Disrupting the disruptor: How can Spotify, Tinder and others handle the constant threat of tech disruption?

For all the hype that accompanies every Apple curtain raising, critics are quick to point out that its products are very rarely, if ever, first to market. Its breakthrough device the iPod may have transformed the company’s fortunes and the way we listen to music, but it was not the first MP3 player – in fact, it didn’t hit shelves until three years after the MPMan F10 was released. Yet Apple comes first where it matters: it is the world’s most valuable brand at $741.8bn, and the iPod legacy lives on long after the MPMan has faded into obscurity.

With the launch of its Apple Music streaming service, the tech goliath is once again aiming to shake up music consumption, this time at the expense of market leader Spotify. It was already a crowded enough space with Deezer, Google Play and Jay-Z’s Tidal in situ. And to make it even more competitive, four weeks to the day since Apple Music’s arrival, and with the ‘will it be a Spotify killer?’ debate still raging, the goalposts moved again as Amazon brought its contender, Prime Music, to the UK. There remain persistent rumours (officially denied, it should be said) that Facebook is about to enter the fray too.

All this adds up to Spotify, one of the darlings of digital disruption, facing an existential crisis of its own just nine years after it began to reshape the music market. And it will not be the last of the disruptors to be disrupted themselves. “The rate of change is so fast that no one is safe, and keeping up, let alone disrupting, is a severe challenge,” says Dare’s creative partner Brian Cooper, a former Apple senior executive. “It reminds me of the canal story from the 19th century. As soon as the canal system was built it was made redundant by the steam engine.”

Of course, one brand being displaced by a rival is hardly news – that’s just business. But the speed at which today’s startups – often built on little more solid than imagination – go supernova seems to be accelerating by the minute. Live video streaming app Meerkat was the breakout hit of SXSW this year, but the buzz faded within weeks when similar product Periscope emerged, with the backing of Twitter, to steal its thunder.

“A lot of the startups and the big technology names that we’re familiar with, in particular the ones that are software-based, are very vulnerable,” says Rafe Blandford, mobile strategist at DigitasLBi. He attributes this in part to the sheer enormity of the mobile market. “There are two billion odd smartphones out there. There are a billion PCs but most of those are shared and the individual ones are probably in the hundreds of millions. It’s a different scale. Android and iOS are so huge now that they are markets intheir own right, and we don’t have a very good understanding of how those markets operate at the scale we’re talking about, which in mobile is a billion-plus consumers – there is basically no precedent for that in the digital space and certainly none in the analogue space.”

As Blandford puts it, your business being usurped by another could be nothing more than an app install away – a powerful prospect when the big boys own the playing field. To this end, he says the Book on Google service for hotels and the like will prove “pretty chilling for companies such as Kayak, Expedia and Ebookers who are relatively youthful brands”. And all this would appear to make Spotify particularly vulnerable when its biggest rival, Apple, runs its key platform, iOS. So what can Spotify and others do to stave off the competition?

Daniel Harvey, experience design director at Sapient, puts it like this: “Companies are most successful when they’re able to integrate as many pieces as possible. The labels have integrated the music and production. They’ve always outsourced the distribution. First to radio, then MTV, then Spotify. Spotify’s only integrated distribution. The music and production of it are all modular and feed from the labels.” To fully integrate, Spotify would effectively have to become a record label. As Lawrence Weber, managing partner of innovation at Karmarama, says: “The music arena is a race to the bottom, until someone like Spotify or Apple goes ‘Let’s make and own music/artists’.”

If that’s too daunting a brand extension, then the other way to insulate your brand is to do unto others what they’re doing to you – attack new markets. “Given its recent emphasis on running and video, Spotify is trying to change the formula,” Harvey says. “Time will tell if that pays off and it ends up fighting different frenemies.”

Harvey believes a lot of on-demand services should be wary because they risk commoditising the service layer. “That’s where all those companies live and that turns the whole thing into a price arms war. Once Uber has driverless cars it will be fully integrated. That’ll help protect it from challengers. But will Handy, InstaCart or even Airbnb be as protected? Will Tinder still be a darling in five years? Three years? What about SnapChat? WhatsApp? Twitter? I suspect we’ll see mergers, acquisitions, and pivots from a lot of them shortly.”

Dare’s Cooper thinks some of the other disruptors who could be disrupted include “Google Maps by Citymapper, Dropbox by iCloud and Gmail by Slack”. One of the keys to survival, he says, is to think big. “There is a story that investors have a trick question, ‘What is your target audience?’ If you specify an answer then they won’t invest as they know that to succeed the ambition must be for everyone.”

A particularly interesting area is the world of finance. Having been disrupted by fintech startups, the banks are starting to fight back with their own disruption. “We think of banks as boring and safe but they gave us ATMs and online banking,” Cooper says. “Yet, Barclays invested heavily in bPay, its payment bands, and launched at the same time as ApplePay. Canals and steam engines again.”

Right now, tech’s flagbearers are mostly fighting on the same battlegrounds. “We seem to be at a stage where all the big digital players are competing for the same territories – namely music, video and commerce – because if you can monopolise in any or all of these areas you’ve got a large proportion of online activity nailed,” says Amy Kean, head of futures at Havas Media Labs. “As such, while the industry is seeing a number of new ‘Davids’, ie startups with great ideas that look set to threaten the status quo, it’s the scale of the digital Goliaths that continues to push new products into the mainstream.”

The danger here is that it could lead to a homogenised digital landscape, where a small clutch of big players – the Googles, Facebooks, Apples and Amazons – simply hoover up the best startups or blow them out of the water with their own iterations.

As Karmarama’s Weber says: “VCs are desperate for consumer facing products to get to scale quickly, before a more established player, with a broader user base and deeper pockets, emulates the product. It used to be a fair bet that the more established player wasn’t savvy enough about technology to emulate or harness the change for themselves, in time to stop the disruptor. However you now have a layer of new tech companies like Google, Apple, Facebook and to a certain extent Twitter who are mainstream, have a decent user base and an ad/brand friendly company and product.”

So where does all this leave startups? Blandford says that today, in order to be acquired or enjoy a successful IPO, you need to work much harder. “Startups are best structured for the moment at which they launch, and any time after that they are in danger of being displaced by someone who is able to be nimble or move more quickly. The very best companies are nimble enough to keep changing that strategy. The simplest way to express this is to say it’s not enough just to have a good idea anymore.”

This feature was first published in the 5 August issue of The Drum.