Innovation in the Cultural and Creative Industries 9781119681199, 1119681197, 9781119681250, 1119681251

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Innovation in the Cultural and Creative Industries

Innovation and Technology Set coordinated by Chantal Ammi

Volume 8

Innovation in the Cultural and Creative Industries Edited by

Estelle Pellegrin-Boucher Pierre Roy

First published 2019 in Great Britain and the United States by ISTE Ltd and John Wiley & Sons, Inc.

Apart from any fair dealing for the purposes of research or private study, or criticism or review, as permitted under the Copyright, Designs and Patents Act 1988, this publication may only be reproduced, stored or transmitted, in any form or by any means, with the prior permission in writing of the publishers, or in the case of reprographic reproduction in accordance with the terms and licenses issued by the CLA. Enquiries concerning reproduction outside these terms should be sent to the publishers at the undermentioned address: ISTE Ltd 27-37 St George’s Road London SW19 4EU UK

John Wiley & Sons, Inc. 111 River Street Hoboken, NJ 07030 USA

www.iste.co.uk

www.wiley.com

© ISTE Ltd 2019 The rights of Estelle Pellegrin-Boucher and Pierre Roy to be identified as the authors of this work have been asserted by them in accordance with the Copyright, Designs and Patents Act 1988. Library of Congress Control Number: 2019944508 British Library Cataloguing-in-Publication Data A CIP record for this book is available from the British Library ISBN 978-1-78630-379-0

Contents

Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Estelle PELLEGRIN-BOUCHER and Pierre ROY

ix

Chapter 1. Nintendo in the Pursuit of the Blue Ocean . . . . . . . . . . Pascal AURÉGAN and Albéric TELLIER

1

1.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.2. Blue Ocean strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.3. The video game industry: observation method and characteristics . 1.3.1. The methodological system . . . . . . . . . . . . . . . . . . . . . . 1.3.2. The video game industry: a presentation . . . . . . . . . . . . . . 1.4. Nintendo’s strategy: mixed results . . . . . . . . . . . . . . . . . . . . 1.4.1. A spectacular recovery . . . . . . . . . . . . . . . . . . . . . . . . . 1.4.2. How can recovery be achieved? . . . . . . . . . . . . . . . . . . . 1.5. What lessons can be learned from Nintendo’s strategic directions? . 1.5.1. The Nintendo Wii: a case study of Blue Ocean strategy? . . . . 1.5.2. Sailing on the blue ocean: how far? . . . . . . . . . . . . . . . . . 1.5.3. The launch of the Switch: a return to the fundamentals of the Blue Ocean strategy?. . . . . . . . . . . . . . . . . . . . . . . . . . 1.6. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.7. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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1 2 6 6 7 13 13 15 18 18 21

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23 25 27

Chapter 2. Omnichannel Innovations in the Bookstore Business: The Case of the Libraires Ensemble Group . . . . . . . . . . . . . . . . . Carole POIREL

29

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2.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2. The transition from multichannel to omnichannel: a strategic innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.3. Research methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

29 31 35

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2.4. A presentation of the bookstore sector . . . . . . . . . . . . . . . . . . . . 2.5. The analysis of the innovative strategy . . . . . . . . . . . . . . . . . . . 2.5.1. The role of networks in the omnichannel strategy . . . . . . . . . . . 2.5.2. An omnichannel model adapted to the singularities of bookstores . 2.6. Feedback on concepts and best practices . . . . . . . . . . . . . . . . . . 2.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.8. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

36 40 43 45 48 50 51

Chapter 3. The Innovative Business Model of Daft Punk . . . . . . . . Alexandre PERRIN

55

3.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . 3.2. The definition of a business model . . . . . . . . . . . 3.3. The business model of the music industry . . . . . . . 3.3.1. Recorded music . . . . . . . . . . . . . . . . . . . . 3.3.2. Live music . . . . . . . . . . . . . . . . . . . . . . . 3.3.3. Current business models . . . . . . . . . . . . . . . 3.4. First historical attempts to break the model . . . . . . 3.4.1. Attempts concerning value propositions . . . . . 3.4.2. Attempts concerning value architectures . . . . . 3.4.3. Attempts concerning business equations . . . . . 3.5. Methodology . . . . . . . . . . . . . . . . . . . . . . . . 3.6. Daft Punk: an innovative model in electronic music . 3.6.1. Innovation concerning the value proposition . . . 3.6.2. Innovation concerning value architecture . . . . . 3.6.3. Innovation concerning the business equation . . 3.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . 3.8. Appendices . . . . . . . . . . . . . . . . . . . . . . . . . 3.9. References . . . . . . . . . . . . . . . . . . . . . . . . .

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55 56 57 58 61 61 63 63 64 65 65 67 67 68 69 70 71 75

Chapter 4. Innovation through Visitor Experience in Museums: The Case of the Lascaux Caves . . . . . . . . . . . . . . . . . . . . . . . . . Juliette PASSEBOIS-DUCROS

77

4.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2. Innovation through and in consumer experience . . . . . . . . . . 4.2.1. The concept of consumer experience . . . . . . . . . . . . . . 4.2.2. Innovation through the creation of memorable experiences . 4.2.3. Innovating through UX Design or how to simplify the user experience . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2.4. Innovating by analyzing and understanding the customer journey or how to personalize consumer experience . 4.3. Heritage institutions: a sector in the throes of change . . . . . . .

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77 78 78 79

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81

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81 84

Contents

4.3.1. The weight of assets in the French economy . . . . . . . . . . . . . 4.3.2. The economic structuring of the cultural heritage “industry” . . . 4.4. A presentation of the Lascaux case and the analytical methodology . 4.4.1. The case study methodology . . . . . . . . . . . . . . . . . . . . . . 4.4.2. The context of recent innovation in Lascaux: a brief account of 70 years of operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4.3. Towards the creation of a center worthy of Lascaux’s worldwide reputation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.5. Innovation at the service of the visitor experience in Lascaux . . . . . 4.5.1. Lascaux and the “prehistoric experience” . . . . . . . . . . . . . . 4.5.2. Visitor data to improve the individual experience . . . . . . . . . . 4.5.3. Data at the service of the organization’s management . . . . . . . 4.6. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.7. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

vii

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84 85 86 87

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89 91 91 93 95 96 98

Chapter 5. Tale Me, Green Innovation for the Textile Industry . . . . Arthur CARÉ

101

5.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.2. The theoretical framework . . . . . . . . . . . . . . . . . . . 5.2.1. Green innovations: semantic diversity and definition . 5.2.2. The nature of green innovation . . . . . . . . . . . . . . 5.2.3. Blue Ocean strategy and the strategic framework . . . 5.3. The research method . . . . . . . . . . . . . . . . . . . . . . 5.3.1. A sectoral qualitative study . . . . . . . . . . . . . . . . 5.3.2. Data collection and processing . . . . . . . . . . . . . . 5.4. The textile and clothing industry . . . . . . . . . . . . . . . 5.4.1. Historical landmarks . . . . . . . . . . . . . . . . . . . . 5.4.2. Textiles, the flagship of French industry . . . . . . . . 5.4.3. Fashion is passing, waste remains . . . . . . . . . . . . 5.5. Ready to rent . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.5.1. Tale Me and clothing rental . . . . . . . . . . . . . . . . 5.5.2. Tale Me casts off . . . . . . . . . . . . . . . . . . . . . . 5.6. Case lessons and good practices. . . . . . . . . . . . . . . . 5.6.1. “From cradle to plateau”. . . . . . . . . . . . . . . . . . 5.6.2. Green Ocean strategy . . . . . . . . . . . . . . . . . . . 5.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5.8. References . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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101 102 102 104 106 107 107 108 109 109 111 112 113 113 117 122 122 124 126 127

Chapter 6. Identity for Innovation: The Strategies of Cinema Sites . Ève LAMENDOUR

131

6.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.2. Methodology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

131 132

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6.3. A changing industry . . . . . . . . . . . . . . . . . . . . . . . . . 6.4. The identity and strategy of cinema sites: tensions in Nantes 6.4.1. The tension between city-center and periphery . . . . . . 6.4.2. The magic of cinema sites . . . . . . . . . . . . . . . . . . . 6.4.3. Programs, the DNA of cinema sites . . . . . . . . . . . . . 6.5. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6.6. Glossary of terms . . . . . . . . . . . . . . . . . . . . . . . . . . 6.7. Sources and archives . . . . . . . . . . . . . . . . . . . . . . . . 6.8. References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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135 139 139 142 145 151 155 156 157

Chapter 7. Coopetition Between Architects: Designing Innovative Projects with Competitors . . . . . . . . . . . . . Estelle PELLEGRIN-BOUCHER and Pierre ROY

159

7.1. Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.2. Coopetition: an example of an innovative strategy. . . . 7.2.1. Presentation and definition of coopetition strategies 7.2.2. Different types of coopetition . . . . . . . . . . . . . . 7.3. Methodological choices . . . . . . . . . . . . . . . . . . . 7.4. Presentation of the architecture sector . . . . . . . . . . . 7.4.1. Architecture as a profession . . . . . . . . . . . . . . . 7.4.2. Recent developments in the sector . . . . . . . . . . . 7.5. The different types of coopetition between architects . . 7.5.1. Type 1: improving commercial prospecting . . . . . 7.5.2. Type 2: reducing geographical distance . . . . . . . . 7.5.3. Type 3: a successful project from A to Z . . . . . . . 7.6. Lessons learned and good practices . . . . . . . . . . . . 7.6.1. Choosing coopetitors . . . . . . . . . . . . . . . . . . . 7.6.2. Managing coopetition . . . . . . . . . . . . . . . . . . 7.6.3. Exploiting the benefits . . . . . . . . . . . . . . . . . . 7.7. Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . 7.8. References . . . . . . . . . . . . . . . . . . . . . . . . . . .

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159 160 160 161 162 163 163 164 165 165 168 169 172 172 174 175 176 177

List of Authors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

179

Index . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

181

Introduction

In a globalized context where standardization is becoming the norm, cultural and artistic heritage certainly embodies one of the greatest tangible and intangible assets of a country. In Europe, the cultural and creative sectors thus represent 4.2% of the Union’s GDP and nearly 7.1 million jobs, mainly in small businesses (EY 2013). In France, as shown by the studies conducted on the subject, the cultural and creative industries (CCIs) are also a lever for national influence. Indeed, the panoramas of these industries highlight the economic (104 billion euros) and social (nearly 1.7 million jobs) value of these sectors (EY France Créativité 2013; BPI 2017). Because of their innovative nature and the value creation they generate, these sectors represent a real source of wealth and job creation, particularly since they are rarely relocatable. In addition, they require rare talents and knowledge that is difficult to substitute, rooted in specific know-how, heritage, etc. The figures also highlight that the development of these sectors is linked to the increasing use of digital technologies (EY France Créativité 2013). Indeed, software, Big Data and artificial intelligence reduce technical constraints and help creators to concentrate on their production while freeing up their creativity. They also make it possible to get closer to the needs of consumers. Yet these sectors have long been neglected by academia and the business media, partly because of their heterogeneity and apparent complexity. They cover a wide range of activities, from film and publishing to the more recent video game industry. The first objective of this book is to better define this Introduction written by Estelle PELLEGRIN-BOUCHER and Pierre ROY.

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Innovation in the Cultural and Creative Industries

set of activities and give it greater visibility. Our second objective is to show the innovative nature of CCIs and to identify useful best practices for companies. We believe that, despite the specificities of each cultural and creative industry, and precisely because of the innovative and avant-garde nature of CCIs, some innovations are transferable to other sectors and industries. I.1. Definition, characteristics and scope of CCIs In the field of economics, or in management sciences, some specialists have defined and characterized these industries. For example, Busson and Evrard (2013) identified seven sectors of activity that are part of the CCI: heritage, performing arts, the book industry, the music industry, video games, film and television. Paris (2010) considers that the cultural and creative industries encompass all activities characterized by a creative process. He thus integrates fashion, advertising, gastronomy, design, etc. He identifies three characteristics common to CCIs: – the creative act (the supply) exists independently of any market demand; – the value of a good is linked to a social dimension (listening to the same music as our friends, going to the cinema in a group, wearing clothes that set us apart, etc.); – prescription plays an essential role and contributes significantly to the success of the works. Other researchers have highlighted the economic particularities of these industries (BPI 2017). First, they include editorial institutions responsible for the selection and distribution of products to consumers. Actors within the sector have the function of selecting works and promoting them to the general public (Caves 2002). Second, in these industries, success is never predictable. As a result, a few major successes finance a majority of commercial failures (Karpik 2007). A film, book or music album is indeed a prototype whose commercial success is always uncertain. Third, the value of creative and cultural goods is revealed in experience. As these goods only reveal their benefits in use, they require the implementation of judgement mechanisms (criticisms, opinions, etc.) to help consumers in their purchasing decisions. Fourth, dematerialization weakens some parts of the cultural industries (music, cinema, books, etc.), so appropriate solutions must be

Introduction

xi

found to avoid large-scale piracy. Finally, there is a geographical concentration of cultural and creative activities (Hollywood for cinema, Paris for fashion, Bangkok for jewelry, etc.). This grouping is conducive to innovation and excellence, and it contributes to the creation of clusters whose symbolic value reflects on works and brands. In this book, we have also sought to clarify what these activities represent and what are their characteristics. In our opinion, the first point common to all these sectors is creativity (Busson and Evrard 2013). Indeed, all these industries are characterized by a very strong capacity to produce a new, original solution, which draws on the imagination of its creators and whose value is more symbolic than utilitarian (Bouquillion et al. 2013). The second common point is an anchoring in a particular artistic field and a strong cultural capital; for example, fashion and video games have their roots in drawing and are influenced by the graphic and visual arts. The intangible and symbolic aesthetic dimension may be more or less strong in these sectors, but it is always present. It can also override the effectiveness of the product or service being marketed. Finally, the third point is the innovative nature of creative and cultural productions (Evrard and Busson 2018). Indeed, the cultural and creative industries produce objects and services that are new to their markets and create value for consumers. Based on these elements of definition, here are the sectors that we have grouped together in the CCIs for this book (see Table I.1): architecture, cinema, photography, the art market, plastic arts, design, fashion (textiles, clothing, accessories, perfumes, cosmetics, luxury), heritage (museums, monuments), advertising, performing arts (shows, theaters, festivals, concerts), radio, TV, music, video games, gastronomy, living arts (decoration, furniture, tableware), publishing (books, press). For greater clarity, these industries can be grouped into 10 sectors of activity (BPI 2017). In France, the CCIs embody a strong symbol of the country’s identity and a lever for international influence. This is particularly linked to the weight of culture in the country and its very rich heritage. Thus, more than 500,000 companies are active within the CCIs. The BPI France organization in a study published in 2017 shows that these industries represent 104 billion euros (or 5.3% of the national GDP) and have totaled more than 1.7 million

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jobs (or 6.3% of paid employment). As an economic comparison, CCIs represent slightly more than twice the size of the accommodation and catering sector (BPI 2017). CCIs

Description

Architecture

Architecture Textile, clothing, accessories, perfumes, cosmetics Museums, monuments Advertising Shows, theaters, concerts Radio, TV, cinema, music, video, video games Wines Photography, art market, plastic arts, design Tableware, furniture, decoration Book, press

Fashion, luxury, beauty Heritage Advertising Live performance Audiovisual media Gastronomy Visual arts Lifestyle Printed media

Added value (in euros)

Number of jobs

3.9 billion

40,000

As a % of total value added 4%

33.5 billion

593,000

32%

1.7 billion

40,000

2%

8.8 billion

149,000

9%

7.5 billion

172,000

7%

14.1 billion

125,00

14%

3.5 billion

61,000

3%

9.3 billion

179,000

9%

10.6 billion

217,000

10%

10.1 billion

134,000

10%

Table I.1. Cultural and creative industries in France (source: BPI France, based on INSEE data (2017))

I.2. Innovative strategies at the heart of CCIs Many recent transformations have impacted the different CCIs described in section I.1. These include technological revolutions (Internet, dematerialization via digital technology, artificial intelligence, etc.), new sociological and consumer trends, increasing internationalization, changes in legislation or the convergence of certain activities (cinema and video games, for example). Faced with these profound changes, the historical and/or newly arrived companies in these CCIs have thus been confronted with new strategic challenges. The answers provided by companies are at the heart of this book. We would like to highlight the innovative strategies of companies located in CCIs, starting from an idea that has the status of a gamble:

Introduction

xiii

managers and employees involved in CCIs are more creative than average, and companies’ strategies must necessarily benefit from this additional creativity compared to other sectors. In other words, we are convinced from our empirical research in these sectoral contexts that the profile of actors has a positive effect on the innovative dimension of the strategies carried out there. The objective of this book is thus to offer a first overview of innovative and effective strategies carried out in CCIs. We considered innovation from a strategic point of view, that is, how a company innovates in defining its offer, in its approach to the market and/or in its internal organization. Thus, this book discusses strategies whose innovative character lies, for example, in the characteristics of the company’s business model, in the type of distribution channel, in the nature of customer relations, in the combination of cooperative and competitive relations, in open innovation or in the consideration of environmental issues. Each chapter is structured around five elements: 1) a theoretical framework focusing on a specific concept; 2) the methodological design used; 3) a presentation of the CCI concerned; 4) the analysis of the innovative strategy; 5) a feedback on the lessons learned and good practices of the case. The design of this collective work has led us to select authors who are specialists and recognized within the field of CCIs. Prior to their participation in this book, they all carried out empirical research in one or more CCIs, and their work gave rise to different types of developments: scientific articles, books, press articles, communication at conferences, etc. This book also aims to create links between authors working on CCIs and to promote the work of this community of established or future researchers. The selection of authors necessarily leads us to focus on some CCIs at the expense of others. The seven CCIs discussed in this book are video games, books, music, museums, fashion, cinema and architecture. We are also aware that this book embodies a first step in our desire to promote the work carried out in the field of CCI strategy in the months and years to come. We intend not only to fully pursue the exploration of the industries discussed in this book but also to tackle those excluded from it.

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I.3. Summaries of the chapters and the structure of the book In Chapter 1, Pascal Aurégan and Albéric Tellier analyze Nintendo’s Blue Ocean strategy using Kim and Mauborgne’s tools (2004). Through a longitudinal analysis of the game console industry conducted from 2006 to date, the authors show that this industry has grown steadily. Within this sector, Nintendo pursued a Blue Ocean strategy with the launch of the Wii in 2006, which allowed it to become the world leader in video game consoles again in 2011. However, the failure of the Wii U from 2012, and the aggressive imitation strategies of its competitors Sony and Microsoft, quickly reduced its competitive advantage. The authors show that imitating a blue ocean can be quick and that the competitive advantage gained through this strategy is sometimes short-lived. In order to innovate and maintain the benefits of innovation within the creative and cultural industries, Pascal Aurégan and Albéric Tellier make several suggestions. First, in order to innovate and develop blue oceans, it seems essential to question and renew the rules of the game commonly acquired within a sector. Second, it is necessary to assess the long-term potential of a blue ocean. Finally, it is in the interest of innovative companies to create links between the various actors because their partners must adhere to their projects. Chapter 2, written by Carole Poirel, is devoted to the study of omnichannel innovations in the book trade concerning a group of booksellers that has distinguished itself by its choices in favor of the omnichannel since 2015. This Libraires Ensemble group, created in 2001, currently has 54 bookstores located in major urban centers outside Paris. The resulting innovation analysis, based on a case study and a qualitative method, is part of the retail cooperative and has a collective resource-pooling dimension. The author shows that, in order not to appear commercially obsolete compared to other brands, self-employed people have developed their online presence, connected their bookshops to the Internet and set up networked CRM tools. This has enabled them to take advantage of the complementarities between physical and virtual businesses that consumers seek and appreciate. However, the omni-channel devices used by the group do not constitute an ex nihilo innovation since they already existed in other brands and in other sectors. The innovative character here lies in the import and adaptation to the independent library of a managerial approach based on the strength of its network. Carole Poirel draws many lessons and good practices from this research. We can mention in particular the importance of the variety of the assortment (products and services), but also the strategic

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nature of merchandising and the customer experience in stores and on the website in order to encourage people to stroll around and buy books. Among CCIs, the music industry has also experienced major upheavals in recent years. Alexandre Perrin explores some of these transformations in Chapter 3 through the case of Daft Punk and the economic model developed by the famous French electronic music duo. The author traces the group's journey from its beginnings in 1993 to its recent successes and demonstrates its ability to innovate in relation to the dominant models of the music industry. The concept of the economic model and its components (value proposition, value architecture, profit equation) serves as an anchor point for Alexandre Perrin to compare the strategies of the various industry players and the changes that have occurred. Based on Daft Punk’s accounting, financial and organizational data, the author deciphers the various innovative dimensions of their economic model. Thus, he highlights how the group has been able to create a model adapted to the evolutions of the music industry. Four key success factors embody the success of Daft Punk’s strategy according to the author: an ability to “do things their own way”, to present finished products, to finance their own work and to maintain close control over it. Beyond the artistic aspects, the case thus reveals the role played by the control of the financial dimension in both the creation and distribution of musical works. In Chapter 4, Juliette Passebois-Ducros studies innovation for the visitor experience in museums, using the Lascaux caves as a case study. Thanks to digital technologies, the establishment has not only been able to offer innovative mediations concerning the built heritage of the caves, but also to offer an “enhanced” and more personalized visitor experience (before, during and after the visit), thanks to the analysis of personal data generated by visitors’ behavior. Thus, Lascaux inaugurates the use of Big Data for cultural organizations, extending the movement initiated by the major creative industries. This study also examines in more detail the notion of “User Experience” (UX). One of the challenges of UX is to make technology easy, pleasant, and as intuitive as possible for a user, as well as to perfectly meet the user’s needs. The objective is also to personalize his/her experience and make it memorable in order to create a sustainable competitive advantage. The author shows that the cultural industries are a prime area in which to test experiential marketing but also different digital technologies. The experiment must be carried out throughout the visitor’s journey in order to offer opportunities for innovation and differentiation. When managing the

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experience itself, it is good practice to use technological tools to complete the visitor experience in a measured way. Finally, the study shows that it is not a question of collecting data to obtain monetary benefits but rather of using this data to continuously improve the visitor experience. The fashion and textile industry is discussed by Arthur Caré in Chapter 5. The author challenges this creative industry in terms of green innovations and the major issues to which this industry is exposed in terms of its environmental impacts. The chapter is particularly interested in the introduction of a green innovation strategy in textiles and clothing through the case of Tale Me, whose core business is the rental of clothing for customers whose bodies are rapidly changing (children, pregnant women). Against the trend of actors embodying the dominant model of fast fashion (H&M, Zara, Gap, etc.), the case of the company Tale Me highlights how some companies are trying to develop alternative models based on a green approach. When examined in a qualitative approach, the case of this “clothing library” makes it possible to identify the ways of introducing a green disruption but also the limits and obstacles to its widespread dissemination. Arthur Caré shows how Tale Me manages to achieve a certain success with the targeted niche but also the difficulties encountered when it comes to extending the strategy to a wider market. This result leads the author to compare the specificities of the Green Ocean strategy with those of the Blue Ocean strategy. In particular, Caré stresses the importance of seeking relays (through cooperation with dominant industry players) to expand the green innovation strategy on a larger scale and meet the dual objective of economic and environmental performance. Chapter 6 gives Eve Lamendour the opportunity to question innovation strategies in the cinema sector from the perspective of the identity and positioning of supply (types of films offered, original or French version, schedules, pricing policy, services, etc.). Starting from the transformations of the film industry, such as digital projection or the development of streaming platforms, the author studies the impacts on a step that takes place later on in the process: the exhibition of films in cinemas. The stakes are multiple: how to enhance the value of cinema screenings in the age of Netflix? How to position the offer according to its location? How to balance cultural issues and economic imperatives? etc. The competition between cinemas in the Nantes urban area provides a stimulating empirical context for discussing the strategic issues faced in this sector. In particular, the author shows how two types of actors coexist on this market: those responding to an economic and

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commercial type of logic versus those attached to the cultural and artistic dimension of cinema. Tensions between the two cinema profiles as well as that between geographical areas (city center versus suburbs) are discussed. The case shows how cinemas position themselves, sometimes confront each other and enter into games of aggression-reaction in terms of identities. Finally, in Chapter 7, Estelle Pellegrin-Boucher and Pierre Roy explore developments in the architectural sector and discuss the growing trend that leads architectural firms to work together with their competitors. This strategy, known as coopetition, is based on a mixture of cooperation and competition and consists here in responding to a call for tenders with one’s competitor in order to maximize the chances of winning it. The generalization of this strategy embodies an innovative response to new challenges in the sector such as fierce competition between agencies, the growth of powerful brands associated with major names in the sector (“starchitects”), the internationalization of the business and new customer requirements. Based on qualitative empirical studies conducted in Montpellier and Paris, the authors reveal several benefits associated with the cooperation strategy among architects. First, agencies improve their commercial prospecting and thus reveal new opportunities for future projects. Second, cooperation offers a solution to one of the frequent difficulties faced by architects: the geographical distance between the location of the firm and that of the construction project. Finally, the case of the renovation of the Montparnasse tower in Paris demonstrates how the management of an architectural project carried out from A to Z makes it possible to innovate at the product level but also at the commercial and managerial levels. I.4. References Bouquillion, P., Miège, B., Moeglin, P. (2013). L’industrialisation des biens symboliques. Les industries créatives en regard des industries culturelles. Presses Universitaires de Grenoble, Grenoble. BPI France (2017). Le lab, Industries French Touch, Créativité déroutée ou augmentée. Banque publique d’investissement France, Paris. Busson, A., Evrard, Y. (2013). Les industries culturelles et créatives : économie et stratégie. Vuibert, Paris. Caves, R.E. (2002). Creative industries: contracts between art and commerce. Harvard University Press, Cambridge, MA.

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Chantepie, P., Le Diberder, A. (2010). Révolution numérique et industries de la culture, 2nd edition. La Découverte, Paris. Davies, R., Sigthorsson, G. (2013). Introducing the Creative Industries: From Theory to Practice. Sage, Thousand Oaks. Evrard, Y., Busson, A. (2018). Management des industries culturelles et créatives. Vuibert, Paris. EY France Créative (2013). Panorama des industries culturelles et créatives. Ernst & Young, Paris. Karpik, L. (2007). L’économie des singularités. Gallimard, Paris. Kim, W.C., Mauborgne, R. (2004). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press, Boston. Paris, T. (2010). Manager la créativité. Innover en s’inspirant de Pixar, Ducasse, les Ateliers Jean Nouvel, Hermès, etc. Village Mondial, Pearson, Montreuil. Vogel, H.L. (2011). Entertainment Industry Economics. Cambridge University Press, Cambridge.

