Whether you’re aware of it or not, you’re probably already running a startup. Eric Ries, writer of The Lean Startup, one of the canons of Silicon Valley thinking, defines a startup as a “human institution designed to create a new product or service under conditions of extreme uncertainty.”

If you’re involved in the music business, especially as an artist or manager, you’re well-acquainted with extreme uncertainty. “Are people going to buy my album?”, “Are we going to get enough bookings for this tour?”, “How will we ever convince enough people to fund our Kickstarter?

Startups and music companies have found differing ways of dealing with this uncertainty. Much has already been said about how the two categories of companies should collaborate. Now, let’s take a deep dive into what artists and managers can glean from startup methodology like validated learning, innovation accounting, and product-market fit.

The Selfish Consumer

Let’s start with product-market fit and address one of the most dangerous assumptions in the music industry: the fact that you make music means that music is your product. This creates a false belief that your business model needs to focus on performances of your music: sales of copies, and worse: streams.

Instead, take a step back. You’re (part of) an institution and your artist identity is the brand. The music you release is the expression of that brand. The reason for releasing it may or may not be monetisation. Let’s take another step back.

In 2012 I presented my graduation thesis at Midem about music marketing and product development. It included a concept called the Selfish Consumer. It stems from behavioural economics, which argues that all consumers are inherently selfish and are only acting in their own self-interest. Whether you agree with that or not is unimportant, because it’s a great tool for commercial thinking. One can easily see why a statement such as “please support us and buy our album” is a weak one. From a business point of view, as long as they are not willing to pay for it, it doesn’t matter how many people love your music.

This is not unique to the music industry. We’ve all seen high-profile startups struggle to monetise after building a product and brand people love. They crumble, collapse or get acquired by a giant corporation that can afford to not make any money from that operation. For an example, consider loss-making music streaming services being acquired by tech giants.

Lesson 1 is: your music is not necessarily your product.


Validated learning

You might have heard of the phrase ‘minimum viable product’ or MVP. Building an MVP is a startup’s first data-driven step in testing their assumption about what their customers want. To quote Eric Ries: We must learn what customers really want, not what they say they want or what we think they should want.

The unspoken assumption is that customers are willing to pay for digital copies. Tremendous effort goes into making customers willing to pay. That effort is better spent on your fans and immersing yourself in your fanbase. You already have a special connection with them: they like your music, so on some level you connect. Use that connection to figure out who these people are, what drives them, what do they love. Figure out how you can appeal to their inner selfish consumer.

Only after that do you make your big assumption: I believe people are willing to pay for X.

The next step is Build, Measure, Learn.

Let’s take the example of using music as a product. Instead of recording an entire album and having it distributed to all music stores and streaming services at a price point of $10, the logical course of action is to release a single song to a DIY store like Bandcamp or CDBaby and see if people are actually willing to pay for that. If so, then you can release another track this way, see if you can repeat your success. This is your MVP.

However, your assumption also implies that you can make a living off of something with such a low margin as a digital sale or stream. Does this work at scale? Now you need to do some calculations.


Innovation Accounting

You need to understand how to measure progress, define milestones, and communicate progress. Having done some calculations, you can probably rationally conclude that relying purely on sales as a business model is not viable. What works and what doesn’t differs from artist to artist. Some manage to launch amazing merchandise lines their fans love, others do it by releasing limited or bespoke products or services. For the sake of innovation accounting, let’s imagine you would use Patreon, a platform that lets you turn your fans into patrons.

Being successful on Patreon depends on a variety of metrics. Examples of these are the ratio of people you can convert from follower on a particular social network to patron, how long people stay patron (retention), whether people move up or down the ladder of pledge amounts, etc.

The goal of defining your metrics and milestones are so that you can measure you progress. When you build, you need to be able to gauge response, measure it, learn from it and then build more accordingly. By defining the right metrics you can lead people down a funnel, where you can measure at every step of the way.

Beware of vanity metrics. Getting a lot of likes on a FB post is nice, but if it doesn’t lead to movement in the funnel, then it’s not important. I’m not saying you should stop connecting with your fans in a way that doesn’t necessarily push them towards monetisation. What I’m saying is that you should simply not assign importance to that type of metric with regards to understanding your progress towards making a living off of your music.


Where to Start?

First off, start thinking about the way you organise the community around your music. You need to understand your fans and be one of them. This is where your ideas need to come from. Take a look at your social media channels. Are they consistent? Are you leading your fans? Are you making them feel part of something?

Next, you’ll want to familiarise yourself with some tools to further engage your fans. You’re going to need some tools that help you better manage your social media, such as Buffer. You should also check out the posts and growth studies on GrowthHackers.com. They contain fascinating examples of what small companies did to attain success and grow out to recognisable brands. The posts and studies make mention of many great tools you can use to build, measure and learn.

Pick up The Lean Startup by Eric Ries, mentioned a couple of times in this post. It’s full of useful anecdotes and although practical, it doesn’t feel like you’re reading a school book or instruction manual.

Lastly, keep following midemblog. My next post will be about growth hacking as an artist and will go into the various tools and techniques you can use to build, engage, and monetise your following.


Top photo © Monkey Business Images, via Shutterstock

About Author

Bas Grasmayer is a digital strategist & founder of The Music Tech Network and the weekly MUSIC x TECH x FUTURE newsletter. He previously led product for Russian music streaming service Zvooq and was a headline speaker at Midem 2012. Follow him on Twitter: @basgras