deals with artists, whereby the newest songs and albums are released earlier, before they reach any other music platform.

When it comes to SoundCloud, this company differentiates itself by offering a platform where even free agent DJs can upload and share their work with other SoundCloud users.

As a result, it is clear to see that making it in this industry is tough, so here comes the question: How did Spotify become the number one music streaming provider?

spotify

In this graph, it is plain to see that Spotify owns more than a third of the market and has more than 200 million subscribers, out of which 46.4% are premium members (paying customers), across 78 markets. They dominate the industry and the 3 biggest reasons are because of their market penetration, market development and cost-leadership strategies.

Market penetration

To strengthen its competitive position, Spotify is expanding its service availability to more countries and regions, but it also uses an intensive strategy where the aim is to create growth in the already existing markets, where the music platform is already operating.

Therefore, they create a competitive advantage both in existing markets and in new ones. When you take into account the growing numbers of subscribers, it also becomes very beneficial for the artists as well, because more and more of them are interested in making a deal with Spotify as they see the sub count go up.

This trickles down to everyday users, who are even more likely to become a subscriber, as the songs and albums of their favorite artists become readily available on the music platform as soon as possible.

Market development

Spotify also got into product development, which resulted in growth. They offer music-related services. For instance, by partnering up with Facebook in 2010, Spotify created options where you can send songs to your friends via Facebook or on Instagram (which is owned by Facebook).

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Moreover, you are now able to add any song from Spotify to your Instagram story, where your followers can see what you have been listening to.

With what seem like simple, small updates, Spotify is able to create a competitive advantage, offer something more to its users and promote its products at the same time. Spotify also offers a one-month free premium membership trial, to try to win over new customers that may be into services like Amazon Prime or Twitch Prime.

Cost-leadership strategy

Through its innovative strategy, Spotify tries to remain in a low-cost position in order to generate a strategic advantage, as well as a broader scope for strategic targeting. The strategic advantage here is represented by their low prices, which make the service attractive for international users.

Furthermore, a broad scope strategy is employed for the purpose of improving Spotify’s network of online users. In short, the company tries to offer music from as many genres as possible, as quickly as each hit comes out. As mentioned above, the growing user base results in an attractive platform for fans, but also for artists. These intensive strategies result in the rapid growth of the music platform.

It is clear to see that given their various approaches, Spotify will most certainly be able to maintain its huge market share for the next couple years.

The music streaming industry is an industry that will continue to grow at significant rates, due to the increasing state-of-the-art facilities that each studio offers to any upcoming promising artist, in combination with the fact that people’s taste for music has diversified tremendously over the years.

If Spotify keeps coming up with innovative ideas to create more brand awareness and satisfy its users, the future looks even brighter for today’s biggest music streaming provider. However, they cannot rest on their laurels, as we have seen that a lot can change in a period of just a couple of years.

The music industry is incredibly dynamic, which means that the tables can turn unexpectedly. Spotify should expect its competitors to come up with better offers, lower prices or updated services and be ready to counter with their own developments.

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