1 Nintendo in the Pursuit of the Blue Ocean

1.1. Introduction The book by W. Chan Kim and Renée Mauborgne entitled Blue Ocean Strategy, published in 2004, was very successful from its publication. Translated into 44 languages, more than 3.5 million copies of the book have been sold worldwide. According to the authors, the Blue Ocean strategy is taught in more than 2,800 universities! Designed with and for practitioners in constant search for the “winning strategic recipe”, the book aims to propose to leaders an approach that will enable them to create new strategic spaces, “blue oceans”, as opposed to “red oceans”, where competition is fierce. Management researchers, despite showing a definite interest in the concept of the “blue ocean”, are perhaps more likely to question the theoretical robustness of the approach and its ability to systematically produce winning strategies. Thus, the purpose of this chapter is to test the work of Kim and Mauborgne through the analysis of the Nintendo case over a long period, from 2006 to the present day. This analysis seems to us to be conducive to highlighting not only the interest but also the limits of the Blue Ocean approach, particularly in the creative industries. This chapter is organized into five main sections. Section 1.2 briefly presents the Blue Ocean approach, its principles and analytical tools. Section 1.3 presents the methodological framework and the video game industry. Chapter written by Pascal AURÉGAN and Albéric TELLIER.

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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Innovation in the Cultural and Creative Industries

Section 1.4 presents Nintendo’s strategy for launching its various console generations and the results obtained. Finally, section 1.5 is devoted to the discussion of the case, in the light of the Blue Ocean approach. 1.2. Blue Ocean strategy Kim and Mauborgne’s work on Blue Ocean strategies is based on a simple idea: at a time of hyper-competition, it is often more appropriate to “stand where the competition is not” rather than to seek confrontation. Their project is to propose an approach that will allow managers to discover and exploit blue oceans that are untouched by any competition. To build this approach, Kim and Mauborgne started from an observation: leaders have a conception of strategy based on two more or less implicit assumptions that nevertheless guide and limit their actions in a powerful way. On the one hand, they consider that the boundaries of their market(s) are given and that it is not possible to change them. On the other hand, in this constrained environment, the company has only two options: it follows the logic of either cost or differentiation. However, for the authors, these assumptions, which are largely based on the Porterian approach (Porter 1985), are fallacious. In the long run, companies can only exhaust themselves if they only seek to differentiate themselves or reduce their costs. By playing on only one of these two types of logic, they cannot leave their red oceans. Initiating a real strategic change can only come from joint movements aimed at both differentiating oneself (and increasing the value perceived by the customer) and reducing costs. It is this strategic move (defined as “the set of managerial actions and decisions involved in making a major market-creating business offering”, Kim and Mauborgne 2004, p. 10) that will give rise to “innovation-value” and thus a blue ocean (Aurégan et al. 2015). For a company, adopting a Blue Ocean strategy means shaping the industry to its advantage rather than suffering it. Table 1.1 presents the characteristics of the Red Ocean and Blue Ocean strategies. Table 1.1 requires some explanation. On the one hand, the creation of a new strategic space is often associated with Schumpeter’s concept of creative destruction: a new, more efficient technology replaces the old one and the actors who mastered it. However, the authors note that it is also possible to create a new market by disruption, as Christensen (1997) has shown. In this case, a less efficient technology initially replaces the old one.

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3

These two approaches are described as “disruptive creation” by Kim and Mauborgne. Finally, they specify that it is also possible to create new markets through non-disruptive creation. In this case, the aim is to create an ex nihilo market, for example, the market for ringtones. In the end, it is not so much technology that is important to create a new market (many new markets have been created without the specific use of technology or when this was the case, it was not what customers valued) as innovation-value, that is the ability of a firm to open new, economically viable markets. Red Ocean Strategy

Blue Ocean Strategy

Compete in existing marketing space.

Create uncontested market space.

Beat the competition.

Make the competition irrelevant.

Exploit existing demand.

Create and capture new demand.

Make the value-cost trade-off.

Break the value-cost trade-off.

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost.

Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

Table 1.1. Red Ocean versus Blue Ocean strategy (source: Kim and Mauborgne 2004, p. 18)

On the other hand, when Kim and Mauborgne suggest putting competition out of the game, it is not a question of fighting it, imitating it or doing better than it, but rather of delegitimizing it, by making a real leap of value that will deskill it. Rather than competing to acquire existing customers, Blue Ocean strategies seek to expand demand, paying particular attention to the three levels of non-customers (imminent non-customers, non-customers by refusal, unexplored non-customers). Finally, the Blue Ocean strategy involves adopting simultaneously the cost and differentiation approach, and in so doing challenging the cost/value equation. To formulate and execute a Blue Ocean strategy, the authors propose a real toolbox for managers: the strategy canvas, the grid of the four actions, the ERRC grid, the PMS (pioneer-migrator-sedentary) map, the three tiers of

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Innovation in the Cultural and Creative Industries

non-consumers or the buyers’ utility map, etc. For illustrative purposes, we present and comment on the three main concepts in this list in Table 1.2. Tool

Objective(s)

Strategic canvas (diagnostic and action tool)

Represent the current state of the competition in the strategic reference area. To establish the company’s value curve.

Grid of the four actions (tool for redefining the value curve)

Analyze possible changes in the characteristics of the new value proposition (innovationvalue) proposed by the company.

ERRC grid

Systematically identify the criteria on which value innovation will focus and to invent new ones.

Remarks and comments

Content/form Selection of key competition criteria in the sector studied (product attributes in particular). Positioning in relation to the competition in terms of performance. Its shape is a broken line joining the different criteria placed at different levels and forming the company’s value curve. Prioritization of criteria distinguishing between those to be reduced (pure and simple mitigation or deletion), those to be strengthened and those to be created. The form is a matrix of four boxes distinguishing between the criteria to be eliminated, reduced, raised and those to be created.

This tool is in line with the value analysis tools. Nothing is said about how to select the relevant criteria or areas to build the curve.

Once again, the tool is very similar to those used in value analysis, particularly those focused on customer value analysis (CVA). This tool is only an extension of the previous one. Its different form gives a systematic character to the approach and forces the actors to make clear choices.

Table 1.2. Three analytical Blue Ocean tools (source: freely inspired by Kim and Mauborgne 2004)

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5

However, the use of these tools is not sufficient to allow the company to create a Blue Ocean. It must be integrated into an overall strategic approach based on six principles (see Table 1.3). Finally, in their latest book, and probably in response to criticism about the lack of a framework for their approach, Kim and Mauborgne (2017) propose a structured approach for designing and implementing a Blue Ocean strategy. Principles

Objective(s)

Concrete implementation modalities

Principles of formulation

Redraw the boundaries between markets.

Find new strategic spaces.

Give priority to global issues, not numbers.

Build the strategy canvas.

Aim beyond existing demand.

Attract as many new customers as possible.

Successfully complete the strategic sequencing.

Build a business model robust enough to ensure the profitability of innovation and value.

Practice analytical exploration in six areas: alternative services on the market, strategic groups in the sector, buyers present, complementary offers presented, emotional content of communication in the sector, time projection of major sectoral trends. Apply a four-step method (visual awakening, visual exploration, strategic canvas competition and visual communication) in which communication aspects are central. The authors also propose a specific PMS map (pioneer-migrator-sedentary). Deepen the knowledge of nonclients broken down into three blocks (imminent non-clients, “anti” non-clients, “unexplored” non-clients), to attract them and transform them into effective clients. Formulate the strategy by going through essential and ordered steps: 1) analysis of the usefulness for the buyer; 2) price analysis; 3) cost analysis; 4) adoption analysis.

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Innovation in the Cultural and Creative Industries

Principles of execution

Overcome major internal obstacles.

Overcome the four internal obstacles: cognitive (resistance to change), linked to limited resources, insufficient motivation and finally struggles for influence.

Integrate implementation into strategic development.

Involve stakeholders in the field in the development of the strategy.

Practice “management by the tipping point” by choosing to focus on levers (individuals, actions, activities) that have a strong influence on results and make it possible to overcome the four previous obstacles. Practice “fair management” based in particular on the three E’s: engagement, exchange and enouncing consequences.

Table 1.3. The six principles underlying the Blue Ocean strategy (source: freely inspired by Kim and Mauborgne, 2004)

In their books, Kim and Mauborgne multiply the examples of Blue Ocean strategies successfully implemented in a wide variety of sectors: automotive, circus, viticulture, etc. At the same time, in the video game industry, Nintendo’s spectacular recovery in the mid-2000s has often been presented as a perfect illustration of the power of this type of strategy. Many authors have presented the launch of the Nintendo Wii system as the example of the Blue Ocean strategy (Hollensen 2008; Johnson et al. 2008; O’Gorman 2008; Bonneveux et al. 2010). However, after the undeniable success of the Wii, Nintendo’s situation deteriorated again from 2010 onwards. Thus, an analysis of the Nintendo case over a long period of time seems appropriate to highlight the interest but also the limitations of Kim and Mauborgne’s work. This is the objective of the rest of this chapter. 1.3. The video game industry: observation method and characteristics 1.3.1. The methodological system This research is based on a longitudinal study of the video game industry, mainly at the level of game console manufacturers. For more than 20 years, this sector has undergone significant changes, mainly due to the arrival of new players from consumer electronics (Sony) and IT (Microsoft). These successive entries have disrupted competitive positions and even led to the withdrawal of historical manufacturers (Sega). Since the beginning, the

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historical players in this industry have been required to make technological leaps, but in recent years they have also had to deal with the collapse of borders with related industries, particularly mobile telephony. This research is essentially based on secondary data of two types. First of all, we have “internal” secondary data involving the documents produced and distributed by the firms concerned and compiled over the relevant period of time. Then, we collected various secondary types of data from the business press and newspapers dedicated to the video game industry. This “external” secondary data was obtained by querying article banks such as Dow Jones Factiva, which provides access to thousands of full-text titles from the French and foreign press. Various automatic searches on these databases made it possible to select articles by keywords. The use of the Google alert system and the registration of developers and users in online forums also allowed the detection of major events in the sector and facilitated the validation procedure for the data collected. Finally, to enrich the reflection, research work on the same case published in academic journals or books has been used (notably Natkin et al. 2002; Schilling 2003; Benghozi and Chantepie 2017) as well as reports for state authorities (Le Diberder and Le Diberder 2002; Friès 2003; Beau et al. 2007) and studies by IDATE (Institut de l'audiovisuel et des télécommunications en Europe). 1.3.2. The video game industry: a presentation 1.3.2.1. An industry in continuous growth The video game industry is generally considered to be the latest in cultural industries. While it has the key characteristics of this type of industry (including the intensive use of intellectual capital, a chain organized around creation-production-commercialization cycles, income based on trade but also intellectual property rights), it is characterized by a very specific user experience (Benghozi and Chantepie 2017). Indeed, the service offered to a player is not only based on preconceived and fixed content but also depends on the possibilities of appropriation and personalization of the content, the scenario, the characters, the challenges to be met, etc. From now on, the player is involved in the game. He chooses the level of difficulty, creates his characters, acts on the story, invents his playing techniques, etc. This interactive dimension in the gaming experience is undoubtedly unparalleled in the cultural industries and can be summed up in a word well known to video game enthusiasts: gameplay.

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Innovation in the Cultural and Creative Industries

The video game industry is generally considered to have originated in the United States in 1972 when Pong (Atari), the first arcade game, and the Odyssey (Magnavox), the first console to be connected to a television set, were introduced. Since then, this industry has grown considerably under the combined effect of technological developments (machine capabilities, programming techniques, artificial intelligence, computer networks), the improvement of production processes and the specialization of players in specific trades along the supply chain. In 2016, the global video game market (including equipment) was estimated at €74.5 billion (IDATE 2017). Games are now designed for four types of platforms: arcade terminals, microcomputers, smartphones, and consoles (home and portable). The arcade terminal segment is in a slump with the disappearance of gaming rooms. In recent years, the console segment has also suffered. In 2003, home consoles represented more than 70% of the platforms used (Friès 2003, p. 8). They represented only about 40% of the total market in 2017. Similarly, handheld consoles accounted for 13% of the global market in 2017 compared to 22% in 2013. These figures are mainly due to the strong development of smartphones, whose power now makes it possible to offer equally successful games. The video game industry is organized as follows (Friès 2003): manufacturers design and manufacture consoles; “intermediate” manufacturers design hardware and software for game creation; development studios design and produce games; publishers buy the rights to the games created, produce them (in the sense of cinema) and deliver them to wholesalers; distributors (specialized stores – large distribution) market them. As a capital-intensive and technology-intensive sector, video games have historically been an industry of “upstream-driven innovation” (Beau et al. 2007). Indeed, almost all console manufacturing is now carried out by three companies: Microsoft, Nintendo and Sony. These three giants carry out most of the R&D on machines, impose technical specifications on the various players and take care of “technological crossovers” with other sectors (for example, the integration of DVD specifications for the production of games in disc form). The historical choice made by manufacturers to favor a “proprietary” approach by retaining exclusive control over the equipment and their economic weight strengthens their negotiating power over the entire supply chain. Not only does a manufacturer reserve the right to refuse a proposed title for its console, but it also requires high levels of royalties (at

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least 20% on the selling price) accompanied by cash advances. Finally, by also working as a publisher, manufacturers are exacerbating competition between the games they sell. Committed to a race for innovation, manufacturers have made a significant contribution to making video games a short-cycle technology industry, marked by the regular renewal of game consoles with ever-higher performance. These cycles are costly and difficult to manage, particularly because many actors have to integrate new technologies and renew their skills and design/production processes. Many professionals consider that it is very difficult to capitalize on the knowledge acquired over the long term because it is called into question by the technological leaps imposed upstream. Downstream, transitions between generations are also difficult for publishers to manage, as they have to cope with the collapse of sales due to manufacturers’ announcements. The video game industry can thus be described as a “prototype economy” because each game requires specific design and production financing that is difficult to recover (Benghozi and Chantepie 2017). While the development budget for a game with “global potential” for Sony’s Playstation 1 (PS1) was €2 to €3 million, the next generation, Playstation 2 (PS2), needed between €4 and €7 million. Since then, the amounts have skyrocketed. In 2013, the average cost of a video game was $88.4 million: $34 million for development and $54.4 million for manufacturing and marketing (IDATE 2014). For games with global ambition (such as Call of Duty: Modern Warfare 2, GTA 5, Halo 4, etc.), the $100-million threshold is exceeded by far. At the same time, players must take into account the fact that 50% of a game’s sales are made during the first three months of its commercialization and that 80% of its sales are made with 20% of the games. Thus, video games can also be described as “hit economy” (Friès 2003, pp. 10–11). It may be the only consumer industry where sales are made almost exclusively on new products. Unlike music or cinema, catalog collections are relatively unexploited and 99% of games disappear from distribution channels (excluding second-hand sales) in less than a year (Le Diberder 2002). 1.3.2.2. Console video games: key features Typically, the job of console manufacturers is to create a platform that will allow individuals to play games designed by development studios and

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Innovation in the Cultural and Creative Industries

produced by publishers. This position as an intermediary between people wishing to have fun and gaming specialists allows them to consider two types of income. On the one hand, they sell consoles via distribution networks. On the other hand, they give publishers the right to use their technology in exchange for royalties. It is thus said that a console manufacturer is in a “two-sided-market” situation since he can benefit from two different but dependent customers. While this type of situation can be very profitable (as long as the console manufacturer remains an essential intermediary), it raises specific strategic questions, particularly when launching a new generation of product1. The main problem to be solved is the “chicken or egg dilemma”. When a new console is introduced, players will be very sensitive to the number of games available since a single console is not very useful. But on the other hand, publishers will closely monitor the number of consoles sold before deciding whether or not to launch the production of dedicated games. The challenge for the console manufacturer is to have one category of actors initiate the adoption process to encourage other categories to do the same. Three strategies can be considered at the outset: – take on a market side: some console manufacturers are involved in a publishing activity to support the sales of their consoles; – agree, at least for a time, not to gain anything on a market side: some console manufacturers may be tempted to grant publishers operating licenses at very low prices and/or offer console buyers very attractive prices; – get a critical mass of users of an old technology involved by ensuring compatibility with the new one: some individuals purchasing a new console may be sensitive to the possibility of playing their old games with the new hardware. If the manufacturer succeeds in triggering a “snowball effect”, he can set himself up for success: the number of first-time buyers of the console encourages publishers to offer games, which increases the usefulness of the console, pushing even more players to acquire it, etc. It is said that there are “increasing returns” here (Arthur 1988), because the more important the diffusion of a console is at t, the more likely it is to spread more at t+1. The process of technology adoption by users generates positive feedback: any new adoption reinforces past (first customers made a “good” choice) and 1 Readers interested in these questions should consult Daidj and Isckia’s (2009) article.

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future adoptions (future customers will benefit from making the same choice). But on the other hand, if this process does not start, the manufacturer may fall into a spiral of failure and, in the end, be out of the market as Sega was after the catastrophic sales of its Dreamcast console launched in 1998 and withdrawn in 2001. In this “network industry”, where the usefulness of a console depends on the number of users (developers, publishers and customers), manufacturers regularly try to offer radically new products to shake up or strengthen competitive positions. The historical study of the strategies and launches carried out by the main console manufacturers indicates that, since the 1980s, the console market has gradually stabilized around collectively adopted practices that can be described as “rules of the competitive game”. 1.3.2.2.1. The rhythm rule The sector is characterized first of all by a “tempo” that seems to be accepted by all actors. The average time to market a console seems to have stabilized around six years. Since the transition from one console generation to the next is a critical time for many players in the industry, including publishers and development studios, the latter need good visibility on the console launch schedule. For example, if a publisher knows that at the same time console manufacturers will offer machines that are roughly equivalent in terms of power, he or she may consider creating a game for a console and then “transferring” it to a competing machine. 1.3.2.2.2. The double power rule A six-year commercial life in an industry that has among its suppliers manufacturers of electronic components that evolve rapidly (including processors that double in power every 18 months) encourages radical changes between generations of consoles. Without a very significant improvement, there is a great risk of offering equipment that is quickly obsolete compared to the computer manufacturers’ offer. Thus, “video games are caught up in a race for novelty, high-tech performance and original creation” (Beau et al. 2007, p. 6). Thus, from the 8-bit console we switched to 16-bit, 32-bit, then 64-bit, 128-bit, etc. This progression seems to have become even more important since the development of 3D games: the more a console is able to manage a large number of polygons at the same time, the more detailed and realistic the graphics can be. The history of the sector shows that between each generation of consoles, power is doubled.

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Innovation in the Cultural and Creative Industries

1.3.2.2.3. The cost price rule To make a significant leap in performance, manufacturers must integrate very recent and therefore expensive components into their new consoles. The counterpart of the doubled power is therefore an increasingly high manufacturing cost. To disseminate a new game console in a short period of time against competing offers, manufacturers have become accustomed to selling their consoles at an average cost for two years. This practice was introduced by Nintendo in 1985 with the launch of the NES. The enormous success of this console has helped to impose this rule on all the manufacturers who have since imitated the Japanese firm. 1.3.2.2.4. The rule of partially shared ownership A console without games is useless. It is therefore important for manufacturers to encourage game publishers to offer new products. For this purpose, manufacturers grant operating licenses. A manufacturer retains full ownership of the console but gives access to its technology to publishers to develop games in exchange for royalties. Conversely, the usefulness of a console can be increased by adding features. Coming from consumer electronics, Sony quickly saw the interest in offering consoles that could play audio and then video formats. Each of its consoles has brought additional value to the customer on this point. The PS1 could play compact discs (CDs), the PS2 could play CDs and DVDs, the PS3 and PS4 could play CDs, DVDs and Blu-ray discs. This desire to exploit technological compatibilities has forced manufacturers to integrate current technological specifications into consumer electronics in order to offer games in “disc” format and to abandon the “cartridge” format. 1.3.2.2.5. The rule of priority for big players By offering increasingly complex and expensive equipment, manufacturers have also had to focus on the “big players” (hardcore gamers) of video games that multiple market studies have identified in detail: a male individual between the ages of 15 and 34. As the industry has become a hit economy, publishers tend to exploit highly reputable licenses (e.g. the FIFA license for football games used by Electronic Arts) and to market successful game series (e.g. the Uncharted series). Historically, the game market has been segmented into four types of games: platform games, action games (shoot them all), simulation games (sport, city management, flight, etc.) and adventure games.

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1.4. Nintendo’s strategy: mixed results2 1.4.1. A spectacular recovery Nintendo is a Japanese company founded in 1889. Initially specialized in the manufacture of card games, the company turned to video games in the 1980s. Nintendo has established itself as the leading manufacturer3 thanks to its 3rd and 4th generation machines. In 1992, the firm held 80% of the console market. However, in 1994 Sony took advantage of a technological breakthrough (5th generation machines) to disrupt competitive positions thanks to its PS1. Sony’s domination was even greater from 2001 onwards. The company is the big winner of the 6th generation console competition. The PS2 is currently the best-selling console in the history of the industry, with approximately 120 million units sold. Launch dates – Consoles

Cumulative global sales

(1985) Generation 3 – NES

62 million

(1990) Generation 4 – Super NES

49 million

(1996) Generation 5 – Nintendo 64

32 million

(2001) Generation 6 – Gamecube

Competitors (cumulative sales) Sega Master System (13 million) Nec PC-Engine (11 million) Sega Megadrive (35 million) Sega Saturn (10 million) Sony PS1 (100 million) Microsoft Xbox (26 million)

24 million

Sega Dreamcast (11 million) Sony PS2 (120 million)

Table 1.4. Nintendo’s sales and competitors, 1985–2005 (source: based on data compiled by the authors)

In December 2005, the era of the 7th generation of consoles began with the arrival of Microsoft Xbox 360. Sony also entered the competition in March 2007. Nintendo’s situation seemed to be difficult at this time. The 2 This section is largely based on two previous publications, by Aurégan and Tellier (2009) and Aurégan et al. (2015). 3 Nintendo is also a leader in the handheld market (its current product on the market is the DS). In order to simplify the following developments, this activity is not discussed in detail.

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Innovation in the Cultural and Creative Industries

relative failure of its Gamecube console (24 million units sold) seemed to indicate an inevitable decline in a market that was nevertheless growing. On the other hand, Microsoft, the latest entrant in this market, has managed to become the second largest manufacturer (26 million Xboxes sold, see Table 1.4). Sony and Microsoft’s 7th generation projects built on the sector’s traditional “ways of doing things”. Both consoles were presented as extremely powerful and proposed major technological changes. In December 2006, one year after Microsoft, the Japanese company entered the 7th generation battle with a very innovative product, breaking with the history of the sector. Its console, called Wii, was offered at a price of €250, the same as its previous model. The great novelty came from the controller (called Wiimote). Similar to a remote control, it made it possible to point objects at the screen and detect the player’s movements. This detection was enabled by the presence of an “accelerometer”. Designed by Analog Devices and manufactured by IBM, it detected the player’s movements in 3D. This remote control could also be connected to extensions or integrated into accessories (car steering wheel, tennis racket, etc.). The player was no longer sitting in front of his screen, he had to perform the movements required by the game (for example, imitating the hitting of a baseball player). On the other hand, the graphics were considerably simplified. The Wii chip was not as powerful as those of the Xbox 360 or PS3. More broadly, the technical performance seemed limited: no hard disk, no DVD playback, no high definition, no Dolby 5.1 sound, limited connectivity, etc. However, the success was dazzling. While sales were exploding (see Table 1.5), Nintendo’s share price increased fourfold between 2005 and 2007. The firm ended its 2007 financial year with a 90% increase in turnover and a 77.2% increase in net income! Cumulative worldwide sales in millions of units

Console

Launch date

Introductory price

12/2007

12/2008

04/2009

01/2011

01/2012

Microsoft Xbox 360

12/2005

400

14

22.5

24.5

36.5

43

Sony PS3

03/2007

600

5

16.5

19

34

42

Nintendo Wii

12/2006

250

18.5

36

42

80

100

Table 1.5. Competition between 7th generation consoles: some figures (source: based on data compiled by the authors, prices in euros)

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1.4.2. How can recovery be achieved? In January 2011, Nintendo once again became the world’s leading manufacturer of video game consoles. The company has sold about 80 million Wii consoles, far ahead of Microsoft (36.5 million Xbox 360s) and Sony (34 million PS3s). While its 2004/2005 turnover was 515.5 billion yen, its 2008/2009 turnover exceeded 1,753 billion yen! However, Nintendo is no longer alone in the market it helped to discover. In September 2010, Sony launched the PlayStation Move, a device that can be connected to its PS3 console and also detects player movement. Two months later, Microsoft made its debut with the release of Kinect, a device connected to the Xbox 360 console that also allows the development of controllerless games. It was a success. In March 2011, Microsoft reported that it had already sold 10 million Kinects. The effect on Nintendo’s sales is significant. The firm is now facing a slowdown in console sales. In March 2011, it announced a 29% decline in its annual turnover and in net profits. The limited performance of the Wii is increasingly seen as an obstacle to the development of new games and the initial choice not to offer high definition is questionable at a time when this type of TV screen is becoming popular with households around the world. In June 2011, Nintendo announced the arrival of its new model, the Wii U. This console was the first to be equipped, in addition to the joysticks with motion recognition, with a tablet (the Gamepad) that allowed players to use a new device for certain games. The gameplay can thus be “asymmetrical”: the player on the tablet has features and information that other players do not have. The Gamepad also makes it possible to do without a television screen. It is indeed possible to finish a game started on television on a tablet, provided however that the player does not move more than a few meters away from the console. This project marked an important change for Nintendo, both technically and in terms of the target market. First of all, the technical characteristics of the console were clearly comparable to those of competing PS3 and Xbox 360 consoles. The time for technically limited consoles seemed to be over. In the announcements accompanying the launch of the Wii U, Nintendo officials continued to praise the quality of the high-definition graphics and the tablet’s capabilities. The tablet had a Wi-Fi connection, motion detectors

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Innovation in the Cultural and Creative Industries

and a high-resolution display. Integrated cameras made it possible to offer “augmented reality” games and videoconferencing between console owners. It was also possible to download games via an online platform. Nintendo’s new system was released in December 2012, just six years after the Wii. Its price was €349. Even if it remained the cheapest console of its generation (the Xbox One was sold for €499 and the PS4 for €399, see Table 1.6), price differences were narrowing and, above all, the difference with the Wii selling price was significant (€100). The commercial results quickly became disappointing. In July 2013, the console had sold 3.45 million copies (the initial target was to reach 5.5 million by the end of March); the worst launch in Nintendo’s history. Even more worryingly, publishers did not seem to show much interest in this machine and its asymmetric gameplay. Noting the low level of sales, they gradually abandoned their projects for the Wii U. These poor results were all the more worrying as, in 2013, competitors Sony and Microsoft officially launched their new consoles: the Xbox One and the PS4. In line with the historical choices of these companies, these two new machines were clearly intended for experienced players and once again offered much higher performance levels than the Wii U. The arrival of these new-generation consoles was likely to make it even more difficult for Nintendo to convince new players. Engaged in a spiral of failure, deprived of publisher support and without games that exploited the Gamepad's potential, Nintendo’s management was trying to rely on the release of very popular games like Mario Kart or Super Smash Bros. in vain: in October 2016, the management made the failure official. Since its release four years ago, only 13.36 million copies of the Wii U have been sold. In the Japanese company’s offices, the focus is already on a new model that can erase this disappointment: the Switch. Announced in 2015 and presented in October 2016, this console was launched in March 2017 at a price of €300 (see Table 1.6). Nintendo’s management presents it as the first hybrid system, which can be used as a home console but also as a handheld. Indeed, the Switch includes several modules: a tablet associated with removable controllers, which allow mobile use, and a charging dock that can be connected to a television set. Thus connected, the Switch can also be used

Nintendo in the Pursuit of the Blue Ocean

17

as a home console; a player can easily start a game at home and continue it in mobile mode. To promote a nomadic mode, the games are offered in cartridges. This hybrid product is a real change in the history of the video game industry where manufacturers traditionally maintained strict boundaries between the “home consoles” and “handheld consoles” markets to avoid cannibalization phenomena. The element of risk is real for Nintendo, which has always been able to profitably exploit the mobile market, particularly with its Gameboy, DS and then 3DS consoles. However, since the arrival of Apple’s iPhone, this very profitable market for Nintendo has been challenged. In 2016, for the third year in a row, the Nintendo 3DS mobile phone recorded a drop in sales. Although the launch of the Switch raises many questions among shareholders and industry analysts, it has been a success. Fifteen days after the launch, 1.5 million Switch consoles had already been sold. The 10 million mark was reached after only nine months on the market. On December 31, 2017, Nintendo announced that the Switch had already exceeded the total sales of the Wii U with almost 15 million copies sold (see Table 1.6). Initially driven by successive game launches leveraging Nintendo’s successful licenses such as Super Mario Odyssey, Mario Kart 8 Deluxe and The Legend of Zelda: Breath of the Wild, the Switch is now attracting thirdparty publishers such as the giants Electronic Arts and Ubisoft.

