Innovate by jumping sideways like Simon Cowell [Guest blogger: David Nichols]

For those of you who keep, as I do, a close eye on contemporary British "culture" you will know that Leon was the surprise winner of X-Factor 2007 (the UK version of American Idol).  Simon Cowell’s marketing juggernaut just rolls on having delivered the guaranteed Christmas no.1 hit for a thoroughly average re-hashed song.  Surely this is a miracle money machine?  Not really, just a stunning piece of value chain innovation, one of those now emerging from the crumbling music industry.

Unlike many large incumbent record companies, who are trying
desperately to cling on to the old music biz model of ‘record-distribute-promote-tour’, Simon Cowell has innovated "sideways". He has attacked a big market by coming from an adjacent one. So, he starts with the promotion via a TV series, building up interest in the artists and making money on phone/text voting each week. He then releases the hit single online first (more money). Then the CD. Then there is the tour with the top finalists.

The businesses best equipped to capitalise on the changes in the music market structure are those who are adjacent to it.  They know enough to see the opportunity, but are not encumbered by existing assets.  They simply step sideways and gobble up market share of the music publishing business: TV companies, internet networking sites, musicians, recording studios and more – all adjacent markets that the big record companies once looked on as potential expansion areas are turning heel and attacking back.

Who has Madonna just signed a $120 million deal with? Not a record company. Rather, Live Nation a concert promoter. Who did Paul Mc Cartney launch his latest album with? Starbucks.

It seems that one of the best ways to innovate might be to watch your neighbour and then steal a nice bit of their turf.  Look at Apple and their iPhone. And what is the biggest news in the multi-billion dollar global laxatives market – a laxative brand?  No, it’s a yoghurt from Danone – Activia.

So as Leon takes his first tentative steps into his new life as a nano-celebrity, maybe you should consider doing the same – jump sideways.