Console

Launch date

Introductory price

Cumulative worldwide sales in millions of units 2013

2014

2015

2016

2017

Microsoft Xbox One

11/2013

499

3

11

20

22

31.5

Sony PS4

11/2013

399

4.4

19

36.7

53.4

70.6

Nintendo Wii U

12/2012

349

5.3

8.9

12.3

13.4

13.6

Nintendo Switch

03/2017

300

Table 1.6. Competition between 8th-generation consoles: some figures (source: based on data compiled by the authors, prices in euros)

14.9

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Innovation in the Cultural and Creative Industries

1.5. What lessons can be learned from Nintendo’s strategic directions? This case, presented over a relatively long period of time, offers a sufficiently long perspective to question the robustness of the Blue Ocean approach, in the light of Nintendo’s successes but also its failures. Nevertheless, some precautions should be taken. On one hand, since this is still an ongoing case, it is probably too early to draw definitive conclusions, particularly, of course, on the future of the Switch. On the other hand, if the references to the Blue Ocean strategy are relatively constant on the part of Nintendo’s management4, it is difficult for us to know to what extent the approach has actually been mobilized by the manufacturer’s teams. Moreover, if Kim and Mauborgne (or their assistants) demonstrate, in their writings, their interventions in large companies, they do not mention the Nintendo case. 1.5.1. The Nintendo Wii: a case study of Blue Ocean strategy? The commercial success of Wii has been widely interpreted as a typical illustration of a controlled Blue Ocean strategy (Hollensen 2008; Johnson et al. 2008; O’Gorman 2008; Bonneveux et al. 2010). In particular, two salient aspects make it possible to decipher this case in the light of the work of Kim and Mauborgne: the abandonment of the collectively established rules of the competitive game and a value proposition largely reviewed through four types of actions. First of all, for Kim and Mauborgne (2004, p. 37), the adoption of a Blue Ocean strategy implies a break with the “competitive rules” in force. We have already mentioned the five main rules that have governed the

4 The following verbatim account is an extract from an interview with Satoru Iwata, then CEO of Nintendo. It appeared in the magazine Venturebeat (June 9, 2009), offering a good example of this almost constant reference to the Blue Ocean. “Take the example of Wii Fit. When we talked about it two years ago, a lot of people thought the Wii Balance Board was crazy. They thought Nintendo would start selling a bathroom scale. But Wii Fit became a success because we saw a ‘blue ocean strategy’. But now a lot of companies are fighting in the red ocean of follow-up exercise games. When we introduced the Wii controller, we were in the blue ocean and this year is still the blue ocean. But the year 2010 may become the red ocean for motion-sensing controls, based on what Microsoft and Sony say. The advantage for Nintendo is that we always try to do things that other companies don’t try to do.”

Nintendo in the Pursuit of the Blue Ocean

19

development of this industry. These rules, which can be seen as “behavior specifications”, arise from interactions between organizations and gradually constitute shared representations. If we compare the Wii project to the current rules, it is quite easy to highlight its subversive nature. First, as the industry is driven by technology, each generation of consoles generally performs at a higher level than the previous one (the double power rule) and is based on increasingly complex and expensive technologies. However, the power of the Wii is far from reaching this level compared to the previous model. Then, to disseminate a new game console in a short period of time, manufacturers agree to sell their consoles at cost price and rely on the sale of dedicated games. Since the Wii largely incorporates older and less powerful components, its production cost is lower. So, while offering the lowest price, Nintendo can make margins from the start. This desire to keep the cost of the system to a minimum also forced Nintendo to significantly limit compatibility with other audio and video formats. Finally, manufacturers have become accustomed to targeting early adopters, who are very sensitive to novelty. With a less powerful console, it was not possible to target these individuals. The firm then turned to casual players and even non-players. Nintendo CEO Satoru Iwata’s words are clear on this point: “We have decided to follow a different path. Our objective is not to fight Sony or Microsoft to take their customers away from them, but rather to convert people who had not previously been interested in video games to video games” (Johnson et al. 2008, p. 607). Second, the service offered by Nintendo corresponds to a new “strategy canvas” (Figure 1.1). This tool, which is prominent in Kim and Mauborgne’s book, assesses the value proposition in terms of “competitive criteria and investment areas characteristic of the sector in question” (Kim and Mauborgne 2004, p. 31). Several authors have proposed a representation of this strategy canvas for the Wii. While the representations differ significantly, not least because the criteria taken into account are not identical, this work emphasizes the modification of Nintendo’s “value proposition” (O’Gorman, 2008; Hollensen, 2013). The manufacturer no longer offers a technical performance but a new playful experience thanks to its new controller.

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Innovation in the Cultural and Creative Industries

Traditional features

New features

High

Average

Weak DVD CPU High definition Motion sense Family User Price Hard disk integration power Connectivity controller oriented friendliness

: Nintendo

: Microsoft

: Sony

Figure 1.1. Analysis of the functionalities of 7th generation consoles (source: inspired by O'Gorman, 2008 and Hollensen, 2013). For a color version of this figure, see www.iste.co.uk/pellegrin/cultural.zip

For Kim and Mauborgne (2004), four typical actions lead to such an original positioning. These actions involve eliminating, reducing, raising or creating criteria that are characteristic of the sector. In our case, the exclusion and mitigation actions have allowed Nintendo to reduce design/production costs and thus offer a cheaper product while ensuring margins. At the same time, actions carried out to strengthen and create criteria were considered to increase the perceived value of the service. Unlike its competitors, Nintendo has abandoned the “race to performance” and designed an offer for a widely renewed audience. For example, in 2008, Nintendo introduced the Wii Fit, a foot pressure-sensitive board that determines the player’s center of gravity, weight, position and movement. This has allowed the development of fitness programs, balance games, etc., all market that had not previously been tapped by manufacturers. In the end, the analysis of the genesis and success of the Nintendo Wii seems to show how this case corresponds to a Blue Ocean strategy, characterized by the detection of untapped strategic space, the creation of new demand and extremely profitable growth. The undeniable success of the console even seems to reinforce the two authors’ thesis on the “three characteristics of a good strategy” (Kim and Maubogne 2008, p. 45). There is indeed a “focus” on a few criteria valued by the target audience, a

Nintendo in the Pursuit of the Blue Ocean

21

“divergence” from the strategy canvas proposed by the competitors and a “striking slogan” with a very original communication highlighting the playful and then useful side of the console, involving players a priori far from the world of video games (families, actresses like Michèle Laroque in France, etc.) and using new media for the sector (women’s press, media aimed at the elderly, etc.) (Bonneveux et al. 2010, p. 26). 1.5.2. Sailing on the blue ocean: how far? The Wii U console did not have the same fate as its predecessor. This failure is irrevocable and has been acknowledged by Nintendo’s management. Different questions then come to mind. Has Nintendo intentionally abandoned the Blue Ocean approach for a more conventional strategy? If so, why? If not, is Kim and Mauborgne’s approach robust enough to replicate previous successes? Various arguments lead us to put forward another hypothesis: Nintendo has inadvertently returned to the red ocean it had tried to leave with the Wii, due to unclear or insufficiently asserted strategic choices: – poor customer targeting; – an unsatisfactory attempt at technological convergence; – an unclear value proposition; – Nintendo’s inability to involve game developers in the new system. The Wii U project is a general attempt to expand the market exploited with the previous console. Satoru Iwata himself pointed out that this console could satisfy all types of audiences, including avid gamers5. The Gamepad was presented as both a “high-tech” and “fun” accessory, capable of bringing together all types of players. The reasons for this strategic choice are probably due to the relatively rapid decline of the Wii console. While Nintendo has discovered a blue ocean of casual players, it has proven to be a market with limited potential over the long term. This observation was extensively detailed by Satoru Iwata during the annual presentation of Nintendo’s results for 2012: Wii has managed to reach a wider audience, but we have not been able to retain new consumers. Nintendo has failed to set 5 Les Echos, June 9, 2011.

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Innovation in the Cultural and Creative Industries

up an adequate situation to encourage these new consumers to play frequently and over long periods of time.6 In other words, Nintendo found, with the Wii, that it was not enough to discover a blue ocean of new players to automatically induce high and above all sustainable growth. That is why the Wii U was designed to satisfy all types of players. The new console was therefore technologically more advanced (graphics quality, Wi-Fi connection, integrated camera, etc.) and comparable to the PS3 and Xbox360. But the equation turned out to be impossible to solve because gamers and casual players do not have the same expectations and it is difficult to offer a product that can meet both targets at an attractive price. As a result, price differences between competitors were narrowing and the selling price of the Wii U rose to €349 compared to €250 for the Wii. Moreover, as soon as the PS4 and Xbox One consoles were launched the following year, the Wii U experienced a significant technological decline. Gamers had undoubtedly anticipated this situation and preferred to postpone their purchase for consoles that they knew would better meet their needs. Casual players did not find in the Wii U the simplicity of use and userfriendliness of the Wii. They were disrupted by the Gamepad and the asymmetric gameplay it allowed. In fact, the value proposition developed for the Wii U proved to be very difficult for these players to identify. Many first thought that the Gamepad was an additional accessory for Wii, just as the Wii Fit could have been. Its usefulness was also challenged by players who essentially appreciated the detection of movements with the Wii and the possibility of mimicking certain gestures. Finally, the possibility of playing on the tablet screen while remaining close to the console (and therefore to the television) was hardly highlighted. To create a blue ocean, it is certainly necessary to offer a leap in value, but this must also be perceived by customers. Obviously neither gamers nor casual gamblers have understood this. On the other hand, given the aforementioned factors and the low sales volumes, game publishers did not follow Nintendo. For their part, it was the concept of asymmetric play that was the main problem. Since the Wii U was less powerful than its announced competitors, and had a new tablet, it was extremely difficult for publishers to develop cross-platform games. The dilemma of the “chicken and egg” disadvantaged Nintendo here. Very low 6 Nintendo, Financial Results Briefing for Fiscal Year, April 27, 2012.

Nintendo in the Pursuit of the Blue Ocean

23

console sales discouraged publishers from developing games. This position, in turn, frightened many potential buyers. Nintendo’s attempt to take over the development of new games through its publishing activity was not enough. Nintendo’s development teams themselves found it difficult to imagine asymmetric games for the tablet. In the Wii U version of the famous Mario Kart 8 racing game, the Gamepad was almost exclusively used to toot a horn! This observation illustrates the imperative need to know how to mobilize partners within a business ecosystem. Nintendo had successfully used its flagship products (Mario, Pokémon, etc.) offered by its own publishing subsidiary7 to launch its game catalog, in order to enable the distribution of Wii consoles. Second, the launch managed to reassure studios and game publishers. On the other hand, in the case of the Wii U project, the very early disappointing sales of the console and the inability of Nintendo teams to develop convincing asymmetric games, which could have been a proof of concept for game publishers, led them to postpone or even cancel dedicated projects. 1.5.3. The launch of the Switch: a return to the fundamentals of the Blue Ocean strategy? Today, the launch of the Switch is particularly successful. Some observers even believe that it could do better than the Wii, which sold 100 million copies. Can we understand this success of the Switch's launch and its original positioning as a return to a Blue Ocean approach? There are various indications that this may be the case. Shinya Takahashi, Nintendo’s CEO, says that: During its design, we wondered about the discovery of this blue ocean concerning our console. But the most important thing was to put ourselves in the players’ shoes. How could they find the Nintendo Switch useful and what would they like to do with it? In the end, maybe we managed to reach this famous ocean, but this was not our only concern.8 7 Nintendo was a very powerful publisher when the Wii began to be developed. In 2000, Nintendo published 6 of the 13 games that exceeded €25 million in turnover, including the top four in the ranking (the Pokémon series) (Natkin et al. 2002, p. 3). 8 Le point.fr, April 30, 2018.

24

Innovation in the Cultural and Creative Industries

Philippe Lavoué, Managing Director of Nintendo France, notes that Nintendo, which is smaller than its direct competitors (counting fewer than 5,000 employees), is trying to avoid direct competition with Sony and Microsoft by trying to create a Blue Ocean every time a new system is launched9. Obviously, Nintendo has learned from the failure of the Wii U. Unlike the previous system, Nintendo has been very careful to define a clear value proposition, target customers, and provide a game offer rich enough to accompany the launch of the system. Here are the ingredients that have contributed to the Wii’s commercial success and that are likely to explain the very encouraging debut of the Switch. First of all, the value proposition of the Switch is easy to understand. As was the case for Wii, this proposition is built around a few dimensions, focused on uses and not technologies: – mobility: that is, the possibility of starting a game on TV and ending it on the console; – simplicity: the “joy-con” controllers of the Switch, although very sophisticated (accelerometer, gyroscope, infrared camera, near-field communication reader), make it possible to handle the console in an extremely simple and intuitive manner; – a transgenerational experience: like the Wii console, children and adults can come together to play the Switch together. But Nintendo has taken this idea even further with the “joy-con”10. As for customers, Nintendo is no longer trying to appeal to hardcore gamers. The possibility of switching from one mode of use to another (visible in the choice of name) can be enhanced by a clientele that is increasingly reluctant to purchase a portable console at a time when smartphones are becoming widespread. The objective is no longer to attract seniors or non-players but to cleverly exploit a space at the convergence of two historical market segments, that of home consoles and that of portable consoles. Forgetting about the Wii Fit fitness programs and putting aside the asymmetrical family games of Wii U, with the Switch Nintendo returned to 9 Gameblog, December 26, 2017. 10 Nintendo developed a set of cardboard boards to cut, fold and assemble into game accessories for the Switch. With these additions, the manufacturer wished to attract children, who really liked its portable consoles.

Nintendo in the Pursuit of the Blue Ocean

25

the great classics of video games (races, action games, etc.) without abandoning movement recognition, which is now an essential feature in the world of video games and which allows the design of complementary products: “toy-cons” (guns, fishing rods, etc.). This attempt to exploit a new Blue Ocean is once again leading Nintendo to abandon rules of the competitive game which have been historically established. The failure of the Wii U made it necessary to accelerate the development of the next console (the Switch was announced less than three years later). The power of the new console remained significantly lower than that of its competitors. The use of cartridges limited the possibilities of compatibility with other electronic products. Finally, to support the launch of its system, Nintendo recalled a basic principle of the video game industry: having “hits” is essential to sell a system without good games. With Zelda: Breath of The Wild and Super Mario Odyssey, Nintendo counted on two games that were attractive enough to trigger the purchase of the system. 1.6. Conclusion The objective of this chapter was to discuss the scope and limitations of Blue Ocean strategies in a particular creative industry, that is, video games. After a review of the work of Kim and Mauborgne, who started this type of strategic approach, we proposed a historical study of the strategies deployed by the console manufacturer Nintendo. This study showed that Nintendo developed a Blue Ocean strategy with the Wii and that this has led to a spectacular recovery. However, the events that have occurred since 2010, and in particular the resounding failure of its Wii U model, raise questions. In their book, Kim and Mauborgne (2004) write that in most cases the company behind the Blue Ocean strategy can maintain a competitive advantage for 10 to 15 years. They add (Kim and Mauborgne 2004, p. 216) that the rapid imitation of a Blue Ocean strategy is very rare. These claims must be put into perspective, to say the least, in view of Nintendo’s situation from 2010 onwards. Two main questions then emerge from the case analysis. How can we explain the short duration of the competitive advantage obtained in the Wii project? Why did the industry players (publishers, studios, etc.) agree to participate in the Wii and Switch projects, and not in the Wii U project?

26

Innovation in the Cultural and Creative Industries

The duration of the competitive advantage depends on the reaction of competitors (itself related to their ability to imitate the performance of the innovative firm) and the intrinsic potential of the Blue Ocean discovered. It should be noted here that the video game sector corresponds to a situation where competitors quickly succeed in developing technologies that offer the same functionalities to players and thus seek to benefit in turn from the innovations introduced by pioneering firms. After inventing the Wii Remote, Nintendo was quickly imitated by its two competitors Microsoft and Sony. In such a situation of ephemeral competitive advantage, there arises the issue of moving “from one ocean to another” or simultaneously managing the red and blue oceans. Moingeon and Ortega (2010) highlighted the difficulty of moving from the old to the new business model or the difficulty of having two coexisting business models. In the case analyzed here, Nintendo first made a transition from its dominant business model to a Blue Ocean by abandoning historical industry rules. Subsequently, realizing that competitors were inviting themselves into the Blue Ocean and cutting back on their positions, the Japanese company tried, with the Wii U, not only to continue exploiting the Blue Ocean it had created, but also to reposition itself in the heart of the hardcore gamers’ market. This strategy proved to be very difficult to implement. As for the second point, it should be recalled that in an industry such as video games, the usefulness of a console depends on the number of dedicated games, and more broadly on the offer of complementary products. However, abandoning the rules collectively accepted by a console designer can strongly destabilize the supply chain. By abandoning the double power rule (many professionals believed that the Wii was 1.5 times more powerful than the previous generation), Nintendo made it more difficult for studios and publishers to easily adapt the successful games of the Xbox 360 and PS3 for this console. These difficulties were clearly too hard to overcome with the proposal for asymmetric games on which the Wii U was based. The challenge for an innovative firm that offers a platform is to convince the “complementors” to follow it. Kim and Mauborgne do not offer precise answers on this point. In the case of Nintendo, two characteristics seem to have played in favor of legitimizing the Wii and Switch projects vis-à-vis publishers. First of all, the company is a long-standing player in the field, it has made a major contribution to the development of the industry, and it has (for the Switch) extensive experience in the handheld console market. Thus, Nintendo was able to use its flagship products (Mario, Zelda, Pokémon, etc.) offered by its own publishing subsidiary to enrich its catalogue of games so

Nintendo in the Pursuit of the Blue Ocean

27

that the console could be distributed. In a second step, the successful launch reassured studios and game publishers. It should be noted here that Nintendo’s huge catalog dedicated to its historic handheld consoles (Gameboy, DS) probably played a key role in the launch of the Switch. On the other hand, in the case of the Wii U project, the very quickly disappointing sales of the console and Nintendo’s inability to offer games with asymmetrical gameplay prompted game publishers to postpone or even cancel dedicated projects. At the end of this chapter, it is thus possible to make three main recommendations for people engaged in innovation strategies, particularly in the creative industries: 1) a sector of activity operates according to collectively constructed and accepted rules of the game. Uncovering these rules is sometimes difficult because they are deeply rooted in the minds of the actors and taken for granted. But questioning their renewal makes it possible to consider possible avenues that could lead to Blue Ocean strategies; 2) once a Blue Ocean is discovered, it seems crucial to evaluate its potential and the interest of “navigating” it over a long period of time because the simultaneous exploitation of different oceans is very delicate; 3) in many cases, innovation can only be achieved if links can be created between different actors: industrial partners, complementary service providers, distributors, prescribers, etc. The development of a Blue Ocean strategy then implies a reflection on the capacity of an innovative firm to encourage these actors to support its project. 1.7. References Arthur, B. (1988). Competing technologies: An overview. In Technical Change and Economic Theory, Dosi, G. et al. (eds). Pinter Publishers, London, 590–607. Aurégan, P., Tellier, A. (2009). La modification des règles du jeu sectoriel : Le cas de l’industrie du jeu vidéo. Revue Française de Gestion, 35(197), 127–145. Aurégan, P., Loilier, T., Le Vigoureux, F., Tellier, A. (2015). Le changement stratégique est-il “soluble dans l’océan bleu”? Une analyse critique des travaux de Kim et Mauborgne. Économies et Sociétés, Série K “Économie de l’Entreprise”, 23(1), 83–110. Beau, F., Forsans, E., Michaud, L., Puissochet, A. (2007). L’innovation et la R&D dans l’industrie française du jeu vidéo. Synthesis Report, French Ministry of the Economy, Finances and Industry, IDATE, DGE.

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Benghozi, P.J., Chantepie, P. (2017). Jeux vidéos, l’industrie culturelle du siècle. Presses de la Fondation nationale des sciences politiques, Paris.

e

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Bonneveux, E., Le Saout, E., Soparnot, R. (2010). Nintendo : Remis à flot avec la Wii. Revue des cas en gestion, 3, 23–34. Christensen, C.M. (1997). The Innovator’s Dilemma: When New Technologies Cause Great Firms to Fail. Harvard Business School Press, Boston. Daidj, N., Isckia, T. (2009). Entering the economic models of game console manufacturers. Communications & Strategy, 73, 23–42. Friès, F. (2003). Propositions pour développer l’industrie du jeu vidéo en France. Report for the French Ministry of Economy, Finances and Industry. Hollensen, S. (2013). The Blue Ocean that disappeared – the case of Nintendo Wii. Journal of Business Strategy, 34(5), 25–35. IDATE (2014). Available: https://fr.idate.org/idate-consulting/notre-expertise/jeuxvideos/. IDATE (2017). Available: https://fr.idate.org/produit/marche-mondial-jeu-videodataset-rapport/. Johnson, G., Scholes, K., Whittington, R., Fréry, F. (2008). Stratégique. Pearson, Montreuil. Kim, W.C., Mauborgne, R. (2004). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press, Boston. Kim, W.C., Mauborgne, R. (2017). Blue Ocean Shift: Beyond Competing - Proven Steps to Inspire Confidence and Seize New Growth, Hachette Books, New York. Le Diberder, A., Le Diberder, F. (2002). La création de jeux vidéo en France en 2001. Développement Culturel (139), Direction de l’administration générale, Département des études et de la prospective. Moingeon, B., Lehmann-Ortega, L. (2010). Genèse et Déploiement d’un Nouveau Business Model : l’Étude d’un Cas Désarmant. M@n@gement, 13(4), 266–297. Natkin, S., Le Prado, C., Gal, V., Vega, L. (2002). Quelques aspects de l’économie du jeu vidéo. Journées d’études ‘jeu et socialisation’, Paris, December. O’Gorman, P. (2008). Wii: Creating a Blue Ocean. The Nintendo Way. Palermo Business Review, 2, 97–107. Porter, M.E. (1985). Competitive Advantage. The Free Press, New York. Schilling, M. (2003). Technological leapfrogging: Lessons from the U.S. video game console industry. California Management Review, 45(3), 6–32.

2 Omnichannel Innovations in the Bookstore Business: The Case of the Libraires Ensemble Group

2.1. Introduction “Fnac ejected from the top 3 most visited e-commerce sites in the second quarter of 2018”1. This was the headline presented by the magazine LSA in its article on the latest e-commerce figures released in September 2018 by the Fevad (e-commerce federation and distance selling) and the Médiamétrie barometer. The Fnac-Darty group’s site was overtaken in this ranking by Vente-Privée, which took third place, behind Amazon and Cdiscount. Beyond this announced underperformance, it is striking to note that among the best audiences, there are sites where books occupy an important place. Amazon made its debut in e-commerce in 1995 in the United States by selling books and has since then continued to develop in this sector with e-books through Kindle and the publication of authors via its dedicated platform. Fnac is obviously not to be outdone, since it was ranked as the leading specialist chain by the magazine Livres Hebdo with book sales of more than €500 million in 2017 generated by its online sales site and its 165 stores. Together, Amazon and Fnac account for nearly 90% of online book

Chapter written by Carole POIREL. 1 [Online]. Available at: https://www.lsa-conso.fr/la-fnac-ejectee-du-top-3-des-sites-e-commerceles-plus-visites-au-t2-2018,296111 [Accessed September 20, 2018].

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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sales. What about independent booksellers who position themselves in the book trade primarily through their physical stores? To avoid losing customers or appearing commercially obsolete compared to other brands, self-employed people are developing their online presence and increasingly connecting their bookshops to the Internet. This allows them to take advantage of the complementarities between physical and virtual businesses that consumers seek and appreciate. In other words, independent booksellers are also involved in so-called multichannel strategies and innovations. Omnichannel means coordinated management of different distribution channels and contact points, so that consumers can move seamlessly from one channel to another at any time during the purchasing process and the company can achieve better performance (Verhoef et al. 2015). In this chapter, we look at how independent booksellers have been grasping omnichannel logics in recent years: developing an e-commerce site, reinventing their store, creating a Facebook page, advertising book signings on smartphones, etc. In short, as Barba said in his book on connected commerce, it is a question of how to “develop a multimodal store that is permanently accessible and meets the customer’s needs to order wherever he wants, whenever he wants” (Barba, 2011, p. 91), bearing in mind two specificities of the sector studied. On the one hand, there are a large number of references with more than 700,000 reputed titles available and more than 45,000 new books every year. On the other hand, publishers who legally fix the selling price limit a retailer’s pricing policy to granting a maximum discount of 5% to individuals for new books and activate services as competitive levers. We have chosen to study a group of independent booksellers, called Libraires Ensemble, which has distinguished itself by its strategic choices in favor of the omnichannel approach since 2015. The resulting analysis of innovation is therefore part of a specific organizational framework, that is, the retail cooperative. Omnichannel innovation takes on a collective dimension in this case. Thus, our problem intersects both strategic and organizational aspects. To be even more precise, this analysis focuses more on “how independent booksellers have innovated” than on “why they did it”. It is structured into five main sections: a literature review (section 2.2) and a brief overview of the methodology used (section 2.3) precede a presentation of the

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independent bookstore sector (section 2.4). Then the analysis of the group’s strategy is introduced (section 2.5), followed by a feedback on the main concepts and best practices (section 2.6). 2.2. The transition from multichannel to omnichannel: a strategic innovation Developing consumers in a world of connected commerce requires companies to make a number of technological investments in Internet use, mobile telephony, payment systems, geolocation processes, database development, etc. The target is the information technology field in the broadest sense, encompassing both software and hardware, system security and tool interoperability. These technologies have made it possible to introduce customer relationship management tools (CRM) that support companies in the implementation of their multichannel devices (storage and automated processing of customer data, message routing) and in achieving optimal consumer satisfaction objectives (Volle et al. 2012). While these technologies are necessary because they make omnichannel achievements possible, they only make sense if they are integrated into an overall strategic approach. The latter aims to move from multichannel approaches, where channels are juxtaposed, to omnichannel approaches, characterized by an assembly of channels into a single distribution system that promotes customer transfer (Vanheems 2009). To move from multichannel to omnichannel, a paradigm shift which invites companies to think of omnichannel innovation as a strategic innovation is needed (Verhoef et al. 2015). The entire supply system needs to be revisited with a global marketing analysis of the different elements of the mixture as well as an organizational analysis of how to achieve the new value proposition under the best cost conditions. In other words, a new business model must be developed in the sense of Lecocq et al. (2006), covering the distribution and marketing functions and beyond that all the company’s services (information system, human resources, finance, logistics, etc.). A company is led to transform to provide customers with an optimal experience. This is the objective assigned to omnichannel management, which Verhoef et al. (2015) particularly emphasize. The customer experience that can be defined according to Carteron (2013, p. 29) as “the way in which a consumer perceives his interactions with the brand or with the brand” takes into account the entire supply system designed in a holistic vision to embody the attributes of the brand such as:

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Practicality (recognition and memorization of past experiences), guarantee (assurance of a standard of performance regardless of the place of purchase), personalization (identification and projection process), playfulness (pleasure experienced) and specificity (signature of a unique configuration of attributes). This transformation is not only desirable, but essential: on the one hand, because connected commerce has become the rule for consumers who appreciate the complementarities between the Internet and a store, and increasingly use their smartphones and social networks to learn about the existing offer and buy products; on the other hand, because multichannel behaviors make consumers both more dependent on and loyal to a brand or trademark. In the literature, several authors have emphasized that the transition from multi- to omnichannel involves several stages (including recently (Berman and Thelen 2018). While the starting point is a multichannel distribution characterized by a silo organization in which each channel operates independently of the others, the end point is an integrated organization where the consumer experiences a fluid and satisfying experience through a set of seamless channels. Moving from one to the other is a transformational process fraught with obstacles: the emergence of conflicts between channels, the risk of one channel cannibalizing another, the increased distribution costs inherent in technological investments, and consumer disappointment with unfulfilled marketing promises (Rosenbloom 2007). To overcome them, three lines of action seem crucial: – information management; – the harmonization of marketing policies; – logistics management. An important step towards the integration of distribution channels is first and foremost the centralization of customer information gleaned from the various channels. As shown for the bank Helfer and Michel (2006), clients do not want to be treated in a fragmented way by a brand or a trademark, as they desire to receive a complete service upon each contact, thanks to a kind of “one-stop shop” capable of answering all their questions. For a company, the issue is then to have a single view of consumers by creating a common database, allowing each channel to effectively monitor a transaction but

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above all to improve the understanding of their behavior in order to offer them the appropriate services. The development of the Internet makes it possible to rely on more than just the information written on a receipt, for example collecting dated declarative data included in a satisfaction questionnaire as well as behavioral data such as product sheets consulted on a site, items placed in a basket and not yet purchased, reactions to offers sent by e-mail, etc. For the company, the difficulty lies in the collection rather than in the analysis of data, given their abundance (Volle et al. 2012). The harmonization of marketing policies is another area of integration of distribution channels. For the company, it is not necessarily a question of ensuring that all channels have the same assortment, price, service and promotion policies. A differentiated marketing strategy that directs consumers to specific channels based on products and services can be more effective in reaching consumers (Isaac and Volle 2011). An e-commerce site thus makes it possible to offer a wider and deeper assortment than in stores, offering additional display space for goods unless the company opts, on the contrary, for a smaller online selection than in stores for products that are less easily suitable for e-commerce due to high logistics costs (weight/volume/price ratio) or the need to test a product. Differences in prices and services exist between channels due to differences in cost structures and the principles of organization and management of each channel. This can result in a multiplication of offers through different channels leading to inconsistent proposals that are detrimental to the company’s image, namely different prices quoted for the same products, combined with equally different levels of service, for example when the price of a trip to a hotel club abroad, found on the Internet, varies from the price received by mail and that quoted at an agency. In an omnichannel system, consumers benefit from a transparent experience based on a unique loyalty program (Berman and Thelen 2018). Channels are aware of purchase profiles and histories, which allows them to provide sound advice and make a number of suggestions to consumers. Joint promotions are possible with smartphone notifications, which encourage consumers to visit stores, or when sellers invite consumers to buy exclusive web products online or out of stock in stores. Mobile marketing allows consumers to be informed in real time about flash sales, discounts or vouchers in stores depending on their geographical location. More personalized and interactive marketing thus makes it possible to improve the performance of sales and promotional actions.

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Logistics forms a third axis of integration of distribution channels. Although often overlooked in academic research, as Galipoglu et al. (2018) complain at the end of their state-of-the-art article about omnichannel distribution, logistics remains just as important as the previous axes, making it possible to move from a marketing promise to its implementation, that is to supply stores with sufficient quantities to ensure the immediate availability of products, to deliver quickly at home without prohibitive prices, to offer different delivery methods (home, in-store, relay points), to allow the traceability of outbound and return packages, etc. However, logistics schemes designed to supply stores are based on the massification of flows, while e-commerce delivering to consumers follows the logic of dispersing flows, creating urban logistics and last mile delivery problems (Chanut and Paché 2013). In the 2000s, companies like Fnac, which added an e-commerce site to their physical networks in a “click & mortar” approach, initially did so by creating a new logistics organization serving Internet users from a new stock clearly distinguished from the central stock, which already existed and supplied the stores (Poirel and Bonet 2008). To reduce costs and satisfy consumers who want to cross channels (order online and pick up in store, order in store and receive at home), logistics integration has become essential. It involves, according to Paché et al. (2014, p. 57), “coordinating the supply chains associated with the different channels in order to set up common nodes (warehouses, regional depots, platforms)”. Stores have an important place and role in an omnichannel distribution system. While the Internet may have led us to fear their disappearance, it has instead created an opportunity to modernize stores (Barba 2011). Considering online presence as a means of creating in-store traffic (web-tostore) is now something accepted by most brands (Isaac and Volle 2011). Vanheems’ work (2012; or in collaboration with Bouzid 2014; with CollinLachaud 2016) in particular focused on the need to reinvent the point of sale for consumers who are used to learning about the web first and then buying in stores (or ROPO, i.e. research online and purchase offline). On the one hand, these consumers are over-informed when they face sellers, who do not intervene to advise but to finalize the transaction by eliminating the last reservations. Therefore, the sellers must adapt by dealing with a decisionmaking process that has already been initiated and is underway and by embodying the brand in a reinsurance relationship. On the other hand, these consumers know what they have come to buy in stores and have a shopping plan. Their purchase is planned. Thus, the store must allow them to make other discoveries and facilitate their movement in the sales area by guiding

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them along the shelves through interactive terminals for example. The store must also agree to serve only as a logistical basis for the collection of orders placed online, even if additional sales are still possible. Finally, the point of sale reinvents itself by integrating the Internet into its walls (web-in-store). It should be noted in the latest figures from the Fevad (2018) that smartphones are used by a growing number of consumers inside the store (60% of Internet users had a mobile in 2017) to compare prices (28% of them), to take a picture of a product and then share it (25%) or to receive advice (22%). With the web-in-store, a store provides customers with terminals, tablets, screens, tables or touch walls. The use of mobile technologies requires a thorough rethinking of the location of a store, an investment in equipment and information systems, and an understanding of the functionalities and services that a brand wishes to provide to customers. 2.3. Research methodology We conducted a unique case study on the Libraires Ensemble group. A case study is a qualitative research method that allows an in-depth analysis of a strategy to identify all its facets and its paradoxical nature. This group was chosen for the omnichannel devices it developed for its members in a pioneering way in the book trade. There are currently 54 bookstores, all of which also sell stationery and some of which have CDs and DVDs. They are located in major urban centers outside Paris. The group has existed since 2001, when it was created by the disillusioned booksellers of the Plein Ciel group which they had joined. It operates as a cooperative of retailers in the form of an association under the 1901 law, with nine directors (including a president, a vicepresident and a treasurer) and two employees, one responsible for communication and marketing, the other responsible for the application of the general policy of the group. It has a cumulative turnover of €100 million. The smallest bookshop has a turnover of €800,000 and the largest €5 million. The sales areas range from 150 m² to 1,500 m². Members contribute 0.15% of their turnover to the group. A portal site offers the full range of members’ offers, that is, more than 340,000 titles with the possibility of ordering and paying online for customers and collecting in store or having items delivered at home. The group does not have its own stock in terms of logistics. Each bookstore has a stock from which it serves its customers online and in store. Regarding multichannel, members adopted

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a common customer strategy in 2015, which involved coordinating different channels based on a customer loyalty program: physical bookshop, website, mobile application, and social networks. After the adoption of a common management software (Infocentre) in 2012, which enabled the feedback of customer data from the various bookstores within a single database, a CRM tool was gradually deployed throughout the network from June 2017 after a test phase on pilot stores in 2016. With regard to data collection, we have gathered various documentary sources: press articles mainly from the professional journal Livres Hebdo and reports or studies carried out on the independent bookshop. We took part in two professional conferences: one in February 2017 on bookstore sharing, which was organized in Toulouse by the Université Jean-Jaurès and the Centre régional des lettres in Midi-Pyrénées, and the other in June 2017 for the Rencontres nationales de la librairie, organized by the Syndicat de la librairie française in La Rochelle. In addition to this secondary data, we also conducted two semi-structured interviews in the summer of 2018 with two professionals working for the Libraires Ensemble group. The topics discussed were the functions of each member of the group, the group’s progress in terms of omnichanneling and the members’ opinions in terms of reports, difficulties encountered and prospects. With regard to data analysis, the interviews were fully transcribed, and each lasted approximately two hours. Each interview and documentary source was treated according to the principles of thematic content analysis (Bardin 2013). Then, the identified themes were brought together for comparison. The result was the identification of four main themes: resource pooling, professional identity, the favored web-to-store model, and the sharing of responsibilities between bookstores and groups. These are presented in detail in the section devoted to the analysis of the strategy. Before presenting this topic, we propose to first review the characteristics of bookstores as an industry. 2.4. A presentation of the bookstore sector The bookstore sector in France is characterized by a large number of small independent shops. The Lang Law on the Single Book Price, passed on August 10, 1981, contributes to this fragmented sectoral structure in that it prohibits price competition between retailers and thereby limits commercial concentration without removing it. This is evidenced by the presence of

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major brands such as Fnac, Amazon, Cultura, Espace Culturel Leclerc, Gibert Joseph, Decitre, etc. Book sales is the main activity carried out at around 3,000 points of sale, but the figure falls to 800 in surveys conducted on the sector (Xerfi 2011) and according to the commercial segmentation criteria used by publishing, reflecting the most professional nature of the bookstore portfolio. In the latest ranking of the top 400 bookstores carried out annually by LivresHebdo, the largest Joseph Gibert store located on Boulevard Saint-Michel in Paris makes a profit of nearly €35 million in book sales. From the 100th bookstore, the amount of turnover falls below €2 million and from the 200th, below €1 million. The last classified bookshop clears less than €400,000 per year, but it is not one of the smallest structures. The surveys mentioned above include bookshops with a turnover of less than €300,000. And the latter are numerous enough to constitute a category in its own right of “small bookstores” next to the “large bookstores” which make more than €1 million in annual sales and the “medium-sized bookstores” which fall between these two thresholds. In 2017, bookshops as a whole achieved a market share of 22%, behind cultural superstores but ahead of Internet sales and hypermarkets (see Box 2.1). The book trade is shared in a relatively balanced way between the different channels, which has been a constant in France since the law on the single price. – Bookstores (all networks combined): 22%; - large bookshops, department store bookshops, specialized bookshops: 18.5%. - press houses, book and stationery shops, news-stands, stations, airports: 3.5%. – Specialized cultural supermarkets: 25.5%. – Non-specialized supermarkets: 19%. – Internet sales (all networks combined, including mail order: clubs): 20%. – Mail order, brokerage and clubs (excluding Internet): 9.5%. – Others (discounters, schools, markets, fairs, garden centers, etc.): 4%. Box 2.1. Distribution channels for printed books in 2017 (source: multiclient barometer Book purchases, Kantar-TNS Sofrespour MC-SLLL/OEL, a panel of 3,000 people aged 15 and over)

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However, the economic importance of bookstores is decreasing over the long term, for two main reasons (Chabault 2014): first, the disaffection of the French with the culture of the written word, with a decrease in the number of avid readers who read more than 20 books per year in favor of the screen culture fueled by the arrival of new devices such as the iPhone and the Kindle in 2007, then the iPad in 2010; then, competition from other distribution channels, first from GSS (supermarkets) and hypermarkets in the 1970s and 1980s, then from e-commerce in the 2000s with brands like Amazon and Fnac.com, which together account for almost all online sales of printed books. E-commerce is a major issue for bookstores (Chabault 2013). It has not only enabled new players like the GAFAs (Google, Apple, Facebook, Amazon), whose economic power is well known, to enter and develop in the book trade. It has also made it possible to attract consumers in the long term for the services e-commerce provides in terms of catalog consultation and access to the retail space. Amazon’s arrival has revolutionized the way books were sold from the mid-1990s onwards in comparison with bookstores: an exhaustive offer thanks to expandable virtual shelving and a market place, a system of book recommendations calculated by algorithms and complemented by the opinions of other customers, and rapid delivery in 48 hours. Like other cultural products, books sell very well on the Internet. In 2017, while Internet sales accounted for 8.5% of retail trade overall, the percentage rose to 45% for cultural goods, both physical and virtual (Fevad 2018). Customers of independent bookstores have developed multichannel behaviors, as have an increasing number of consumers. A study carried out in 2013 (ObSoCo 2013) revealed that customers who claimed to be very attached to bookshops did not, however, make most of their purchases there, using online sales systems in a complementary way. Thus, “eclectic avid readers”, who read and buy many books in all channels, are particularly accustomed to this type of behavior, since they constitute a quarter of the bookstores’ buyers and they are responsible for a third of the purchases made there. “Loyal conservatives”, who are equally important for bookstores from an economic standpoint, are less inclined to adopt a multichannel approach, but they are older than average. The youngest customers loyal to bookshops, that is, the “technological faithful followers”, are fewer (15% of customers), buy less than the others (15% of sales), and especially like the digital world and its uses.

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While the largest independent bookstores quickly converted to online sales by creating their own e-commerce sites, small and medium-sized bookstores waited several years, in vain, for a common portal to be set up. This portal, named 1001Libraires.com, was launched in spring 2011 under the aegis of the Syndicat de la librairie française but only operated for one year because of the complexity of the strategic and organizational choices inherent in such a project (Poirel 2015). Since then, several solutions have been available to booksellers who wished to develop an online presence, either from IT services companies (Tite-Live, for example) or booksellers who have developed a digital services activity (such as leslibraires.fr of the Dialogues bookshop in Brest). E-commerce is also the preferred method of distributing e-books. Their sale in physical stores via interactive terminals has not given encouraging results. But the digital migration has not been as complete and abrupt for books as for music and films, with e-books accounting for only 5% of the market. Bookshops that have an e-commerce site may offer e-books in addition to printed books, but they do not represent a privileged distribution channel for these products. The brands that combine online stores, reading media and computer files in a single ecosystem (Kindle at Amazon, Kobo at Fnac, iPad at Apple), make it easier for consumers to use e-books and seem to be used preferentially in this respect (Benhamou 2014). Compared to other distribution channels, bookstores have a competitive advantage based on a diversified assortment, the presence of specialized salesmen, and a policy that involves presenting the collections both in and outside stores according to the various literary and cultural events in a city. In a summary note prepared for the 2017 national bookstore meetings, the GfK Institute indicated that the weight of bookstores was particularly high (47–48% of the turnover) for references that counted fewer than 1,000 sold copies. At the beginning of the literary year in 2016, out of 600 titles identified, bookstores accounted for an average of 56% of the total sales of novels, with several of them accounting for 70%. The economic equation remains fragile and delicate. Despite the high commercial margin rate, between 30% and 35%, the average profit is only €0.60 per €100 of sales (Xerfi 2011). The weight of the wage bill, the cost of renting in the city center, and the maintenance of slow-moving books in stock are the main factors responsible for this.

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Independent bookstores also compete with other distribution channels to obtain from suppliers discounts that contribute to their profitability. In addition to quantitative discounts, qualitative discounts are granted to retailers by publishers and their distributors for the launch of new products and the promotion of catalogs. These discounts are particularly sought by independent bookstores for the bookstore-diversity services they provide to publishing. Moreover, they are regularly supported to this end by the public authorities, which have thus stipulated through the Lang law that qualitative discounts are greater than quantitative discounts. In 1991, the state appointed a book mediator to establish an interprofessional protocol defining the criteria for qualitative discounts and then appointed a new one in 2014 after the implementation of a government support plan for bookshops following the 2008 crisis. More aware of the threats facing bookshops, publishers have given them their economic support, collectively through the ADELC (Association développement de la librairie de création) and individually through an increase in discounts. However, in a market that is not growing much and that is shifting in favor of online operators, with or without a physical network, the distribution of value generates, through the battle for discounts, a rivalry between retailers whose arbitration is partly up to the publishers. 2.5. The analysis of the innovative strategy2 Compared to other bookstores engaged in omnichannel management, this group differs in that it dematerializes loyalty cards, which make it possible to link channels and bring more fluidity to customers in their purchasing processes. As indicated in Box 2.2, multichannel devices have “simple features” that allow customers to find information about bookstores, books and activities as well as their personal space online. They also have “driving functionalities” that combine physical and virtual commerce following a web-to-store type of logic as well as “bonus functionalities” using mcommerce and s-commerce, to distribute content and communicate about non-commercial aspects.

2 In this section, we quote three professionals (noted #1, #2, #3). Two of them were our preferred respondents, in an individual interview prepared in advance (#2, #3). The comments of the third were not made during a one-to-one meeting but at a conference that we recorded for later transcription (#1).

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Simple features and functions – Location of bookshops on the site (information on opening hours and services offered). – Display of sales prices. – Information on products and reading tips (firm favorites, seasonal catalogs, etc.). – Online access to the customer area (voucher, history, events, etc.). Engine functions – Online consultation of the availability of products in stores. – Collection of products in store and at relay points after ordering and online payment. Bonus Features – Enhanced content: videos, reading guides, newsletters. – Integration of social networks: Facebook, Twitter. – Mobile integration: personal customer account access, notifications, geolocation. Box 2.2. Omnichannel devices of bookshops belonging to Libraires Ensemble

Thus, loyalty card customers benefit from a personalized area on the website that contains their purchase history, vouchers (limited to 5% of a book price), recommendations and event notifications. The newsletters, sent twice a month, are also personalized. A mobile phone application not only allows customers to access their personal account as they wish, but also to receive, when they are nearby, specific information from the bookshop about meetings, promotional offers and vouchers. This customer relationship management allows a business to: Maintain a relationship with a customer and talk to him about his own interests... whereas he usually comes to the bookstore and then no one talks to him after a while. The loyalty card makes it possible to maintain dialogue, and the connected business [as a whole] can bring the customer back into the bookstore. (#1)

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Content is created and shared by network bookstores. In September 2018, a 116-page guide offered clients a selection of 100 titles from the 567 novels published in the new literary season. “Fifteen days after being posted on the group’s Facebook page, it had been shared more than fifty times by member booksellers, publishers and customers” (#3). Contests are also organized on social networks, “the winners of which come to the bookstore to pick up their books, and agree to be photographed and to appear on the Facebook page” (#3). In addition, videos that recall the Blouses Roses sponsorship operation, conducted in 2016, are available online: A €25 000 donation has been made by the group to create Blouses Roses committees. [...] Fifty books signed by their authors were chosen and bought by the customers of member bookstores, who gave them to patients. For booksellers, it was a question of doing something meaningful in a charitable rather than commercial sense. This is unusual for the bookstore. And the partners are new. (#1) The omnichannel devices described are not part of something that Libraires Ensemble invented out of nothing. They also existed in other companies and in other sectors of activity. In particular, Amazon and Fnac, in the book trade, have adopted CRM principles. The Dialogues bookstore in Brest, which is also an online service provider for all French bookstores under the brand name leslibraires.fr, was a pioneer in CRM, experimenting with targeted promotional campaigns in 2011 (Livres Hebdo April 15, 2016). For one of our interlocutors, “Libraires Ensemble are bookstores that operate like brands” (#2). The innovative character lies in the import and adaptation of a managerial approach to the bookstore. One of the service providers (Diffuzia) through which the group develops its strategy at the operational level, states that “his method, widely used by retailers, is not innovative but [that] it allows independent booksellers and their uniqueness to adopt this type of practice” (Livres Hebdo, no. 1135, June 23, 2017, p. 23). The results of our case study allow us to assess this singularity from two angles: on the one hand, the role of the associated network as an organizational form in the implementation of the omnichannel strategy (section 2.5.1) and, on the other hand, the characteristics of the adapted omnichannel model that the group has achieved (section 2.5.2).

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2.5.1. The role of networks in the omnichannel strategy Compared to an integrated form of stores such as Fnac or Decitre, for example, an associated form freely brings together retailers within a network. Retailers are free to join, participate in one service and refuse another and ultimately leave. In an integrated form, retailers are salaried employees of the network, and they are constrained by strategic and operational decisions taken by their management. Consequently, the multichannel devices developed in bookstores together reflect the vitality of the network and its appeal to independent retailers. Thus, on the eve of the announcement of its new customer strategy in 2015, the group had recruited 12 new members, bringing the total number up to 49 (Livres Hebdo, February 6, 2015). According to one of our respondents (#2), the group currently includes 54 bookstores for 47 members, losing in the meantime, on the one hand, the Dialogues bookstore, which left in 2016 to create its own CRM, Fidélivres, and on the other hand the Masséna bookstore, which is finally uncomfortable with the group’s bookstore-stationers’ shop policy. As an organizational form, an associated network allows the multichannel strategy to be deployed, and this in turn strengthens the network by making it even more attractive. It seems to us that these virtuous relationships between organization and strategy are based on two different springs, an economic one concerning the pooling of resources, and a cultural one, responsible for sharing the same professional identity. 2.5.1.1. For the pooling of resources A network enables self-employed people in general, beyond the omnichannel approach, to carry out several actions that they alone could not have envisaged. By mutualization, we mean the voluntary pooling of financial and material means, information, and skills in order to obtain economic, ecological, financial and image gains (Chanut and Paché 2013). In terms of omnichannel, what matters are the technological and human investments that enable everyone to be trained and supported in the use of new tools, as highlighted by Livres Hebdo in an article devoted in 2018 to “techno-bookstores”, that is, booksellers engaged in CRM-type approaches (Livres Hebdo, no. 1174, May 18, 2018). For Libraires Ensemble, the amount invested by the group would have amounted to €100 000 (Livres Hebdo, October 28, 2016) for a complete service, carried out in partnership with a service provider, that involved dematerializing loyalty cards, geolocating customers, and sending ads to each customer account. At

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present, it would cost each user of the service between €800 and €1000 per year (#2). Management is another area in which the group requires points of sale to provide balance sheets and profit and loss accounts in order to analyze their economic situation and draw lessons both collectively and individually, with a view to possible assistance. As specified by the respondents (#2, #3), this can be achieved by mobilizing internal skills (the employees of the group or bookstore members who are aware of the problems encountered) or external skills (specialized service providers used by the group for these management analyses). The network also uses its economic weight to obtain better rates from insurers, bankers and accountants in particular (#2), making it possible to reduce external charges, which account for between 10% and 13% of turnover (Xerfi 2011). It appears that the group that has favored communication and management in these mutualization practices since its creation was ready to invest in customer relationship management, which bridges the gap between these two areas. For Jean-Michel Blanc, President of Libraires Ensemble and manager of the Ravy bookshop in Quimper, “the progress of new technologies has pushed us to shift and deepen our mutualization practices” (Livres Hebdo, no. 1176, June1, 2018, p. 22). 2.5.1.2. For professional identity The Libraires Ensemble group has seemed attached to the values of the bookselling profession, based on the passion for books and reading, while being particularly uncomplicated on a commercial level. The Livres Hebdo magazine reflects a profession concerned about the negative effects of CRM on the standardization of funds, on the disembodiment of the relationship with clients and on the intrusiveness of push communication (No. 1174, May 18, 2018; No. 1180, June 29, 2018). This last aspect is highlighted by one of our interviewees (#3): “Booksellers [from the Libraires Ensemble group] are not always prepared to geolocate a customer [using the loyalty card on smartphones]. They are very respectful of customers. They are part of an intellectual environment.” He added: “Booksellers are traders and activists. They are both at the same time. But they do not hesitate to say that they sell books.” The absence of a commercial complex manifests itself in many ways among the members of Libraires Ensemble: they have had customer files for

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a long time; they appreciate catalogues with a commercial vocation and not only bibliographic; they “redesign their stores and enlarge them” (#2); they acquire bookshops to take over, etc. This vision of the business seems to us likely to facilitate the transition to the omnichannel system, which places the customer at the center of the organization. Supported by the group, this vision acts as an identity catalyst likely to remove more easily than elsewhere the reticence inherent in CRM and omnicanality, which has been mentioned just now. In a work devoted to the professional identities of booksellers’ groups, Leblanc (1998) studied the Voie du livre, a group that disappeared in 1999 but which was partly recreated in Libraires Ensemble in 2001 through a few joint co-operators. However, the former group was characterized by commercial imperatives that were entirely assumed while, according to the sociologist, it could not be considered a group of book sellers, but rather a group of booksellers committed to the cultural dimension of the book. 2.5.2. An omnichannel model adapted to the singularities of bookstores Several steps in the integration of distribution channels have been taken by the group. But the resulting model does not correspond to the successful model mentioned in the literature review as an assembly of distribution channels part of a single system. The adaptations that have been made are based on two main sources: on the one hand, the web-to-store logic that places integration at an intermediate stage more in line with the particularities of bookstores; on the other hand, the sharing of responsibilities between bookstores and groups, which leaves bookstores in control of the strategy as independent entities. 2.5.2.1. For the web-to-store logic The implementation of a common management system, the creation of a customer database and the coordination of communication and promotion actions are part of the integration of distribution channels. The convergence thus achieved is put at the service of the physical store in a type of logic confirmed by our respondent (#3): “In any case, the interest of the Internet is to attract customers to the store.” As a result, some multichannel devices are not offered by Libraires Ensemble to customers or in other bookstores. This is the case for in-store orders for home delivery, while this system is also

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used by other brands. If we take the example of Fnac, 10 years ago the company considered that what is called in the profession the “customer order” should be placed on the website. The customer order is the free order (as the Lang law underlines) placed by a customer in store when the book desired is not immediately available. In the early days of e-commerce, Fnac.com was destined to become the preferred channel for customer orders (Poirel and Bonet 2008), whether the customer placed the order online or a seller did it for him in store. At the moment, omnichannel innovations carried out through this device are taking place, involving stores without stock or with limited stock, such as Sephora in cosmetics and Décathlon in sports. With regard to books, it should be noted that the so-called Amazon amendment to the Lang Act has prohibited free transport in the event of home delivery since 2014, as well as the application of the 5% discount. This regulation, taken in order not to create competitive price distortions (free shipping being likened to a price advantage), creates an incentive for customers to go to the store. Moreover, the shipping costs associated with home delivery can be prohibitive for customers given that the average price of the book is €10. In the case of the Libraires Ensemble group, the Colissimo service costs between €6 and €8 depending on the formula. In total, in bookstores in general and within the group studied in particular, the omnichannel is designed more to communicate with customers than to distribute books. Distribution remains the responsibility of the physical bookstore, which therefore retains its logistical function and has a virtual version with the omnichannel to keep in touch with customers. From this perspective, it is possible to understand why e-books, which are difficult to sell in physical commerce, are not put forward by the group and its members. 2.5.2.2. To share responsibilities between bookstores and groups Our analyses revealed that each bookstore has its own strategy and that the group operates as a service provider. In the rest of this paragraph, we quote exclusively from the comments made by one of the respondents (#3). It should be noted that the services provided by the group to members cover a wide range, from the supply of gift bags and gift wrap to a turnkey CRM. They can be more personalized – “a bookseller wondered what digital lending in the bookstore was and how he could participate” – and sometimes characterized by high added value, when “change management such as the reorganization of a department, an expansion or a financial study” is

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involved. Technical and IT services were provided, for example, to connect all individual bookstore sites to the group’s portal site, whereas these bookstores had opted for different solutions in their own shops. But strategically, entire sections remain under the control of each bookstore. We identified four of them: 1) there is no network brand. The brand promoted to customers is that of each bookstore. Libraires Ensemble is discreet or it totally disappears. “Both newsletters and catalogues are white-label items. The group makes a model and the bookseller can then add his guidelines and brand.” The Librairesensemble.com portal displays a first page dedicated to the network’s offer under the logo Libraires Ensemble and the slogan “prescribers of healthy addictions”. But then, once the customer has chosen a book, he finds a bookstore on the interactive map or list provided, which takes over the rest of the transaction, both financially and logistically. For the customer, the Libraires Ensemble brand is almost transparent both online and in stores. 2) e-books are completely excluded from the prerogatives of the group. “Each member can decide whether or not to sell e-books on their site. But you can’t find any on the portal site.” 3) customers are holders of a loyalty card from a bookshop that is a member of Librairies Ensemble, but each bookshop sets the conditions of use. “Each bookshop has its own loyalty card and loyalty program. Each one therefore allocates the 5% discount according to its own terms.” 4) The customer database is operated by booksellers but not at the group level. “The bookseller undertakes to his customer not to disclose personal data. Libraires Ensemble offers actions to booksellers and merely acts in an operational capacity. The group cannot access the customer databases of the bookstores.” In short, “Libraires Ensemble proposes, the booksellers choose”. Even if the booksellers have defined a common customer strategy, the group is responsible for the operational aspects, and the booksellers for the strategy. This is the division of powers operated by Libraires Ensemble as part of its omnichannel strategy, which preserves the independent status of the members of the group. As a result, omnichannel devices are more applicable within each bookstore than between bookstores at the group level.

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2.6. Feedback on concepts and best practices The results we have just presented call for theoretical feedback about two aspects: strategic management within the associated trade on the one hand and the benefits of full integration of distribution channels on the other. As for the first, we found that the academic literature on omnichannel has shown little interest, preferring to focus on themes like mix-retailing, performance and consumer behavior (Verhoef et al. 2015). These themes are eminently oriented towards consumer marketing, such as business to consumer. It is necessary to abandon avenues of research that focus on the omnichannel system and concentrate on strategy, as advised by Galipoglu et al. (2018), in order to understand managerial issues of a business-tobusiness nature. Work on franchising has carried out this type of investigation (notably Branellec and Perrigot 2013), focusing on the legal difficulties encountered by franchisors with franchisees when launching ecommerce sites. For independent associations such as Libraires Ensemble, approaches based on collective strategies and cooperation strategies seem appropriate to put into perspective the advantages and disadvantages of networking. According to our own work on the subject (Poirel 2015), while the advantages lie in the pooling of resources, which allows several people to do what was not possible individually, the disadvantages lie in the difficulty encountered in defining a viable business model and sharing the benefits of joint action. The case study highlights the fact that the network has made it possible to launch a common strategy but that it now seems to be limiting it. How could the shareholders go further in the integration of the channels without transferring a larger part of their strategic prerogatives to the network? The fears associated with the loss of independence and the fact that the common strategy focuses on the core business and not on a peripheral area are limiting factors. For us, it seems difficult to envisage deeper omnichannel strategies without increasing the group’s remit, but we may also wonder whether doing so is something desirable. Publications are putting into perspective the total integration of distribution channels after a consensus has been reached on its virtues (Verhoef et al. 2015; Berman and Thelen, 2018). Collin-Lachaud and Vanheems (2016), for example, show that consumers can be satisfied with their hybrid shopping, both real and virtual, even if the distribution channels are not fully integrated. They appreciate not being confronted with a formatted offer and using their private sphere to supplement the information that the distribution system does not give them. The fact that this is not a

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“seamless” system does not therefore tend to reduce customer satisfaction, but on the contrary it contributes to increasing it. In the same vein, the increasing incorporation of smartphones, particularly for in-store payments, is facing a number of limitations. Research by Hoehle et al. (2018) showed that consumers are not exactly well-disposed to certain omnichannel innovations, whereby a point of sale allows customers to scan the products themselves and pay through a device at any point in the store without going to a specific cash register. Consumers are seeing their habits transformed, and they are more or less tolerant of the controls carried out by the store. As the results of our case study highlighted the importance of the web-tostore logic, the best practices consequently focus on reinventing the store. The idea is for customers to experience something rather than merely making a purchase when they come into the store. Multisensory stimuli, a dramatically staged offer, and a rewarding interaction with the sellers thus contribute to a favorable context for this shopping experience. The aim is to create an atmosphere that customers will recognize as the specific atmosphere of this bookshop or even this bookshop Libraires Ensemble, if the group were to take the path of stronger integration. Five elements constitute it as shown in Table 2.1. Diversification of the range of products – Libraires Ensemble are bookstores-stationer’s shops. They are situated in the world of the written word. Many also offer leisure products. – Two directions to explore: e-books and second-hand books. Merchandising – The book, a lounging and relaxation product: making spaces airy and creating comfort spaces (sofas) even if it means losing productivity per m². – Improving the customer’s understanding of shelf organization and helping him/her to find his/her way around the shelves with appropriate signage. In sectors of activity other than books, some brands offer real-time guidance in the store to customers via their mobile phones (by opt-in, i.e. after customers have given their opinion when entering the sales area). Availability of the offer – The website as a store relay: accessing the offer at any time and especially when the bookshop closes, finding out the availability of titles in stores, placing an order. – Increasing immediate in-store availability through in-store on-demand printing solutions.

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Engaged staff – Consulting booksellers, trained in the profession and knowledgeable about new products: this is a strong point of independent bookshops. – The group emphasizes on its portal site the continuous training of staff. – Supplementary reading advice offered on the site and in the newsletters. Communication – Letting clients know about meetings, book signings and other events, by sending emails, on social networks, etc. – Explicitly relaying information in store. – Developing “horizontal” communication by leading a community of readers. Table 2.1. Best practices of the connected bookstore

The measurement of customer satisfaction should be added to these best practices. The implementation of an indicator at the group level would make it possible to assess the performance of the omnichannel strategy. Customer enthusiasm is a simple measure that can guide strategic developments (Carteron 2013). This involves asking customers to what extent they would recommend a brand by offering them a rating scale. This makes it possible to evaluate the importance of promoters (giving a good score) and detractors (giving a poor score), and to identify the proportion of very satisfied or delighted customers, that is, those who talk about the brand in a very positive way to the people they know. 2.7. Conclusion The case study we conducted on Libraires Ensemble shows that independent bookshops have not only become aware of the challenges of connected commerce but are successfully developing multichannel devices based on the strength of their network. These really make it possible to approach the bookshop as a multimodal store, accessible 24 hours a day, with a wide range of products and personalized reading advice. Our enthusiastic comments must certainly be put into perspective since the group’s strategy is relatively recent. Moreover, it has not yet been the subject of a performance measurement and we have identified limits to the deepening of this strategy because of the booksellers’ visceral attachment to their independent status. The question remains open as to whether it is necessary and desirable for the group to further integrate distribution

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channels at the network level, taking into account the specificities of independent bookshops. This would require further empirical investigation on the part of the members of Libraires Ensemble as well as a comparison with other groups such as Initiales, whose positioning is different, probably more literary and less commercial, and with the initiatives of past booksellers providing services for the whole sector, such as Dialogues in Brest with leslibraires.fr and its CRM tool, Fidélivres. Finally, to conclude, another working perspective, which has not been mentioned, lies in the possible transformation of the relationships between a bookshop and publishing, following the adoption of an omnichannel approach. This is the case because bookshops are transforming their relationship not only with customers but also with suppliers. We know the strategic importance of customer databases in understanding consumer behavior and adapting marketing policy accordingly. It is not to be ruled out, as has already happened in other sectors, that booksellers may derive significant and lasting financial benefits (additional discounts, the definition of joint promotions, etc.). 2.8. References Barba, C. (2011). 2020 : la fin du e-commerce… ou l’avènement du commerce connecté. Fédération e-commerce et vente à distance. [Online]. Available at: https://www.vsnews.fr/images/etudes/fevad2011malineaecommerce2020.pdf. [Accessed September 2018]. Bardin, L. (2013). L’analyse de contenu. Presses Universitaires de France, Paris. Berman, B., Thelen, S. (2018). Planning and implementing an effective omnichannel marketing program. International Journal of Retail & Distribution Management, 46(7), 598–614. Benhamou, F. (2014). Le livre à l’heure numérique. Papier, écrans, vers un nouveau vagabondage. Le Seuil, Paris. Bouzid, Y., Vanheems, R. (2014). Comportement web-to-store : vers une nouvelle logique de contrôle de soi ? Management & Avenir, 5(71), 189–200. Branellec, G., Perrigot, R. (2013). Franchise et e-commerce : une approche droitmarketing des problématiques liées à l’exclusivité territoriale. Décisions Marketing, 71(Jul-Sept 2013), 31–42. Carteron, V. (2013). Expérience client et distribution ‘omnicanale’. L’Expansion Management Review, 2(149), 25–35. Chabault, V. (2013). Librairies en ligne. Presses de Sciences Po, Paris.

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Chabault, V. (2014). Vers la fin des librairies ? La Documentation française, Paris. Chanut, O., Paché, G. (2013). La culture de mutualisation du PSL peut-elle favoriser l’émergence d’une logistique urbaine durable ? Revue Interdisciplinaire Management, Homme & Entreprise, 3(7), 94–110. Collin-Lachaud, I., Vanheems, R. (2016). Naviguer entre espaces virtuel et réel pour faire ses achats : exploration de l’expérience de shopping hybride. Recherche et Applications en Marketing, 31(2), 43–61. Donnat, O. (2009). Pratiques culturelles des Français à l’ère numérique, Enquête 2008. La Découverte/Ministère de la Culture et de la Communication, Paris. Fevad (2018), Les chiffres clés : cartographie du e-commerce en 2018. [Online]. Fédération du e-commerce et de la vente à distance, Paris. Available at: https://www.fevad.com/chiffres-cles-cartographie-e-commerce-2018 [Accessed August 28, 2018]. Galipoglu, E., Kotzab, H., Teller, C., Hüseyinoglu, I.O., Pöppelbuß, J. (2018). Omni-channel retailing research – state of the art and intellectual foundation. International Journal of Physical Distribution & Logistics Management, 48(4), 365–390. Helfer, J.-P., Michel, G. (2006). La stratégie de contacts multicanal : opportunités, risques et facteurs clés de succès. Décisions Marketing, 41, 33–41. Hoehle, H., Aloysius, J.A., Chan, F., Venkatesh, V. (2018). Customers’ tolerance for validation in omnichannel retail stores: Enabling logistics and supply chain analytics. The International Journal of Logistics Management, 29(2), 704–722. Isaac, H., Volle, P. (2014). E-commerce de la stratégie à la mise en œuvre opérationnelle. Pearson, Montreuil. Leblanc, D. (1998). Le métier de libraire. L’Harmattan, Paris. Lecocq, X., Demil, B., Warnier, V. (2006). Le business model, un outil d’analyse stratégique. L’Expansion Management Review, 123, 96–109. ObSoCo (2013). Les clients de la librairie indépendante. Mieux les connaître pour mieux les fidéliser. Étude réalisée pour le compte du Syndicat de la librairie française. [Online]. Observatoire société et consommation, Paris. Available at: www.syndicat-librairie.fr/images/documents/rapport_d_finitif_l_obsoco.pdf. [Accessed September 2018]. Paché, G., Seck, A.M., Fulconis, F. (2014). Quels bénéfices peut retirer l’entreprise d’un management multicanal intégratif ? La Revue des Sciences de Gestion, 5(269–270), 55–63. Poirel, C., Bonet-Fernandez, D. (2008). La stratégie de distribution multiple : à la recherche des synergies entre les canaux physique et virtuel. Le cas de la Fnac. Revue Française de Gestion, 2(182), 155–170.

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Poirel, C. (2015). Analyse d’une stratégie collective manquée : le cas de 1001 Libraires.com dans le commerce du livre. Management International, 19(2), 64– 82. Rosenbloom, B. (2007). Multi-channel strategy in business-to-business markets: Prospects and problems. Industrial Marketing Management, 36(1), 4–9. Vanheems, R. (2009). Distribution multi-canal : pourquoi les clients mixtes doivent faire l’objet d’une attention particulière. Décisions Marketing, (55), 41–52. Vanheems, R. (2012). Multicanalisation des enseignes. Comment Internet transforme les comportements en magasin. Revue Française de Gestion, 8(227), 13–29. Verhoef, P., Kannan, P., Inman, J. (2015). From multi-channel retailing to omnichannel retailing: Introduction to the special issue on multi-channel retailing. Journal of Retailing, 91(2), 164–181. Volle, P. (ed.) (2012). Stratégie clients : Point de vue d’experts sur le management de la relation client. Pearson, Montreuil. Xerfi (2011). La situation économique et financière des librairies indépendantes. Report on behalf of the Ministry of Culture and Communication, Paris.

3 The Innovative Business Model of Daft Punk

3.1. Introduction Music, much like other activities in the creative industries, has undergone profound changes since the late 1990s with the transformation of physical media (such as compact discs or CDs) into digital media (in a specific format such as MP3) and the massive adoption of peer-to-peer download software such as Napster. Some actors have benefited from these developments, such as computer and MP3 player manufacturers (Apple with iPod and iTunes) or streaming services (such as Spotify or YouTube), while others have experienced an inexorable decline (physical media distributors such as Virgin Megastore in Europe or Tower Records in the USA) (Tellier 2017). These technological innovations have made it possible to implement new “ways of doing business” in the music industry by promoting new offers and innovative services through young companies (Moyon 2011). In management terms, what a company offers, the customers it targets and the way it is organized and remunerated constitute its business model. While the effects of these technological innovations on business models have been widely studied in management science research at the level of companies in the sector such as music labels, little work has focused on those who create music: the artists. The first electronic music group to win a Grammy Award in 2015 for best album, the French duo Daft Punk, composed of Thomas Bangalter and GuyChapter written by Alexandre PERRIN.

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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Manuel de Homem Christo, is an innovative business player in the music industry. However, the general public does not know much about these musicians. Cultivating secrecy and media scarcity, since 2000, Daft Punk have effectively chosen to hide their faces and appear as robots, a decision that goes against the promotion strategies in force in this sector. This idea, borrowed from the main character of the film Phantom of the Paradise, is not new in the electronic music scene, however, as Kraftwerk were pioneers in this field. The group’s innovative character is therefore to be found elsewhere. In this chapter, we show how since the beginning of their careers in 1993, these creators have been in opposition to the dominant business model of the music industry. In section 3.2, we define more precisely the components of a business model and then describe the model used in music (section 3.3). Subsequently, in section 3.4, we will describe the first attempts by artists to break the dominant model. Finally, we will focus on the specific case of Daft Punk and the electronic music segment to address the innovative nature of the French group’s business model (section 3.6). The methodology, as well as the main lessons to be learned from this dive into the “Daft Punk system”, will be described in section 3.5. 3.2. The definition of a business model A business model can be defined in different ways, which is why we have included in this article the summary proposed by the authors of Strategor (2016). They propose a business model composed of three elements: – a relevant and attractive value proposition for customers (a); – a valuable architecture (b); – a business value equation (c). The first component of the business model focuses on the value proposition: what do I offer and for whom (a)? This offer may take the form of a good, a service or both. It corresponds to a set of characteristics that will be offered to customers in the hope that they will value them. This is why these characteristics (price, features, related services, brand image) are called the “value proposition”. Proposals are made according to the buyers interested in the offer: it can be free on one hand (e.g. Google and its search engine can be freely accessed by users) and profitable on the other hand (the massive number of free users allows Google to sell advertising space on this free service).

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The second component focuses on the ability of companies to mobilize resources and skills (b). The value architecture corresponds to the organizational framework necessary to achieve this proposal. Some activities are carried out internally while others are carried out by service providers. Designing such an architecture is like asking oneself the question “how”. Of course, the choices made by the company about what it proposes and how this is organized are only judicious if they allow it to be profitable (c). The cost structure and revenues generated are determined by the value architecture and the value proposition. Thus, a model is coherent if all the elements that compose it create business value. Building this equation requires answering the question “how much”. Table 3.1 summarizes the various issues related to the definition of a business model. Proposal Characteristics of the service or product offered What do I offer? Who do I offer it to?

Architecture Resources and skills mobilized What do I need to do internally or to commission?

Business equation Revenues generated and costs generated How much and how are my profits generated?

Table 3.1. The dimensions of a business model

Major technological changes can lead to the development of new business models and make old ones obsolete. Innovation can then focus on the model itself. In order to understand the innovative nature of Daft Punk’s model, it is therefore necessary to explain the predominant/principal/ dominant model in the music industry. 3.3. The business model of the music industry The business model of the music industry constantly oscillates between two main activities: recorded music and live music. The revenues generated by one usually influence the other, since musicians usually produce a recording to encourage listeners to come and see them in concert and vice versa. The size of the global music market has been estimated at €56 billion for 2016–2017 (Page 2018). The recorded music sector is estimated at around

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€26 billion overall (section 3.3.1). The cost of live music (concerts, festivals) is estimated at €30 billion (section 3.3.2). We will then detail the current business models (section 3.3.3) and present some examples of innovations (section 3.4). 3.3.1. Recorded music To understand the business model of music, it is essential to describe the different rights holders involved in the creation of a recorded work. This includes two types of intellectual property: one about the composition (score and lyrics) and one about the interpretation. Figure 3.1 provides a summary of this complex operation. Author

Collect rights Publisher

Composer

Funds Help

Singer

Collective management societies Producer

Funds Disseminate Promote Reproduction on a medium

Recorded work Public performance

Figure 3.1. How the music industry works

At the beginning, as with any artistic creation (a book, a painting, etc.), music is an idea. The composer will transform this idea, this melody that runs through his or her head, into a concrete, real creation, either by writing notes on a score, or by composing directly on an instrument or on a computer. The author is the person who will write lyrics for this musical composition, provided that it is a song. The composer and the author are creators: they give birth in a concrete way to what was, before them, only an idea, they give it a precise and personal form, and they must ensure its original character (under penalty of

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being accused of plagiarism). From a legal point of view, they are the “parents” of the musical work and that is why they have “rights” over their creation: copyright. These authors also have a proprietary right to authorize the exploitation of their works through their public performance (e.g. at a public concert, in radio broadcasts, or when they are used in film music or advertising) or their reproduction (on a medium such as CD, or on a streaming platform). In return for the use of their work, authors receive remuneration. The author may decide to entrust the management of their business rights to a collective management society such as Sacem in France or Ascap in the USA. From a business point of view, music composition is therefore an activity linked to music publishing and its economic impact is assessed nationally by performance royalty organizations, as their data is aggregated at the global level by CISAC (Confédération internationale des sociétés d’auteurs et compositeurs). Composers or authors may receive payment of their royalties directly from these organizations for an annual subscription. They can also receive payments of their rights from their publisher. These companies, such as Sony/ATV Music Publishing, Warner/Chappell Music or Universal Music Publishing, finance (in advance) author/composer creation projects and assist them in the administrative procedures for protecting their rights. Very often, the contract with the creator stipulates a 50/50 sharing of the income generated by the intellectual creation. In the long term, the objective of these companies is to build a broad catalog of songs and lyrics that can be used on as much media as possible or in public performances. In France, the number of employees in a music publishing house is mainly between one and ten (EY 2013). To be broadcast, a musical work must be recorded. It is then said to be “fixed on a medium”. Recording the work is an important step because then the music can be played – on the Internet, on the radio, sold in stores, etc. Performers are required to record a musical work. They are the individuals who play music (musicians, orchestras) and sing it. It is of course possible that a performer may also be a songwriter. Performing rights are additionally managed by producers (commonly known as music labels). Labels finance, distribute and promote recorded music. A work is usually recorded either in a “personal” studio (or home studio) or in a professional studio. In the latter case, specialists such as sound engineers are involved in the recording. Given the costs and risks involved, record companies obtain a substantial share of the revenue generated by the use of this recording. For a music label, this

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involves signing an exclusive contract with artists. By financing the production of the music album through a lump sum advance, the company in turn ensures control over the payment of royalties and revenues generated during concerts, the sale of merchandising products, etc. When this system works, the biggest sales of a company finance more intimate or less popular recordings, because the latter may become the cult records of the future. Music labels are therefore responsible for promoting artists to radio stations, streaming platforms and social networks. In return, they create a catalog of recordings (called masters or master tapes) that trigger the payment of reproduction rights for each use. In France, the three main labels collect the rights to their recordings through the SCPP (Société civile des producteurs phonographiques) while the independent labels collect them through the SPPF (Société civile des producteurs de phonogrammes en France). With the emergence of streaming, these labels have signed agreements with streaming companies (such as Spotify) to monetize their catalog. Platforms pay advances to record companies in order to use their catalog. This process is revised upwards or downwards depending on the titles the listeners of these platforms actually listen to. In practice – and depending on the country–music publishing and sound recording activities are grouped under the same legal entity. A simple search of the NAF code of companies registered with the code “5920Z Sound recording and music publishing” includes Universal Music Publishing (publisher), Universal Music France (label) and Universal Production Music France (producer). Although these activities are separate due to the reasons previously mentioned, these different entities are often subsidiaries or have cross-shareholdings in share capital. In terms of economic weight in the sector, the activity of publishers and creators represents 43% of recorded music, estimated at €26 billion worldwide. Music producers and labels therefore represent the majority (57%) of the revenues generated in the recorded music sector (see Table 3.2). 2016

2017

Publishing activity

2 billion (publishers) €8.3 billion (rights)

2 billion (publishers) €8.9 billion (rights)

Production activity

€14 billion

€14.8 billion

Table 3.2. World market for recorded music (source: adapted from Page 2018)

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3.3.2. Live music Live music encompasses all activities that allow a musician to play music in front of an audience in a specific location (a concert hall, bar/restaurant, festival, etc.). This is called a public performance or show. For example, six out of ten French people attend a concert or festival at least once a year. Despite a growing concentration within global companies such as Live Nation, this sector remains very fragmented and very local. The usual process for a young musician is therefore to start by performing concerts in their neighborhood, city, or region and finally to be recognized at a national level. Each venue holding public concerts (or live music) must pay a license fee to the collecting societies. These charge around 10% of a festival’s total budget or an annual sum depending on the size of the venue. Recent audio signature technologies allow these venues, if they wish, to identify in real time the different tracks that are played by a group or a DJ. The remuneration system here is quite similar to that of recorded music, since festivals or concert halls often pay musicians an advance. The most renowned artists can also negotiate a percentage of the income generated by the tickets sold or on merchandising. Given the high structural costs and low occupancy rate of some concert halls, it is in the interest of the business actors involved in the organization of a concert or festival (the promoter or owner of the concert hall) to build partnerships with other business actors such as local authorities (city, region) or companies wishing to be associated with the event in question (banks, textile companies, media, technology, etc.). 3.3.3. Current business models We tend to forget that the original business model of music is indeed that of public representation: a musician, whether a composer or not, will give a “performance” in front of people who have gained entrance, for a fee, to live this temporary experience. The first source of income for musicians, therefore, is still the concert. Whether it is at a wedding, or a private or public concert, musicians and performers derive most of their income from the practice of music. Since songwriters are not necessarily performers, recorded music allows them to receive income from the use of their music. Therefore, for all the players in the sector, there is an essential link between the revenues generated by concerts and those generated by listening to recorded music. A group of musicians can use streaming platforms to promote a national or international tour, etc., and conversely a listener can discover a music group during a festival and listen to it on a private copy.

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In detail, each player in the music industry (creator, publisher and producer) is trying to build a business model that will allow them to solve their own equation between their costs and revenues. – Creators (composers and performers) produce music on scores or music composition software based on their own musical knowledge. Their main difficulty lies in the need to finance this creative and complex activity because the income is, as the work is being created, to be received in the future. They, therefore, need a financial advance that is most often paid by publishers or producers. – The publishers’ objective is to build a catalog of works that is broad enough and rich enough to be of interest to users such as advertisers, television or film studios, etc. Their equation is based on a type of risk taking (investment in an artistic creation) whose future revenues will be generated by repeated use on media as diverse as video games or television series. – Producers develop content that requires distribution on a medium that is adopted by the majority of the public. The latter can then use an MP3 player, mobile phone or CD player. Producers must therefore work with the most widespread distributors in a specific area. The producer’s risk taking is thus based on the investment, support and promotion of a performer. It is then said that the producer “signs” an artist to receive future income. As risk-taking is becoming increasingly unpredictable, producers have made it mandatory to sign so-called “360 degree” contracts including recorded music revenues and concert, merchandising or neighboring rights revenues. Table 3.3 summarizes the business models in use in the music industry. Proposal

Architecture

Economic equation

Creator

Artistic creation projects on a score or on software.

– Ability to create intellectually. – Lack of financial resources.

Receives income but shares rights if there is a financial advance.

Publisher

Obtaining a catalog and disseminating an artistic creation on any medium.

– Collects the income from the catalog. – Needs to have a quality catalog.

Collects revenue if the catalog is used on any medium.

Producer

Recording and promoting an artistic creation on a medium.

– Invests in recorded media. – Need to diversify investments.

Funds and promotes recorded music by collecting artists’ rights.

Table 3.3. Business model of the music industry

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3.4. First historical attempts to break the model Noting the abuses and inadequacies of some actors in the sector to adapt to technological changes or, more simply, responding to the evolution of their own audience, musicians have been the first actors of innovations on the business model. 3.4.1. Attempts concerning value propositions The first attempt of an author to modify the offer most certainly dates back to James Brown and his album Live at the Apollo (1963). As Albéric Tellier (2017, p. 25) reminds us: “At that time, live records were still very rare, but James Brown wanted to follow in the footsteps of Ray Charles, who had become a huge star thanks to such a recording published in 1959.” Faced with the reluctance of his record company, King Records, for which the business model was based on the creation of singles recorded in the studio, a live album was unlikely to be as successful as expected. Moreover, this type of recording went against the classical model: if the public bought such a record, why would they continue to come to concerts? Unlike Ray Charles, who was supported by his record company, James Brown financed his recording himself: He personally invested $5,700 (about $70,000 today) to rent the equipment and the concert hall he had chosen, the Apollo Theatre in New York. Once the recording was finished, James Brown tried to convince Syd Nathan, the boss of King Records, to buy the tapes from him and publish the album. (Tellier 2017, p. 25) The success was colossal since the album remained 66 weeks in the American charts. Live at the Apollo is now ranked 25th in the Rolling Stone’s ranking of the “500 Best Albums of All Time” In this example, the creator (James Brown) ran the risk of financing the recording project of his concert. Usually, this risk is assumed by the producer, in return for a majority share of the income in their favor. Another interesting attempt in history concerns the group Radiohead. In 2007, the English group distributed its new album, In Rainbows, only for download and offered Internet users the possibility of setting their own price. The context here is different from the one experienced by James Brown,

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since the innovative proposal here concerns the dissemination of the recorded work (and not the cost of its recording). In 2007, recorded music was still mainly consumed on a physical medium. Customers with personal music players then mainly used illegal download sites (such as Napster or Kazaa) or legal sites (such as iTunes). In the latter case, the industry price was $0.99 for a title (or single) and $9.99 for an album. Therefore, offering an album for free was revolutionary (Elberse 2008). In fact, downloading the album was not totally free of charge since a price of $0.90 had to be paid as a technical fee. But at the same time, the band distributed a deluxe $80 box set including two CDs (with exclusive songs), a vinyl record, an art book and a download code for the album. Like James Brown, it was Radiohead that shouldered the risk by financing the creation of this deluxe box set. Having ended their relationship with the label EMI in 2003, the group indeed achieved total financial and creative independence. With this original proposal, creators can therefore capture the total value produced by the sales of their recorded music. 3.4.2. Attempts concerning value architectures The decision to sign with a record company or to remain an independent player is certainly the most strategic issue for a creator. To the rhetorical question “what is in my best interest to do?”, many artists answered “everything” since they prefer to focus on composition or interpretation. But by receiving a financial advance or simply by outsourcing certain investments, artists will reduce the share of their future revenues and, more often than not, transfer the intellectual property of their works to the producer of the container. As musician Moby sums it up: “It’s as if you go to a bank, they give you a loan to buy a house and at the end of the loan that you have repaid, with interest, the bank owns your house!” The financial and legal independence of artists is therefore essential for them to maintain control over their creation and income. This is why a growing number of artists have chosen to create a legal entity such as a single-person company or a limited liability company. Examples include Madonna, Michael Jackson or more recently Jay-Z, who have respectively become producers (Maverick Records for Madonna), investors in publishing (the Beatles catalog in the case of Michael Jackson) or investors in music distribution platforms (Tidal in the case of Jay-Z).

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3.4.3. Attempts concerning business equations Turning fans into subscribers is certainly the most interesting proposal for an artist in search of financial resources. In 2000, the singer Prince offered his fans exclusive information, concert tickets, invitations to sessions and unpublished songs to download in exchange for a monthly subscription. More recently, and shockingly, in the history of music, the band Vulfpeck asked their fans to stream an album with no sound on Spotify to collect rights to finance a tour. They therefore used their own music catalog to finance their tour, without the financial support of a promoter. Crowdfunding platforms (or participatory funding) have also been a response to the problem of the artists’ financial independence. By allowing fans to make monthly financial contributions (as is the case on the Patreon platform) or investments in a catalog (MyMajorCompany), or simply to receive a future signed album or a private concert (PledgeMusic), these platforms allow artists to receive financial advances without sacrificing their future revenues. They remain masters of their artistic creation. This section aimed to define the business models in place in the music industry and to identify the various issues and innovation attempts by artists who have acted as entrepreneurs in the industry’s eyes. Let’s now look at the specific case of the French group Daft Punk. 3.5. Methodology The methodology used involved a case study. Data collection was based on financial documents (balance sheets available on the Internet) and a literature review on the group Daft Punk. Given the difficulty of assembling primary data, we have opted for this method, which allowed us to access not only financial information accessible from the beginning of their careers, but also to “reconstruct” all the decisions taken by the group, bearing in mind that these decisions are recorded in the accounting documents. We have therefore downloaded the accounting documents of the business entities attached to the Daft Punk group, namely: – Daft Trax S.A.R.L. (France). Created on August 21, 1996 under the French sectoral code “Enregistrement sonore et édition musicale (5920Z)”, it

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Innovation in the Cultural and Creative Industries

aims to finance the group’s activities, collect their rights and carry out financial transactions with the English entity described below. It is the music label and publishing house of Daft Punk. Its shareholder base consists of two representatives: Thomas Bangalter and Guy-Homem de Manuel Christo. The financial documents of this company are available on the Infogreffe website for a fee. However, the announcements published on the Bodacc (Official Bulletin of Civil and Commercial Announcements) make it possible to retrieve some partial data; – Daft Life Ltd (England). Created on June 20, 1997 under the sector code “Artistic creation (SIC 90030)”, this company aims to collect the group’s revenues from recorded music. It was created on the same date on which the license agreement for the group’s first album, Homework, was signed with Virgin Music. The financial documents of this company can be freely accessed on the website of the Companies House Financial Authority in Great Britain from 1997 until the present day. Table 3.6 in the Appendices (section 3.8), presents the result of this reconstruction; – Daft Arts Inc. (United States). This audiovisual production company was created on January 18, 2005 by Cédric Hervet and Paul Hahn. Hervet has been editor and creative director of Daft Punk for 15 years and coproducer of Interstella 5555 and Electroma. Hahn is a producer and manager of the group in the United States. This entity made it possible to finance video clips and the feature film, Daft Punk’s Electroma, a visual and musical odyssey that follows the story of two robots in their quest to become human. The company was dissolved on June 27, 2018. Daft Arts was based at the Jim Henson Production Studios in Los Angeles, a company known for its family audiovisual productions, and more specifically for the Muppet Show. The reconstitution of the group’s financial situation between 1997 and 2017 therefore allows us to “follow” the financial flows between the different entities. For the year 2017, the financial results of each entity have been simplified in Table 3.4. Year 2017

Daft Trax SARL

Daft Life Ltd

Daft Arts Inc

Revenues from operations

€1, 918,342

£1,066,884

NC

Net income (loss)

€383,147

£16,005

NC

Table 3.4. Daft Punk Group's financial results for 2017

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67

3.6. Daft Punk: an innovative model in electronic music In the following table you can view the impact the innovations made by Daft Punk in the context of electronic music have influenced other artists. Each of the dimensions will be detailed. Proposal

Description

Influenced artists

Offer a finished product from a home studio.

Architecture

Business equation

Control of financial resources and intellectual property.

Share revenues under a temporary license agreement.

Use record companies only for promotion and distribution.

Tax optimization between legal entities based in different countries.

DJ

Hip-hop artists

Reinvest the profits in spectacular concerts. EDM (Skrillex)

Table 3.5. Innovations in the business model and influence on other artists

3.6.1. Innovation concerning the value proposition Electronic music has offered a new opportunity for artists. For Violaine Schütz, its birth in France (and more generally the French Touch) resulted from importing English warehouse parties in the early 1990s: The hits of the time were created at home, in the bedroom, in the home studio, with brand new machines such as sequencers, samplers, turntables... and were produced by small independent labels like Solid, the record company launched by Étienne De Crécy. The songs were then often tested in the evenings by the artists themselves who were also DJs. The traditional pattern of music production was then short-circuited. Many young people sold their guitars and discovered the joys of electronic equipment and the freedom it implied. (Schütz 2014, p. 34) This is exactly what three young musicians, Thomas Bangalter, GuyManuel de Homem-Christo, and Laurent Brancowitz (who left the group to found Phoenix), did in 1992. They launched the rock band Darlin’ by

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Innovation in the Cultural and Creative Industries

covering Beach Boys songs and some compositions. But they soon realized that this style of music was no longer in fashion and they turned to techno at an evening organized at the Beaubourg Museum in Paris: “During this evening we discovered an underground music that made people dance... when they didn't know the songs played by the DJ. We played rock and nobody danced!” says Thomas Bangalter in the documentary Daft Punk Unchained (2015). But making electronic music is expensive, even if at the time it seemed easier for trainee producers to write electronic music songs instead of pop or jazz. In the early 1990s, it was necessary to spend about 500,000 F (about €80,000, about €120,000, excluding inflation) to build a little French touch studio, including all the necessary music software (like Cubase) (Schütz 2014). Thanks to their savings and the support of their families (Thomas Bangalter’s father was a former disco music producer), Daft Punk equipped themselves with the best computers and synthesizers of the time and set up their home studio to start writing their first album, entitled Homework (in reference to their home studio). Innovation here involved integrating the production costs of music recorded by artists. However, these costs were reduced by the absence of rental fees for a professional recording studio. These two young musicians then learned their trade from a sound engineer. They mixed, sampled, cut, and modulated sounds. They started performing live as DJs at a very early age and showed a certain talent in handling mixing boards. All the record companies of the time then wanted to sign the band exclusively. 3.6.2. Innovation concerning value architecture On October 16, 1997, Daft Punk signed a deal that is a landmark in the history of music. In agreement with the English label Virgin Music, they kept all the intellectual property rights of their catalog but granted the record company an exclusive distribution of the Homework album for a period of 10 years. By offering record companies an (excellent) finished product, the French duo reversed the balance of power. Without the need for a financial advance, they used the record company to promote their record and not to finance it. In fact, they signed with the company that gave them the most artistic flexibility (Schütz 2014). This approach was later taken up by many artists, DJs and rappers, as shown by the editor-in-chief of Les Inrockuptibles, Jean-Daniel Beauvallet, in the documentary Daft Punk Unchained:

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69

For me, this is the biggest hold-up in the history of the music industry! Their business model has been very clear from the beginning: Daft Punk want total control over their artistic production but also over their brand and communication. They managed to impose this on record companies because they didn’t need an advance. Most of the American hip-hop stars of that time referred to Daft Punk when they signed with the big labels. The French duo had perfectly prepared this agreement by creating two legal entities: one in France (Daft Trax SARL) and one in England (Daft Life Limited). The two members of the group are equal shareholders. The innovation operated by Daft Punk is found here in a global vision of the management of their contracts and in an “optimized” use (in the legal and tax sense) of these entities. For example, 2001 shows funding of £1,476,358 (see Table 3.6). It can be hypothesized (because we do not have access to the details of each account line) that these are the costs charged for the recording of the Discovery album. Figures 3.2 and 3.3 show the amount of cash available for the English entity. We can quantify the success of their latest album Random Access Memory here, since the level of available cash increases from £700,209 to £7,152,272. Cash flows in the form of inter-company loans (between Daft Trax SARL and Daft Life Limited) can also be observed in the financial documents. Figure 3.4 illustrates these movements: the French entity “lends” £197,606 to the English entity. The latter paid in the same year a salary of £1,200,229 to Guy and of £1,512,578 to Thomas. By creating their own label and publishing house between France and England (the American entity being dissolved to date), the group has been able to optimize their tax situation. Indeed, interbank loans between subsidiaries are a technique well known to tax practitioners to increase revenues (and conversely to lower expenses) in countries where the tax on commercial profits is lower. This tax architecture was relatively sophisticated in the music industry at that time. 3.6.3. Innovation concerning the business equation Optimizing the group’s financial sustainability has been Daft Punk’s real obsession. Without this financial autonomy, the duo knows that the music industry does not allow for artistic autonomy. Labels or investors want to have a right of control over creators in order to limit risks. On the contrary, each Daft Punk project (see Box 3.1 for the complete list) – the documentary

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Innovation in the Cultural and Creative Industries

D.A.F.T, the film Electroma or the cartoon Interstella 555 – is self-financed by one of the three legal entities owned by the group. This risk-taking led them to a critical financial situation in 2006 (see Figure 3.4) due to the relative failure of their third album (Human After All) and the high cost of Electroma and Interstella 555. That same year, they launched their major world tour and played a poker game with the organizers of the biggest American music festival: Coachella. The group asked for a $300,000 advance to finance a pharaonic project: a giant LED pyramid that would surround the two members of the group on stage. The result was extremely spectacular, and this concert left a lasting impression, so much so that the American magazine L.A. Weekly ranked it as the best concert of all time at the festival. Unlike the general patterns on the electronic scene, Daft Punk chose to reduce the number of concerts on their tour. The innovation here involved building the group’s business equation by self-financing each project and betting significant sums on a few key concerts. This strategy was later taken up by the American DJ and composer Skrillex (he even admitted to having been present in the audience at Coachella in 2006). By handling rare public appearances and record releases produced with the greatest care, the Daft Punk duo has built an innovative and sustainable business model. Each of their public appearances makes the performance unique. Each of these moments makes their collaboration with other artists (Pharell Williams, Chilly Gonzales, etc.) even more precious. Daft Punk has become a French luxury product. 3.7. Conclusion Daft Punk’s success has been built around four key principles that break the rules of the music industry: a) do things your own way; b) present finished products; c) finance your own work; d) keep it under control. Young singer-songwriters like Jacob Whitesides have scrupulously followed these four aspects. Whitesides owns his own publishing and recording house, Double U Records, retains all future rights to his music revenues and uses the BMG label to disseminate his music on all possible channels worldwide. Unlike Daft Punk, he built his success by involving his fans on social networks such as Facebook, Snapchat or Instagram. The latter now appears as an external validator of an artist’s talent in the eyes of record companies. On the contrary, Daft Punk have cultivated media scarcity and have no account on social networks.

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71

We can concludde this chaptter with thiss observationn: creators ccan only mpanied by a rigorous ffinancial exercisee control oveer works if this is accom manageement of thhe process by which their workks are creaated and disseminated. Comppanies suchh as Kobalt offer to acct only as a service writers, that is, to colllect neighbooring rights, that is provider for songw t and d outside colllective mannagement copyright outside thhe national territory bodies. We considerr that this typpe of offer makes m it possiible to mainttain both the finaancial independence of crreators and a fair remuneeration of thee various stakeholders. The neew Europeann copyright legislation, l adopted in Seeptember 2018, iss in line withh this. Howevver, without technologicaal tools that simplify the payyment of thee economic rights of creators c andd performerss, record compannies will rem main in contrrol of the gaame. It is upp to the futuure Daft Punk orr Jacob Whittesides to revverse the pro ocess and puut the creatorr back at the hearrt of the music industry. Human, H afterr all.... 3.8. Ap ppendices

Figure 3.2. An examp ple of the acco ounts analyze ed: Daft Life Liimited’s balance sheet as at a June 30, 20 017 (source: Companies C Ho ouse)

FINANCED BY Called-up share capital Profit and Loss Account Shareholder Funds

£ £ £

£ £

-£

£ £ £

£ £ £

£ £ £

£

100 121,253 121,353

120,439 121,353

£ £ £

£ £

153,566 -£

23,144 60,137 70,285

914

122,617 151,388 274,005

£ £ £

897,952 £ 704,335 -£ 193,617 £ 22,523 -£ 171,094 £ 1,477 £ - £ 172,571 £ 51,318 -£ 121,253 £ £ £

1998

£

£ -£ £ -£ £ £ £ £ -£ £

£ £ £

£ £ £

£

100 377,414 377,514

367,275 377,514

£ £ £

£ £

440,709 -£

111,240 5,935 323,534

137,558 670,426 807,984

10,239

828,995 £ 471,544 -£ 357,451 £ 4,153 -£ 353,298 £ 15,959 £ - £ 369,257 £ 113,096 -£ 256,161 £ 121,253 £ 377,414 £

1999

£ £ £

£

£ -£ -£ -£ -£ £ -£ -£ £ -£

100 656,814 656,914

631,196 656,914

£ £ £

£ £

108,888 -£

79,721 11,487 17,680

233,759 506,325 740,084

25,718

514,662 143,066 371,596 10,030 361,566 36,565 398,131 118,731 279,400 377,414 656,814

2000

£ £ £

£ £ £

£

-£

100 489,762 489,862

294,005 489,862

£ £ £

£ £

£ £ £

£ £ £

£

-£ -£ £ -£ -£ £ -£

£

100 461,072 461,172

289,591 461,072

£ £ £

£ £

759,959 -£

9,089 737,539 13,331

415,263 634,287 1,049,550

171,481

2,951,941 53,528 24,739 28,789 28,789

-£ -£ £ -£

2,898,413

2002 £

236,637 -£

525,299 5,343 530,642

195,857

1,270,170 1,476,358 206,188 67,561 273,749 15,598 24 258,151 91,123 167,028

2001 £

£ £ £

£

100 161,673 161,773

17,743 161,773

£ £ £

£ £ -£

2,988,759 -£

3,452 2,940,060 45,247

542,259 2,464,243 3,006,502

144,030

2,990,249 -£ 352,210 -£ 53,015 £ 104 299,195 £ - -£ 299,195 £

2,638,039

2003

100 217,853 217,953

£ £ £

3,382,707 £ 3,502,835 £ 3,284,882 -£

£ £ £ £ £

100 221,949 222,049

2,836,341 2,942,509 2,720,460

£ £ £

£ £

£ £ £ £ 690,532 -£

29,367 14,678 523,445 123,042

81,724 290,022 3,155,127 3,526,873

£ £ £ £

106,168

£

5,564 £ 1,467 -£ 4,097 £

953,101 £ 43,435 -£ 909,666 £ 1,012,677 -£ 103,011 -£ 108,575 £

2005

£ £ £ £

204,068 -£

343,325 3,243,450 3,586,775

120,128

£ -£ £ 1,647,304 -£ 10,069 -£ 78,131 £ 68,062 £ 11,881 -£ 56,181 £

1,637,235

2004

£ £ £ £ £

100 245,549 245,649

131,510 245,649

£ £ £

£ £

£ 71,736 £ 343,318 £ 135,124 £ 1,959,438 2,509,616 -£

89,139 583,112 1,968,875 2,641,126

114,139

25,184 £ 1,584 -£ 23,600 £

899,953 £ 12,153 -£ 887,800 £ 968,212 -£ 80,412 £ 105,596 £

2006

£ £ £ £ £

100 268,114 268,214

131,217 268,214

£ £ £

£ £

1,673,004 -£

5,265 107,868 1,366,561 193,310

89,144 469,275 1,245,802 1,804,221

136,997

493,272 150,707 342,565

3,706,662 66,040 3,640,622 3,198,918 441,704 51,568

2007

£ £ £ £

£

100 338,895 338,995

226,254 338,995

£ £ £

£ £

2,342,198 -£

63,069 177,873 2,327,510 2,568,452

112,741

2008

£ £ £ £ £

100 359,807 359,907

266,481 359,907

£ £ £

£ £

2,202,156 -£

50,591 302,287 2,115,759 2,468,637

93,426

2009

£ £ £ £

£

100 403,042 403,142

330,029 403,142

£ £ £

£ £

1,418,797 -£

47,720 61,219 1,639,887 1,748,826

73,113

2010

£ £ £ £

£

100 435,270 435,370

349,466 435,370

£ £ £

£ £

880,968 -£

47,720 217,640 965,074 1,230,434

85,904

2011

£ £ £

£

100 434,022 434,122

369,712 434,122

£ £ £

£ £

756,724 -£

220,837 905,599 1,126,436

64,410

2012

£ £ £

£

100 468,238 468,338

410,501 468,338

£ £ £

£ £

833,539 -£

543,831 700,209 1,244,040

57,837

2013

£ £ £

£

100 924,633 924,733

881,198 924,733

£ £ £

£ £

6,681,946 -£

410,872 7,152,272 7,563,144

43,535

2014

£ £ £

£

100 1,027,556 1,027,656

936,648 1,027,656

£ £ £

£ £

5,152,363 -£

820,623 5,268,388 6,089,011

91,008

2015

Table 3.6. Reconstruction of Daft Life Limited’s balance sheets (1998–2017) in Excel (source: author)

Net Current Assets TOTAL NET ASSETS PROVISIONS FOR LIABILITES AND CHARGES

CURRENT LIABILITIES Bank loans and overdrafts Taxation and social security Other Creditors Trade Creditors Provisions for liabilities and charges Total Creditors

ASSETS Tangible CURRENT ASSETS Stocks Debtors Cash at bank and in-hand Total Current Assets

Turnover Cost of Sales Gross Profit Administrative Expense Operating Profit Interest Receivable Interest Payable Profit before Tax Tax on Ordinary Activity Retained Profit for the Period Retained Profit Brought Forward Retained Profit Carried Forward

Year (account as 30th of June)

£ £ £

£

100 1,050,779 1,050,879

972,579 1,050,879

£ £ £

£ £

3,600,699 -£

519,525 4,053,753 4,573,278

78,300

2016

100 1,066,784 1,066,884

1,008,003 1,066,884

4,236,026

1,383,230 3,860,799 5,244,029

58,881

2017

72 Innovation in the Cultural and Creative Industries

The Innovative Business Model of Daft Punk

£8,000,000 £7,000,000 £6,000,000 £5,000,000 £4,000,000 £3,000,000 £2,000,000 £1,000,000 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017

£-

Figure 3.3. Cash flow of Daft Life Limited (1998–2017) (source: author)

9. Transactions with directors Included in other creditors is an amount of £1,200,229 (2002 £64,935) owed to Guy Manuel de Homen Christo, a director of the company. The transactions during the year in the sum of £1,135,294 are related to monies paid to the artist. Included in other creditors is an amount of £1,512,678 (2002 £69,960) owed to Thomas Bangalter, a director of the company. The transactions during the year in the sum of £1,442,718 are related to monies paid to the artist. 10. Related party transactions Included in other debtors is the sum of £197,606 (2002 £244,839) owed by Daft Trax S.A.R.L., a company registered in France. This company is related by virtue of the fact that the directors of Daft Trax S.A.R.L. are also directors of Daft Life Limited. The transactions during the year in the sum of £47,233 are related to third party costs incurred by Daft Life Limited, and funded by Daft Trax S.A.R.L. Included in other debtors is the sum of £Nil (2002 £11,384) owed to Daft Inc, a company incorporated in the United States of America. This company is related by virtue of the fact that the directors of Daft Inc. are also directors of Daft Life Limited. The transactions during the year in the sum of £1,347 are related to third party costs incurred by Daft Life Limited, and funded by Daft Inc.

Figure 3.4. An example of the financial flows between Daft Trax SARL and Daft Life Limited for the year 2003 (source: adapted from Companies House)

73

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Innovation in the Cultural and Creative Industries

1992: creation of the rock band Darlin’ in Paris. April 11, 1994: first single The New Wave under the name The Two Darlin. 1995: meeting with the manager, Pedro Winter. May 25, 1996: first single Da Funk under the name Daft Punk band. August 21, 1996: Daft Trax SARL is founded in Paris. January 17, 1997: launch of the first album, Homework (Virgin Records). June 20, 1997: Daft Life Limited is created in London. 1999: creation of Daft, Inc. in Los Angeles (later Daft Arts, Inc.). November 1, 2000: launch of the documentary D.A.F.T.: A Story About Dogs, Androids, Firemen and Tomatoes. March 12, 2001: second album, Discovery (Virgin Records). October 1, 2001: first live album, Alive 1997 (Virgin Records). May 28, 2003: Interstella 5555: The 5tory of the 5ecret 5tar 5ystem. 2004: the duo moves to Los Angeles. January 18, 2005: Daft Arts, Inc. is created in Los Angeles. March 14, 2005: third album, Human After All (Virgin Records). April 4, 2006: first compilation, Musique Vol. 1 1993–2005 (Virgin Records). April 29, 2006: first concert at the Coachella Festival in California. November 16, 2007: second live album, Alive 2007 (Virgin Records). 2008: Pedro Winter leaves his position as group manager. February 8, 2009: Daft Punk wins a Grammy Award for Alive 2007 and for its single Harder, Better... December 7, 2010: soundtrack of the film Tron: Legacy (Walt Disney). May 17, 2013: fourth album, Random Access Memory (Colombia Records). January 26, 2014: Daft Punk wins five Grammy Awards including the album of the year. September 22, 2016: launch of the singles Starboy and I Feel It Coming composed for rapper The Weekend. Box 3.1. Chronology of the Daft Punk group (source: author)

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3.9. References EY (2013). Panorama des industries culturelles et créatives. Ernst & Young, Paris. Martin-Delpierre, H. (2015). Daft Punk Unchained. BBC Worldwide. Moyon, É. (2011). Le changement du business model de l’entreprise : une étude des majors de l’industrie phonographique (1998–2008). PhD thesis, IAE Lille. Page, W. (2018). How the global music copyright business grew by 1.5 Bn in 2016, Music Business Worldwide [Online]. Available at: https://www.music business worldwide.com/how-the-global-music-copyright-business-grew-by-1-5bn-in-2016/. [Accessed September 2018]. Schütz, V. (2014). Daft Punk : Humains après tout. Camion Blanc, Rosières-enHaye. Tellier, A. (2017). Bonnes Vibrations. Éditions EMS, Caen.

4 Innovation through Visitor Experience in Museums: The Case of the Lascaux Caves

4.1. Introduction Heritage is a historical part of what are nowadays known as the cultural and creative industries, generally circumscribed within “cultural institutions and industries” (Throsby 2001). It refers to what a nation wishes to preserve for future generations, whether this is tangible (tangible heritage: religious buildings, architectural, museums, art objects, etc.) or intangible (gastronomy, art of living, traditions, etc.), natural (parks, fauna, flora, etc.) or built (Benhamou et al. 2011). This chapter will focus in particular on cultural heritage, that is archives, museums, monuments and libraries. Caught in a tension between the past and the future, cultural heritage actors must protect, restore, conserve and ensure dissemination missions aimed at a large and diverse audience. Over the years, the attention paid to visitor reception has gained considerable weight in the missions allocated to cultural institutions by governments. This burden is increasing as these establishments play a role in the attractiveness of their territory to seize, in particular, the opportunities of mass tourism (Evans 2003; Smith 2006; Plaza 2009). In this context, cultural institutions are attentive to “visitor experience” and are taking measures to enhance/improve it. In this respect, digital technology offers opportunities for cultural institutions to renew the visitor experience at cultural sites. Based on the case of the Lascaux caves, Chapter written by Juliette PASSEBOIS-DUCROS.

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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we will show how a heritage institution addresses these issues and succeeds in offering an innovative visitor experience. Thanks to digital technologies, this establishment has not only been able to offer innovative ways of mediating around the built heritage of caves, but also to offer an “enhanced” and more personalized visitor experience (before, during and after the visit) thanks to the analysis of personal data generated by visitors’ behavior. In doing so, Lascaux inaugurates the use of Big Data for cultural organizations and institutions, thus extending the movement initiated by the major creative industries. The major players in music (Deezer, Spotify), cinema (Netflix) and books (Amazon) have renewed their industry’s business models by exploiting massive user data. In this chapter, we analyze how Lascaux has addressed these challenges without losing sight of the major orientation of cultural institutions: to disseminate quality scientific and educational content. After recalling the concepts of “consumer experience” and the challenges of innovation linked to these experiences, we will propose an overview of the economic challenges of the heritage sector in France before presenting the case of Lascaux and drawing more general lessons on innovation in this sector. 4.2. Innovation through and in consumer experience Museums and heritage institutions are increasingly open to technological innovation as they are attentive to the experience of visitors. As a result, “technological” initiatives are multiplying: mobile applications, virtual reality headsets, augmented reality tablets, touch screens, etc. These innovations aim to improve and renew the visitor experience. This first point, related to a theoretical framework, aims to clarify this notion of “visitor experience” and to put into perspective the contribution of digital technologies to its renewal. 4.2.1. The concept of consumer experience In 1982, Holbrook and Hirschman introduced the concept of consumer experience and experiential consumption. This is a break with consumer decision theory, which substitutes the classic figure of a consumer who maximizes utility for that of an individual in search of pleasure, hedonism and meaning in his consumption. From the outset, the experiential

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framework is presented as particularly well suited to the analysis of cultural and leisure consumption (Benavent and Evrard 2002), but it is now considered suitable for understanding all consumption behaviors (Roederer 2012). There is therefore an abundant literature on consumer experience that provides a consensual definition of this complex concept. Consumption experience refers to both a process and an outcome. It is a process that covers the personal and subjective experience of an individual in interaction with an object (tangible or intangible) in a certain context (place of sale, but also at home, in public spaces, etc.). Four interrelated elements form this process (Hirschman and Holbrook 1986): thoughts, emotions, activities and values (TEAV model). Consumer experience also refers to an outcome insofar as it provides benefits, satisfaction and experiential “value” to the person who lives it. It is generally accepted that the experience is “pleasant, memorable and meaningful” (Kwortnik and Ross 2007). The dominant approach is that of a multidimensional perceived value that integrates the pleasure of the experience with a set of other benefits. Holbrook (1999) identifies eight sources of experiential value by differentiating them according to whether they are oriented towards oneself (for example, hedonic) or others (for example, social interactions), intrinsic (for example, play) or extrinsic (for example, utility), active (for example, ethical/justice) or reactive (for example, aesthetic). These categories have been adapted according to the sectors or types of experience lived. An important work focuses on the value resulting from experiences with the goods of the cultural and creative economy and highlights that the “visitor” experience is particularly rich and gives rise to multiple sources of value: social exchanges, spirituality, aesthetics, intellectuality, attraction, multisensory stimulation, simplicity, calm, imagination, etc. (Chen 2008). The identification of these sources of value offers a complete vision of the lived experience and allows, from a managerial point of view, to identify levers for creating value for clients. Creating a memorable experience is indeed a way to create a sustainable competitive advantage. 4.2.2. Innovation through the creation of memorable experiences In 1999, Pine and Gimore announced the advent of an “experience economy” and popularized the idea that companies can develop a sustainable competitive advantage, not by offering their customers tangible

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products or intangible services but by engaging them individually in memorable events. For any type of company, the aim would be to use the entertainment economy model (first and foremost Disney) to create new categories of offers capable of lastingly marking the memory of customers and likely to constitute a long-term advantage and a source of differentiation. Pine and Gilmore (1999) emphasize that consumers are willing to pay a high price for access to these memorable experiences and that companies have a vested interest in rushing into the creation of an experiential offer to capture this value. The underlying idea is that providers can influence the companydriven experience by creating “theatricalized spaces” that are conducive to generating emotional, physical, intellectual, and even spiritual engagement in clients. For Ritzer (1999), this results in an escalation that leads to the production of increasingly spectacular and extravagant contexts. These experiential contexts according to Caru and Cova (2006) have three characteristics: they are thematized (each brand develops a theme: delicacies for the “gourmet cure”, the Italian dolce vita for Del Arte restaurants), hyperreal (spectacular settings, highly stimulating, extravagant) and secure (no dangers, secure for personal belongings of customers). While physical spaces have provided companies with the opportunity to create experiential contexts, the advent of digital technologies now offers new opportunities (Bolton et al. 2018). Some brands integrate digital technology into their retail spaces to create unique experiences, while others create 100% digital experiences using 3D, virtual and augmented reality technologies. The same is true for museums, which present themselves as fabulous experimental grounds for digital technologies. Technologies are integrated into the visit spaces to “increase” the real experience (example: the Histopad – a digital tablet that allows visitors to relive, thanks to augmented reality, a place as it was during the Renaissance period in Chambord). They bring a “plus” that is both sensational and instructive (new mediation tool). Technologies can also be used to support the experience of “virtual” experiences and constitute a new experience in itself. The Google Art project has launched this trend by offering remote visits to the world's largest cultural institutions. The digitization of content but also digital art now opens the way to highly innovative immersive experiences. For example, the Teamlab collective’s exhibition presented at La Villette in 2018 involves an immersive and interactive installation where people are immersed in enchanted digital settings. Visitors move freely through these worlds of digital artworks that are constantly changing as each person

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moves. This “digital experience to live” is a perfect illustration of the creation of digital theatrical spaces that provide these memorable and pleasant moments to live. While digital technology makes it possible to innovate in the experience of more rewarding visitor experiences, it can also offer simpler and more fluid experiences for users, constituting then another form of experiential innovation. 4.2.3. Innovating through UX Design or how to simplify the user experience The notion of consumer experience is nowadays very much associated with that of usage and gives rise to the concept of “user experience” (UX). The concept of UX can now be suitably applied to companies digitally connected with their customers. While the issue always involves taking the user/consumer’s side, UX refers more (but not exclusively) to an interaction with technologies with the aim of a design that promotes simplicity and absolute fluidity of use (Law et al. 2009). The challenge of UX Design is to make technology easy for users, pleasant, and as intuitive as possible, as well as to make it perfectly meet their needs (user-centered design). This simplicity of use results in user satisfaction and commitment to the product/service (Chitturi et al. 2008; Deng et al. 2010). UX Design requires user integration prior to the design of products/services, so these are innovations driven by users. UX is a source of innovation and provides a sustainable comparative advantage for companies. Netflix is a perfect illustration of this: the interface has been designed to make it easier for users to search and intuitively offer content that matches the tastes of viewers (based on their viewing practices). This simplicity is one of Netflix’s key advantages. 4.2.4. Innovating by analyzing and understanding the customer journey or how to personalize consumer experience The customer experience has to be understood globally, hence this drive for the notion of a customer journey. A customer journey is defined as all the steps taken by a customer throughout his or her consumption cycle, that is before, during and after the purchase of a product or service. The creation of customer paths is now becoming a way of innovating for some companies, which offer a fluid experience through all the customer’s contact points with

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the brand (Edelman and Singer 2015; Lemon and Verhoef 2016). For consumers, we refer to “consumer journey” (Voorhees et al. 2017). The challenge is to offer a personalized experience to customers, whatever the stage of their journey, so that they are naturally carried along the “customer conversion tunnel”. Customers will be taken away on condition that this journey directly and personally benefits them (Edelman and Singer 2015). This hyper-personalization of the processes involves the collection and analysis of customer data, which are key issues for large companies (see Box 4.1 for a classification of customer data). Netflix is an example of a company that innovates by creating ultra-personalized customer paths. The recommendation algorithms make it possible to push personalized content to each customer. In practice, 75% of the content viewed comes from a personalized recommendation. Customers find a benefit: finding content that they like without having to search a large database. Deezer or Spotify have succeeded in establishing themselves in the world of pay audio content through these personalized recommendations. A forward-looking report by the CNIL (2015) dedicated to cultural and creative industries (CCIs) provides an overview of the different types of data collected, which ultimately lead to a personalized recommendation. The report identifies six types of data that can be used in the cultural and creative industries: 1. Profile data: related to users, it has long been collected in companies’ customer files. It is related to the socio-demographic profile of clients. 2. Content descriptive data: this data is product-specific: catalogue data, characterization data, technical data (e.g. format) and legal data (copyright). 3. Consumption data and popularity: this data is general consumption information that provides information on collective tastes (for example, the popularity of a song, the play count, comments, quotations on social networks). 4. Enrichment data: relating to content, this is data such as photos, a biography of a critical artist, notes and evaluation, download links, prices, or song lyrics, provided by professionals or generated by users. 5. Taste and usage data: this data concerns usage and behaviors. It can be general (such as quantity, duration, purchase rate, playlist) or very specific (passages highlighted in a digital book, book reading speed). 6. Context data: this refers to the context in which a user is located. Today, it mainly concerns geolocation, but it can also come from the various sensors and

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concern movements, physiological state, mood, movements, etc. It is still mostly untapped. This classification shows two levels of data: the data that customers are aware of leaving (transactional data related to a purchase, for example) and the “invisible” data which is generally called “metadata”. The latter is the richest and most innovative for CCI companies. However, it raises the issue of user consent, which is in principle addressed by the implementation of a European data protection regulation in 2018 (General Data Protection Regulation 2016/679). This data comes from various sources – content producers, consumers, broadcasters – it can be produced by users themselves (posting a photo on social networks, a note, a comment creating a playlist on Deezer) or result from algorithms. According to this study, personal data collected in the context of cultural and creative content (called “cultural personal data” in the EY report, 2013) is specifically characterized by how it is especially personal, given that it involves identity. But it is also very easy for a service provider to access, given the collective nature of cultural consumption and the desire to share that underlies it. In 2013, the EY report stated that: “Cultural personal data contains strong contextual information and makes it possible to qualify in a fairly precise way the purchasing power of digital identity but also to predict its behavior. This is why, because of its intrinsically high value, it is now drawing all the attention of the Big Data players.” Box 4.1. Overview of the data which allows a personalized journey

To conclude, the visitor experience, at the heart of the strategic thinking of cultural heritage organizations, is a source of innovation for these actors. We have seen that three types of innovative experiences enable actors to add value and differentiate themselves: the creation of memorable experiences using digital technologies or not, the simplicity of user experiences, and finally the creation of personalized “visitor” experiences before, during and after the experience, which is based on the collection and exploitation of “visitor” data. These concerns mark a turning point for a traditionally product-oriented industry (Kotler and Kotler 1998). Innovations in the customer experience must be at the service of the content delivered instead of constituting an end in themselves or a marketing attempt. We will see in the next section how Lascaux succeeds in innovating while preserving an authentic and meaningful experience for visitors.

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4.3. Heritage institutions: a sector in the throes of change France has an extremely rich offer of cultural heritage – Museums of France, national museums, art centers, foundations, historical monuments, listed buildings, etc. – attracting several tens of millions of visitors each year (in 2016, France’s 1,200 museums welcomed 60 million visitors, free and paying, CNIL 2015). This very heterogeneous offering constitutes a complex industry whose economic drivers are significant. 4.3.1. The weight of assets in the French economy The parameter used to address this issue is generally the income generated by cultural activity and, in this case, heritage. In 2006, these directly generated revenues amounted to €269 million (key figures, Ministry of Culture). In addition, there are direct jobs related to heritage, which according to Picard (2016) number around 52,000 in France (8% of cultural jobs). The economic weight of the assets is finally measured by the added value contributed by the assets branch to the entire French economy. Picard (2016) estimates that the added value of cultural activities in France in 2016 amounted to €44 billion (about 2.2% of the French economy), while heritage accounts for around €4 billion in added value (compared to €12.6 billion for the audiovisual industry and €2.5 billion for books, for example) (Picard 2016). In 2016, the added value of the heritage branch fell significantly compared to previous years, which experts attribute to the 2015 attacks, which caused a drop in tourist numbers and an increase in security expenditure for these places. However, tourists are an important clientele of heritage sites. Of the 83 million international visitors to France in 2016, 60% visited a cultural site (CNIL 2015). The major Parisian cultural institutions are highly dependent on tourists, who can account for up to 80% of visitors to the Versailles estate and 69% of visitors to the Louvre. It should be noted, however, that these large institutions, although they concentrate a large part of attendance at heritage institutions, are not representative of museums and cultural sites located throughout the territory. Many establishments rely on local visitors from the local catchment area. For 84% of French people, visiting museums and monuments is part of culture much more than cinema (only 50% of French people associate it with culture), or reading (only 57% of French people).

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In addition to the direct income generated by the wealth branch, indirect income is particularly significant, for the reasons mentioned above. Hotel and catering transport activities are closely linked to the presence of heritage sites. Indeed, although “cultural tourism” itself represents a very small part of the world’s tourist movements, the presence of heritage sites acts as an important element in the choice of a destination. This is confirmed by a study conducted by the European Commission: heritage is a decisive factor for 25% of European tourists, the second most cited criterion before entertainment or gastronomy. This study also reveals that this proportion is increasing for tourists living in the richest countries (Norway, England) and for the most educated tourists (Benhamou et al. 2011). It is therefore recognized that cultural heritage acts as an element of tourist attractiveness for the richest clienteles and therefore indirectly generates tourism revenues. Heritage facilities act as “economic agents” with economic consequences on the entire territory (direct, indirect, induced revenues). It should be noted that including museums and heritage sites in the development of the tourism industry may seem to contradict the need to preserve these buildings. Welcoming more and more visitors may seem a challenge for fragile and preserved sites. Tourist use can jeopardize the survival of heritage sites, as was the case in Lascaux in the 1960s, forcing the site to close to preserve the original decorated cave. Mont-Saint-Michel is another example of a site where it is difficult to reconcile tourist influx and preservation. 4.3.2. The economic structuring of the cultural heritage “industry” Most heritage properties, whether privately or publicly managed (heritage properties are public or private in an equivalent proportion according to Benhamou et al. (2011, p. 38)), are part of the non-market economy. A large part of the expenditure incurred benefits from the contribution of the State or local authorities in the form of subsidies or grants. However, there is an increasing trend towards increased self-financing for heritage and museum institutions. Museums such as the Louvre, Orsay and the Centre Pompidou rely on more than 50% of their own revenues in their operations. New economic models are emerging. Based on the study of a large sample

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of French museums, Mairesse, Tobelem and Vessely (2017) conclude that three models are emerging: the brand museum, the event museum and the local museum. The brand museum’s business model is essentially based on the valuation of intangible assets: benefiting from a strong reputation, this museum can capitalize on its brand name to generate financial resources: branding, licensing, and sponsorship allow it to have a certain financial autonomy. The Louvre or Pompidou are perfect examples of brand museums, competing with major international institutions such as the Guggenheim, the Tate or the Moma, and relying largely on an international tourist audience. An event museum draws its resources from its ability to organize events on an ad hoc basis for a regional and local clientele. Major events provide significant blockbusters and balance the expenses generated by more culturally demanding events. Finally, a local museum relies on the local network, volunteering and the community to carry out its missions. Widely subsidized, it carries out an educational and social mission as a matter of priority. In conclusion, if we consider their direct economic impacts, heritage sites have very little impact on the French economy. But they have an economic role to play in the attractiveness of their territory in addition to a social role through their educational and preventive mission. The State’s financial disengagement from the operation of these institutions encourages the selffinancing and enhancement of their intangible capital, including the brand. In this context, visitors become central because they are at the heart of the value creation system. We will see how Lascaux manages to put the visitor experience at the heart of its strategic reflections and to stimulate innovations that will lead to a permanent renewal of this experience. 4.4. A presentation of the Lascaux case and the analytical methodology Lascaux, a UNESCO world heritage site (classified in 1979), is the largest decorated cave in the world (~19,000 years old), located in the heart of the Vézère valley (Dordogne). The cave, which has been in operation since the 1940s, has welcomed millions of visitors who come from all over the world to admire the remains of cave art. However, Lascaux is not a linear operation and has demonstrated for more than 70 years its capacity for innovation, overcoming obstacles and meeting the challenges of the sector. In 2016, a new stage in the exploitation of the caves was reached with the opening of Lascaux IV, an international center for cave art which placed “the

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visitor experience” at the heart of its approach, making Lascaux the “world leader in prehistory”. The analysis of the Lascaux case will highlight the foundations of innovation in visitor experience. 4.4.1. The case study methodology The case study is based on two data sources. On the one hand, it involves external documentary sources (press articles, media interviews, websites, etc.) and internal sources (activity reports, attendance data) that enabled us to trace the history of the cave’s exploitation and the major facts concerning its evolution. In addition, we conducted semi-directive interviews with the operations department (operations manager, marketing director) and one of the service providers who supported Lascaux in the implementation of the solution (Aquitem, customer data management specialist). These interviews took place throughout the development process of the center between 2014 and 2016. They allowed us to understand the strategic directions, difficulties and challenges of Lascaux IV, and which factors made it a success. This data was analyzed through the lens of the theoretical framework described above and compared with other cases of cultural establishments studied elsewhere (Cité du Vin in Bordeaux, Cité de l’Océan in Biarritz, various museums, etc.) to identify the drivers of innovation in the Lascaux visitor experience. 4.4.2. The context of recent innovation in Lascaux: a brief account of 70 years of operation It would be futile to analyze innovation in the visitor experience at Lascaux IV without recalling the historical context in which this approach is situated. The cave, discovered by chance in the 1940s, is located on the property of the Count de La Rochefoucauld, who decided to open it quickly to the public under sub-optimal conditions, leading the State, twenty years later (1963), to close it definitively to the public due to significant damage to the cave walls. Following this ban, the unprecedented solution involved manufacturing a facsimile a few meters from the original cave in order to enable the transmission of the heritage. The Dordogne General Council was responsible for the construction of this replica (the cave was entrusted to the State in 1972). Achieving the identical reproduction of only part of the cave (40%)

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required colossal work and relied on the strong involvement of sculptors and fresco artists for seven years. This “subterfuge worked”: thousands of visitors flocked to Lascaux II when it opened in the 1980s. In 2016, Lascaux II could claim to be the most visited site in the Dordogne with 270,000 visitors per year. Since its opening, it has reportedly been visited by 10 million visitors. The Dordogne General Council, owner of Lascaux II, has entrusted the management of the site to the mixed economy group Semitour Périgord. Given the public success of Lascaux II, the idea of producing a new replica that could be taken around the world emerged. As Bernard Cazeau, President of the General Council, explains, “Lascaux belongs to the heritage of humanity, we have a duty to show it to those who cannot come to us” (Conseil général de la Dordogne 2008). The concept of a travelling exhibition (Lascaux III) was launched. Thanks to the know-how developed for the previous replica, a new facsimile was created in 2012 (part of the cave not reproduced in Lascaux II). It should be noted that the work required to produce a facsimile was highly publicized, and that the technological (based on the 3D surveys of the cave, the projection of a “stone veil”, the technology patented o reproduce the mineral and porous aspect of the rock, etc.) and artistic prowess exhibited (the precision of the actions carried out, the use of pigments, etc.) were highlighted. The intention was then to reinforce the idea that the work had been reconstituted as close as possible to the original. One of the artists, Renaud Samson, a spokesperson for the facsimile workshops, explained: We reconstruct, line by line, point by point, the path of the artist’s hand by following him in his tracks. Our technology allows us to access the intimacy of the work, to discover hidden details, signs, engravings, in paintings that we thought we knew like this horse covered with stars. By deciphering what the eye cannot see in the cave, we find in the workshop the genesis of Lascaux’ creation. (Conseil général de la Dordogne 2008, p. 13) This replica of the cave took off in 2012, and 12 containers traveled around the world. Bordeaux, Shanghai, Tokyo, Paris, Montreal, etc. hosted this monumental exhibition, unique in the world. This project raised economic challenges (a cost of €3 million, variable rental amount, set at €30,000/month for Chicago) but also symbolic challenges, since the

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Dordogne “brand” was exported together with Lascaux III. The Ateliers de Facsimilés du Périgord (AFSP) succeeded in having their know-how in the reproduction of identical caves recognized worldwide and helped make Lascaux “the leader of prehistory”. The workshop, which now has 30 employees (sculptors, painters, resin makers, molders, locksmiths, welders, etc.), has produced other facsimiles (Ekain in Zestoa in the Spanish Basque Country, Niaux in Teverga, competing for the Cosquer cave in Marseille). In addition to this activity, they produce frescoes (for hotels, for example) and related products for museum shops, with an annual turnover of €2 to €3 million. At the same time, the Lascaux II operation was called into question at the beginning of 2010. 4.4.3. Towards the creation of a center worthy of Lascaux’s worldwide reputation Indeed, in 2008 the hill on which the facsimile was located was given protected status: the passage of thousands of visitors endangered the cave’s ecosystem. A project that involved moving the car parks and the shop was then envisaged, leading very quickly to the idea of creating an information center on cave art, at the bottom of the hill, in 2017. With a strong political desire to establish the Vézère valley as the cradle of prehistory, the actors are swinging into action for an ambitious project (€66 million) for a centre international de l’art pariétal Montignac-Lascaux (known as Lascaux IV). The site’s strategy has been rethought: a complete facsimile of the cave will be ordered from the AFSP and opened for viewing, but it will be complemented by rooms dedicated to cave art so as to reproduce the atmosphere and experience of a cave visit. This 8,000 m2 center, located 2 km from the original cave, will offer a complete experience of cave art: discovering its origins, deciphering the works and understanding the link with contemporary art. Digital technologies are strongly integrated into the project to deliver this “prehistoric experience”. Designed to accommodate 500,000 visitors, this center meets the current standards of the world’s largest tourist sites (accessibility, related services: catering, parking, shops, etc.). The building (Snohetta agency) fits perfectly into the local topography, and its sober architecture reverses the current trend of cultural establishments to opt for striking architecture (the Guggenheim in Bilbao, the Sydney Opera House, the Louis Vuitton Foundation in Paris, the Cité du Vin in Bordeaux) (Evans 2003; Plaza 2009).

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The promise made to visitors is “to explore and interact with the works of art by following the path of the four teenagers who discovered the cave in the 1940s”. The visit is divided into several phases (see Box 4.2). The first part of the visit involves a guide who welcomes the visitors. The guide takes care of a group (32 people at most) and takes them to discover the cave itself. In high season, a group leaves every 6 minutes to visit the cave (for about 30 minutes). Tickets purchased online are therefore time-stamped (day and time of visit schedule), which avoids any form of waiting for visitors (but requires planning). The guide leads his group on the roof of the building to discover the landscape of the valley as a whole and then accompanies them to a antechamber (the shelter) where they can see an animated film, on a large screen, which recreates the life of the valley 20,000 years ago (the steppe, the animals). At the end of the film, the four teenagers who discovered the cave cross the screen, marking a step back in time. It is 1940, the group discovers the cave by chance. The group of visitors then follows in the footsteps of these young teenagers and enters the cave. The luminous intensity and humidity of the atmosphere plunges the visitor into the heart of Lascaux, as close as possible to the conditions of the “real cave”. This part of the visit follows the standards of a cave visit: explanations made by the guide, answers to questions from the public. At the end of this first part, visitors, equipped with their “visiting companion” (interactive digital tablets with a helmet) are left free: they can wander at their own pace in all the other exhibition rooms. The route is designed to take visitors through four spaces. The first is the Lascaux workshop, where there is an exhibition on eight large walls, each of them representing the main works of the cave (The Great Black Cow, the Apse, the Shaft Scene, etc.). Visitors can touch the walls, take pictures of them and obtain additional information (techniques, interpretations, etc.) with their tablet. Other digital devices set up in this room make it possible to understand the techniques involved in parietal art and facsimiles: a virtual reality model, giant tablets which allow visitors to try out parietal art and test their knowledge, a digital table with video projections which makes it possible to manipulate the objects found in Lascaux, as well as giant screens that explain the impact of human presence on the ecosystem of the original cave. Visitors can leave this space whenever they wish and walk into the Théâtre de l’art pariétal. Small productions await them to take them back to the 19th, 20th, and 21st Centuries, and to explain to them the progress of scientific knowledge on cave art (and the debates that have arisen) over the years. Visitors then walk into a 3D cinema where, equipped with glasses, they can see in 3D the Lascaux cave but also other decorated caves in the world.

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Finally, the last part of the visit to the Galerie de l’Imaginaire questions the links between contemporary and cave art. Immersed in a room of 90 screens which show images of works by renowned artists (Miro, Tàpies, Picasso, etc.), visitors can explore these artworks but also choose their own images and scroll through them. The Galerie de l'Imaginaire also hosts temporary exhibitions of contemporary art. At the end of this visit, visitors can walk into the shop and/or the restaurant/bar. Box 4.2. The steps of a visit to Lascaux IV

The following section analyzes how Lascaux renews the visitor experience through this new Lascaux IV concept. 4.5. Innovation at the service of the visitor experience in Lascaux The short history of Lascaux shows a strong capacity for innovation on the part of the operators, first through the creation of facsimiles, therefore finding an answer to the paradox of protected sites – to host and preserve fragile heritage from large numbers of visitors – and then through the consolidation of expertise and know-how in the creation of facsimiles in internationally recognized AFSPs and by offering an innovative visitor experience. As for this last point, let us analyze how Lascaux renews the visitor experience. 4.5.1. Lascaux and the “prehistoric experience” While visits to Lascaux II or III remain relatively close to the standards of cave visits around the world, Lascaux IV has put visitors at the heart of the construction of the facility, providing the true experience defined above. Succeeding in creating an authentic experience, which logically presupposes an encounter with “the real”, from a copy, nevertheless remains a challenge. But the subterfuge works. And this is explained first of all because the copy is an authentic object (its origin, reality, and authors are certified) and does not “try to pass off as the real one”. The quality of the work carried out by the AFSPs, certified and legitimized, makes the copy authentic1. As Heinich 1 Labelled EPV “entreprise du patrimoine vivant”; awarded by the State, it attests to the quality of artisanal and industrial know-how.

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(2009) explains: “Copies are perfectly acceptable as long as their quality compensates for the break in the link with the original author.” François Hollande, amazed by the work done to reproduce the prehistoric cave, stated: “It is more than a facsimile, it is a work of art!” The idea that the copy was produced by authentic artists, who know and understand the artistic process, reinforces this perception of a unique yet fabricated artistic work. Yves Coppens, admiring the precision of the Lascaux reconstruction, explains in one of his chronicles: The author of this tour de force is called Renaud Sanson... he is a painter himself and he can better understand how these prehistoric men worked, how they created their drawings, how they hesitated, or what were their attempts. Technology allows him to enter the minds of artists and to become one with them in order to seek to understand and reproduce. (Coppens 2010) This authenticity is reinforced by staging: visitors immerse themselves in the landscape of the Vézère valley 40,000 years ago, follow in the footsteps of the four teenagers in 1940, and then enter the cave where the temperature, sounds and luminosity of the copy make it faithful to the original. The mechanisms of hyperreality are mobilized to: Create an illusion that uses a trompe-l’oeil mechanism. The use of staging effects and the spectacular factor relegate the criteria of age and authenticity to the background and emphasize the quality of the experience lived, which can bring the visitor into communication with time. (Malgat, Duval and Gauchon 2015) Visitors feel like they are experiencing something “special”, and the visit seems like a break in their daily life: time is suspended, and their mind calms down starts daydreaming. Once this part of the immersive experience in the cave is over, visitors do not immediately return to reality. To avoid the “disconnection between reality and fiction”, which could prevent the “transfer of heritage between the original and the copy” (Malgat, Duval and Gauchon 2015), thus guaranteeing an authentic experience in Lascaux, the visit continues and visitors increase their knowledge about cave art at their own pace. Digital technologies (3D, touch screens, virtual reality, etc.) and the visitors’ companion come into play. The innovation here lies not so much in the use

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of digital technologies, which today are becoming more and more widespread in cultural venues, but in the idea that technologies allow for an enhanced experience. These are simply tools at the service of the experience. Technologies enrich the experience cognitively (acquiring/deepening knowledge), emotionally (experiencing new sensations through virtual reality, 3D projections, image walls), playfully (manipulation and play) or functionally (helping locate things in space through geolocation or automatically triggering content through the ibeacons). If these digital tools are well integrated into the visit experience, it is because they have been designed following a UX Design type of logic so that they are intuitive and easy, but also because they have been designed to complement human mediation. One of the criticisms leveled at the use of digital technology points out the division they establish between men. In Lascaux, mediators are present and available throughout the tour, to guide and accompany visitors in addition to their visiting companions. 4.5.2. Visitor data to improve the individual experience A second aspect of innovation in customer experience is less visible than the aforementioned elements. The Lascaux operators have indeed been thinking about the collection and analysis of “visitor data” since the equipment was first designed. A much discussed theme in recent years, the Big Data at the heart of the business model of many web merchants is struggling to make inroads in the sector of cultural institutions. Lascaux is at odds with the traditional vision that animates cultural facilities and has integrated this issue very early in the design of digital tools to better manage the visitors’ journey before, during and after the visit. The data collected comes from three platforms: the online sales site, the visiting companion and Open Data (the weather forecast, for example). The website collects part of the visitors’ information (gender, age, nationality, language, place of residence) and behavioral data (day of visit, group size, day of booking, etc.). The visiting companion is a rich source of information about the visit itself: duration, downloaded content, number and type of photos taken, itinerary, sharing on social networks, email address, etc. Finally, Open Data such as the weather forecast is associated with each visitor. Processing this data makes it possible to tailor the customer journey. Before the visit, this data makes it possible to establish a first contact with the visitor and to inform him/her before the visit. Two types of

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information are provided: 30 days before the visit, a team can suggest accommodation or partner tourist sites to accompany visitors as they organize their trip. When the visit approaches, the information exchanged is more practical: travel time, parking, restaurant reservation, and the temperature in the cave, for example. During the visit, the use of the data allows a more personalized visit. The data collected through online booking makes it possible, thanks to the barcode on tickets, to obtain a personalized visitor companion with the right language and the right “level” (the content varies depending on whether a visitor is a child or an adult). In theory, the usage data collected in Lascaux could be processed and give rise, via algorithms, to content recommendations. Indeed, the digitization of content offers access to almost unlimited content, easy to store in a visiting companion, but which can leave visitors perplexed or even frustrated when they confront this abundance with the (brain) time available for the visit. Hyper-choice is indeed a source of uncertainty and risk for consumers (Larceneux et al. 2007). Personalizing the contents of the experience is not effective today in Lascaux, even if in theory nothing prohibits it. If such an approach were to be implemented, it would be necessary to ensure that the recommendation method chosen does not favor the recommendation of mainstream content, appreciated by all to the detriment of more demanding and less popular content which, however, could lead to the discovery of more surprising things. After the visit, visitors can connect to their own virtual space and find content to recall their experience (photos taken thanks to the companion, content viewed, games played, etc.) or extend their visit by consulting content that they have not had time to see during his visit. Sharing buttons on social networks also allow visitors to share their photos on Facebook for example. The use of contextualization data offers the possibility of a personalized post-visit experience and tailored recommendations (books, visits, etc.). One year after the opening, not all the possibilities for exploiting this data have yet been explored, but all the technical applications are in place to do so easily. Ultimately, this data will make it possible to offer personalized content according to the interests detected and/or the visitors’ profiles and (why not?) to show them items for sale in the online store (which does not yet exist). These practices are still new in cultural institutions because they are associated with a commercial vision. However, customer knowledge has

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become a major strategic issue that many cultural organizations overlook in the choice of their strategies. Considering data collection early on, Lascaux has given rise to a real innovation that brings added value to visitors in the management of their journey before, during and after their visit. The fact that, for this approach, Lascaux relied on an e-commerce specialist (Aquitem) enabled it to address a “unique customer” vision. Behind this vision is the idea that the company can collect and use data from different sources (websites, applications, online ticketing, ticketing software, fellow visitors, etc.) but that it has only one single customer database containing all the information of the customer journey. The company can therefore have access, in real time, to all the data of each customer. This vision, which originated in the commercial world, prompted Lascaux to anticipate its data needs (nature, source, processing, etc.) and to structure them for efficient use. Hybridized visions (commercial and non-commercial) encourage innovation and make it possible to imagine marketing uses of data to which a cultural establishment is not accustomed. 4.5.3. Data at the service of the organization’s management The use of contextualization data, provided by the visiting companion, makes it possible to gain, in real time, a detailed knowledge of past experiences, which beforehand could only be obtained in a time-delayed manner through costly opinion surveys. Lascaux’s marketing department has a battery of indicators at its disposal in real time to track visitor profiles, visit times, the most popular content and the least viewed shared rooms or events. In addition to this behavioral data, satisfaction survey data is also available to supplement the information about visitors. To make it easy for teams to use this data in their daily decision-making, a data visualization solution has been implemented. This feature makes it easy to identify relevant information and intuitively mix and match data to build customized and easy-to-read dashboards. This makes it easier for managers to carry out actions. For example, teams quickly detected differences in visit time based on how planned a visit was. The average visit time of 128 minutes increased significantly for visitors who purchased their tickets online and therefore waited for their visit. This data highlights the lack of information provided upstream to potential tourists and has led to the implementation of an information campaign for tourists to help

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them better organize their visit time and plan the time needed for a “complete” visit to Lascaux. This can also be shown by the fact that the time spent on each animation makes it very easy to identify which ones work and which ones are played less. In a very reactive manner, a team of mediators was deployed on the applications that were used less to encourage visitors to discover them and provide additional information on their use if necessary. By way of example, thanks to the data collected, those in charge very quickly realized that attention waned at the end of the journey in the Galerie de l’Imaginaire. Twenty-minute activities led by guide speakers were set up to encourage the discovery of these areas and provide additional information. Data also has a predictive value that, in theory, can help an organization’s management. It is easy to imagine using data to build predictive attendance models. The first analyses showed a very high correspondence between attendance and the weather through the integration of Open Data. Although the actors involved in the tourism industry have empirically been aware of this information for a long time, data provides confirmation and precision. It is easy to establish that the weather influences the visit time, the visitor profile, etc. Once this data has been confirmed, we can imagine adapting the staff and activities according to the three-day weather forecast. This type of scenario now faces some intransigence in Lascaux due to the lack of flexibility in the organization of teams and the fact that the idea of a Data-Driven cultural organization has yet to mature. But Lascaux is a trailblazing leader in this area, as it develops approaches that concern the use of data in the management of the organization. Predictive models have yet to be invented in Lascaux and require a few operating seasons. They will make it possible to predict visitor behavior based on the data collected in order to run things in a more detailed fashion (schedules, opening days, the number of employees, etc.). 4.6. Conclusion Providing memorable consumer experiences is a source of sustainable competitive advantage that can create value. Traditionally excellenceoriented, cultural industries have recently opened up to the concept of visitor experience. We have analyzed the dimensions of this concept and shown how innovation can be achieved through visitor experience. We have shown that cultural institutions are a privileged field of experimentation for

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experiential marketing, but also for the different digital technologies, which many companies are adopting without really providing anything meaningful to the consumer. At heritage sites, these tools renew the visitor experience by providing emotional or cognitive value (Coutelle-Brillet et al. 2018). We have previously shown the need to go beyond a vision of visitor experience confined to the time of the visit, taking charge of the experience throughout a visitor’s journey – before, during and after – and offering personalized experiences. Thus, the skills developed by organizations in the collection and analysis of personal and contextual data offer a tremendous opportunity for innovation and differentiation. Based on the case of Lascaux, we showed how a cultural institution could use digital technologies to renew the visitor experience. According to our analyses, the last act of the present-day episode of Lascaux seems to be good practice, in that it allows the renewal of the visitor experience. First, the project was designed around the visitor experience: an experiential context which could promote the visitor’s immersion in prehistory, but also a collection of visitor data designed upstream to optimize the visitor experience with the different contact points before, during and after the visit. In the management of the experience itself, what seems to be good practice is a measured use of technological tools to complement the visit experience. The heart of the experience lies in the visit of the cave, and Lascaux succeeds in creating an authentic experience from a copy and creating a “striking” emotion associated with this place. At the end of this part of the visit, the mixture of digital devices and human mediation creates the conditions conducive to the visitors’ immersion for a memorable experience (Carù and Cova 2009). Previous work has highlighted the limits of “alldigital” mediation by highlighting the weaknesses of these tools: a break in the experience, social isolation (Heath and Vom Lehm 2008; Pallaud 2017; Coutelle-Brillet et al. 2018). However, these mechanisms offer incomparable possibilities to other mediation tools and cannot be eliminated. At Lascaux, these tools allow visitors to be active in their experience, and thus provide the keys to participation, a guarantee of immersion. The use of human interactions during the journey promotes the use of these tools and a rich experience. Beyond the visit experience, Lascaux thinks in terms of the “itinerary”: visitors are considered before and after their visit because Lascaux helps them remember their experience. Personalized paths offer interesting

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perspectives that have not yet been exploited, but it is good practice to consider upstream the data to be collected. Data collection is becoming a major competitive differentiation issue, with the result that personalized recommendations are required. It is interesting to note that data thinking is often associated with large CCI structures (Deezer, Amazon, etc.), but the Lascaux example shows that it can be conducted at other scales if organizations free themselves from preconceived ideas about their purely commercial use. Lascaux demonstrates that the issue does not involve collecting data in order to integrate it into a business model and derive monetary benefits, but rather using this data to continuously improve the visitor experience. This approach has not been considered by every heritage site, and it deserves to become more widespread. The good idea at Lascaux was to supplement the data collection with a data visualization tool that facilitates the reading of massive data and makes analyses more intuitive. Beyond the walls of its establishment, Lascaux appears as a pivot in its Périgord ecosystem, made up of political actors, hoteliers, tourism and environmental actors. A major player in the economy (job creation with the AFSPs) and tourism, Lascaux is responding particularly well to the changes in the sector, as described above. We bet that it will be a driving force for innovation in this very area. 4.7. References Benavent, C., Evrard, Y. (2002). Extension du domaine de l’expérience. Décisions marketing, 28, 7–11. Benhamou, F., Thesmar, D., Mongin, P., Trainar, P., Gacon, J.Y. (2011). Valoriser le patrimoine culturel de la France. La Documentation française, Paris. Bolton, R.N., McColl-Kennedy, J.R., Cheung, L., Gallan, A., Orsingher, C., Witell, L., Zaki, M. (2018). Customer experience challenges: bringing together digital, physical and social realms. Journal of Service Management, 29(5), 1–33. Carù, A., Cova, B. (2006). How to facilitate immersion in a consumption experience: Appropriation operations and service elements. Journal of Consumer Behaviour: An International Research Review, 5(1), 4–14. Chen, Y. (2008). Possession and access: Consumer desires and value perceptions regarding contemporary art collection and exhibit visits. Journal of Consumer Research, 35(6), 925–940. Chitturi, R., Raghunathan, R., Mahajan, V. (2008). Delight by design: The role of hedonic versus utilitarian benefits. Journal of Marketing, 72(3), 48–63.

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CNIL (2015). Les données, muses et frontières de la création. Lire, écouter, regarder et jouer à l’heure de la personnalisation. Cahier Innovation & Prospective [Online]. Available at: https://www.cnil.fr/sites/default/files/typo/document/ CNIL_CAHIERS_IP3.pdf. [Accessed September 2018]. Conseil général de la Dordogne (2008). Vivre en Périgord, 15, 11 [Online]. Available at: https://www.dordogne.fr/attached_file/componentId/kmelia1/ attachmentId/1134/lang/en/name/perigord_n15.pdf. [Accessed September 2018] Coppens, Y. (2010). Le présent du passé au carré : la fabrication de la préhistoire, 2. Odile Jacob, Paris. Coutelle-Brillet, P., Des Garets, V., Maubisson, L., Rivière, A. (2018). Vers une meilleure compréhension des effets de la réalité augmentée sur l’expérience de visite d’un site culturel : Le cas du Château de Chambord. Actes du Colloque International de l’AFM, Strasbourg. Deng, L., Turner, D.E., Gehling, R., Prince, B. (2010). User experience, satisfaction, and continual usage intention of IT. European Journal of Information Systems, 19(1), 60–75. Edelman, D.C., Singer, M. (2015). Competing on customer journeys. Harvard Business Review, 93(11), 88–100. Evans, G. (2003). Hard-branding the cultural city – From Prado to Prada. International Journal of Urban and Regional Research, 2(27), 417–440. Heath, C., Vom Lehn, D. (2008). Configuring “interactivity”: Enhancing engagement in science centres and museums. Social Studies of Science, 38(1), 63–91. Heinich, N. (1999). Art contemporain et fabrication de l’inauthentique [Online]. Terrain, anthropologie et sciences humaines, (33). Available at: https://journals.openedition.org/terrain/2673. [Accessed September 18]. Hirschman, E.C., Holbrook, M.B. (1986). Expanding the ontology and methodology of research on the consumption experience. In Perspectives on methodology in consumer research, Brinberg, D., Lutz, R.J. (eds). Springer, New York, 213– 251. Holbrook, M.B., Hirschman, E.C. (1982). The experiential aspects of consumption: Consumer fantasies, feelings, and fun. Journal of Consumer Research, 9(2), 132–140. Kolter, N., Kotler, P. (1998). Museum Marketing and Strategy: Designing Missions, Building Audiences, Generating Revenue and Resources. Jossey-Bass, San Francisco. Kwortnik Jr, R.J., Ross Jr, W.T. (2007). The role of positive emotions in experiential decisions. International Journal of Research in Marketing, 24(4), 324–335.

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Larceneux, F., Rieunier, S., Fady, A. (2007). Effet de l’hyperchoix sur le consommateur et effet modérateur de la marque : une application au cas de l’horlogerie bijouterie. Recherche et Applications en Marketing, 22(4), 43–57. Law, E.L.C., Roto, V., Hassenzahl, M., Vermeeren, A.P., Kort, J. (2009). Understanding, scoping and defining user experience: A survey approach. Proceedings of the SIGCHI Conference on Human Factors in Computing Systems. ACM, New York, 719–728. Lemon, K.N., Verhoef, P.C. (2016). Understanding customer experience throughout the customer journey. Journal of Marketing, 80(6), 69–96. Mairesse, F., Tobelem, J.-M., Vessely, P. (2017). Musées et bibliothèques : vers de nouveaux modèles économiques et de gestion. In Modèles économiques des musées et bibliothèques, Yann, N. (ed.). La Documentation française, Paris, 51– 86. Malgat, C., Duval, M., Gauchon, C. (2015). Fac-similés et transfert de patrimonialité. La grotte ornée Chauvet-Pont-d’Arc. Culture & Musées. Muséologie et recherches sur la culture, (25), 141–163. Pallaud, J. (2017). Impact of interactive technologies on stimulating learning experiences in a museum. Information & Management, 54(4), 465–478. Picard, T. (2016). Le poids économique direct de la culture en 2014. Culture chiffres, (1), 1–16. Pine, B.J., Pine, J., Gilmore, J.H. (1999). The Experience Economy: Work is Theatre & Every Business a Stage. Harvard Business Press, Cambridge. Plaza, B. (2009). Bilbao’s art scene and the “Guggenheim effect” revisited. European Planning Studies, 11(17), 1711–1729. Ritzer, G. (1999). Enchanting a Disenchanted World. Pine Forge Press, Thousand Oaks. Roederer, C. (2012). Contribution à la conceptualisation de l’expérience de consommation : émergence des dimensions de l’expérience au travers des récits de vie. Recherche et Applications en Marketing, 27(3), 81–96. Smith, A. (2006). Assessing the contribution of flagship projects to city image change: A quasi-experimental technique. International Journal of Tourism Research, (8), 391–404. Throsby, D. (2001). Economics and Culture. Cambridge University Press, Cambridge. Voorhees, C.M., Fombelle, P.W., Gregoire, Y., Bone, S., Gustafsson, A., Sousa, R., Walkowiak, T. (2017). Service encounters, experiences and the customer journey: Defining the field and a call to expand our lens. Journal of Business Research, 79, 269–280.

5 Tale Me, Green Innovation for the Textile Industry

5.1. Introduction At the beginning of September 2018, the luxury brand Burberry abandoned a widespread practice in the fashion industry, the incineration of unsold items. Indeed, haute couture and luxury brands refuse to offer private sales and discounts. These different commercial practices are at the opposite end of the scale to the values defended by these brands. At the same time, the London firm confirmed the elimination of animal fur from its product lines. The French government is following suit and wishes to ban the destruction of clothing by 2019, in the same way as the law on food waste (law no. 2016-138 of February 11, 2016). Fashion is, after petrochemistry, the most polluting industry in the world1. The environmental emergency invites all actors in the sector to find solutions through green innovations. Green innovations are subject to a semantic plurality (Schiederig et al. 2012; Klewitz and Hansen 2014). The latter is defined as a new or improved process, equipment, product, technique or management system that avoids or reduces environmental impacts (Kemp and Pearson 2007; Horbach 2008; Van Den Bergh et al. 2011). Different degrees of change (effects on the economic system) can be distinguished with regard to the innovation selected (Carrillo-Hermosilla et al. 2010): end-of-pipe (end of cycle), ecoefficiency (subsystem), eco-effectiveness (system). Similarly, we observe Chapter written by Arthur CARÉ. 1 CEO of Global Fashion Agenda – Danish Fashion Institute (2013).

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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different dissemination strategies within markets: Blue Ocean, Red Ocean strategies (Kim and Mauborgne 2004). This chapter aims to illustrate, through the case of a clothing rental company (Tale Me), the mechanisms for introducing green innovation. To do this, we used a qualitative methodological approach. This study focuses on the textile and clothing industry, and more particularly on the start-up Tale Me. Our data comes from databases such as Twitter, Factiva (Belgian and French daily press and fashion and eco-friendly blog articles), and interviews with the company’s employees and various experts. Through a chronological study, we propose an analysis of the strategic choices made by the firm and its impacts on the textile sector. This chapter is structured in five parts. Section 5.2 provides a review of the literature on green innovations and a brief introduction to Blue Ocean strategies. Next, in section 5.3 we present the methodological choices related to a qualitative approach. Section 5.4 describes the textile industry and the impacts it has on the environment. We analyze Tale Me’s strategy in section 5.5. Finally, we propose to review the good practices and lessons that we can learn from the Tale Me case study on the introduction of green innovation in the textile and clothing industry (section 5.6). 5.2. The theoretical framework We note that since the end of the 20th Century, the concept of sustainable development and, more generally, the consideration of the environment, as well as its interdependence with the economy, have aroused growing interest among political authorities, researchers and practitioners. Although recent, this field of research is of growing interest not only within the management sciences, but also among other external disciplines that support research on innovations with an environmental dimension, such as the economic, social, ecological or industrial sciences. We will come back to the concept of green innovation, before focusing on these different natures, to finally describe the strategic framework of the Blue Ocean strategies. 5.2.1. Green innovations: semantic diversity and definition Ecological innovations are the subject of a semantic plurality in the academic literature (Carrillo-Hermosilla et al. 2010; Kemp 2010; Berkhout

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2011; Kemp and Oltra 2011; Schiederig et al. 2012; Klewitz and Hansen 2014; Diaz-Garcia et al. 2015; Xavier et al. 2017). Indeed, they are found under different names: “green innovation”, “sustainable innovation”, “environmental innovation”, “eco-innovation” or “ecological innovation” (Schiederig et al. 2012; Diaz-Garcia et al. 2015). These notions are interchangeable with each other, but this heterogeneity complicates the understanding of the phenomenon and its study. At the same time, some of these concepts have several specific characteristics. The notion of sustainable innovation is the only one of the five to integrate a social dimension along the lines of the concept of sustainable development (Brundtland 1987, p. 24). Schiederig and his coauthors (Schiederig et al. 2012) have shown that the definition of ecoinnovation is more restrictive from an environmental point of view. Indeed, the definitions of this concept by Kemp and Pearson (2007) require a complete life cycle assessment (LCA) to assess the reduction of environmental impacts (Schiederig et al. 2012). The other three concepts (green, environmental and ecological innovation) are less restrictive. In 2015, Diaz-Garcia et al. pointed out that the term environmental innovation was the most commonly used in English, but that the term “eco-innovation” had tended to replace it in recent years. In this chapter, we have chosen to use the concept of green innovation, because the term green innovation is readily associated with the term Blue Ocean, which we will present below. Green innovations are defined as a new or improved process, equipment, product, technique or management system that avoids or reduces environmental impacts (voluntarily or involuntarily) and ecological risks compared to existing alternatives (Kemp and Pearson 2007; Horbach 2008). Green innovation does not focus exclusively on the content of a product or service, but it can be integrated into the various organizational aspects of a company. Thus, the environmental dimension of innovation can appear in different components: products, processes, services, methods, business models, etc. The importance of the environmental nature of innovation raises questions about the different nuances of “green” (degree of greenness) that it can take. Due to unlimited mass production, green innovations must implement economic, ecological and social aspects in order to impose limits on current technology (COP 1–COP 24, Conference of Parties). The reduction of environmental impacts can be achieved in various aspects such as biodiversity conservation, energy management, pollution prevention or recycling development (Chen 2008).

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These green innovations differ from non-green innovations in several respects. One of them is the time frame of feedback on innovation, which is one of the key specificities. Indeed, green innovations are characterized by a longer-term orientation than non-green innovations. Therefore, regulation is particularly interesting in the field of ecology and is therefore one of the main drivers of green innovation (Porter and Van Der Linde 1995; Horbach 2008). Nevertheless, some companies may be reluctant to commit human and financial resources due to the regulatory and economic instability associated with environmental issues. Indeed, even if green innovations improve the financial performance of companies (Kim et al. 2018), these economic gains may take time to materialize. The following section presents a classification of green innovations. 5.2.2. The nature of green innovation Each green innovation is unique. Indeed, several companies participate in different ways in the reduction of the environmental footprint of the same industrial sector. Attempts have been made to build a classification system for green innovations. Here, we will focus on the radical nature of innovation, and in particular its effects. Among other things, we can distinguish between different degrees of change with regard to the innovation selected. For example, in the automotive industry, the increase in the percentage of ethanol accepted by combustion engines does not imply the same structural changes as the renewal of the vehicle fleet and infrastructure induced by electric vehicles. Although incremental, some innovations are still needed to improve environmental quality in the short term and are therefore green innovations. Carrillo-Hermosilla et al. (2010) distinguish three types of innovation (see Figure 5.1) in terms of their effects on the environment and the economic system: end-of-pipe, eco-efficiency (subsystem), and eco-effectiveness (system). End-of-pipe is based on improving existing processes by introducing end-of-pipe technologies to reduce negative environmental impacts (Debref 2018). To illustrate this type of innovation, we can simply imagine the different wastewater treatment systems in textile factories. If an innovation involves, as it does here, an addition of a component to an existing system, then additional costs will be incurred. Subsystemic changes (eco-efficiency) allow less resource use for the production of goods and services while generating less pollution. The objective is to produce as much

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or more with fewer resources, minimizing the volume and harmfulness of the production process, but without changing the inevitable linearity of the system (from cradle to grave2). Thus, in the longer term, profits tend to fade due to rebound effects. For example, a 50% reduction in fuel consumption could lead to a more than proportional increase in the number of vehicles worldwide. On the other hand, systemic innovations (eco-effectiveness) require a more profound overhaul of the existing system. The objective is to generate cyclic systems, from cradle to cradle (Braungart and McDonough 2003) that allow materials to maintain their resource status3. Systemic changes are likely to provide new opportunities to improve sustainability, as new solutions are sought beyond existing production systems. To drive such changes, consumer involvement is essential to enrich the process and propose innovations (Carrillo-Hermosilla et al. 2010).

Environmental impacts

ECO-EFFECTIVENESS Systemic changes

ECO-EFFICIENCY Subsystemic changes

END-OF-PIPE

Environmental sustainability

Economic viability

Adding of components

Radicality of system changes Figure 5.1. A classification of green innovations according to their degree of radicality (source: translated and adapted from (Carillo-Hermosilla et al. 2010))

2 Cradle to the grave: a reference to the environmental impact created by a company’s products and/or activities throughout its life cycle. Life Cycle Assessment (LCA). 3 Source: http://ellenmacarthurfoundation.org.

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Finally, there are different forms of circular economy (simple, double, closed, open, functional). We will describe one of them as an economy of functionality (Gaglio et al. 2011). The specificity of this model lies in the notion of use. Companies convert an activity that involves selling goods into a service activity. A company, by remaining the owner of a product, offers its users a service for which it receives remuneration. For example, Totalboox offers its users the option of paying only for pages read from an e-book. Each page read is debited (and corresponds to a percentage of the book) and remains accessible for life because it is purchased by the consumer. This system combines both economic and environmental benefits for society. To model the system changes that these innovations imply, we will come back to the notion of Blue Ocean strategy and describe one of its associated tools: the strategic framework. 5.2.3. Blue Ocean strategy and the strategic framework Kim and Mauborgne (2004) developed a playful metaphor to describe two competitive environments. In order to characterize the creation of a new market or the exploitation of a new market segment for historical companies, the authors use the expression “blue ocean”. In this case, a company does not compete head-on with existing firms and can therefore operate in a new market space where the sources of profits would be greater, compared to the traditional competitive areas, known as “red  oceans”. These refer to the bloody competition in which companies traditionally engage. The strategic framework developed by the authors is a tool for diagnosis and strategic implementation. Its first function is to represent, by means of a diagram, the characteristics of direct competition (regional and international circuses) and indirect competition (response to the same generic need: entertainment, amusement, etc.). The graph is drawn along two axes. The abscissa axis lists the competition criteria (quite close to the key success factors), while the y-axis weights the performance of the latter. In this graph are inserted the “curve values” of the competition and the company (Cirque du Soleil) as shown in Figure 5.2. The advantage of this framework is that it makes it possible to avoid the mimicry induced by the competition. A company that wants to change the rules of its sector will have to shift its focus from existing customers to non-customers. To meet this challenge, it will choose “exclude” or “reduce” as the criteria on which traditional competition is based and “create” or “reinforce” as the performance criteria

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abandonned by thesee players. Affter these few w theoretical reminders, we will briefly detail d the meethod used foor the analysiis of the Talee Me companny in the textile and a clothing industry.

Figure 5.2. The strrategy canvas s of Cirque du Soleil (source: Kiim and Maubo orgne 2004)

5.3. Th he research h method 5.3.1. A sectoral qualitative e study For the Tale Me M start-up study, we used a quaalitative stuudy. The ons and theeir multidim mensional emergennce of reseaarch on greeen innovatio nature encourage qualitative q r research app proaches (Eiisenhardt 19989; Yin 1994; Edmonson E annd Mcmanuss 2007). Thiss is why mosst academic work on this toppic favors ann approach of o this naturee (Schiederig et al. 2012; DiazGarcia et al. 2015). In additionn, green inno ovations are inherently dynamic phenom mena, and fieeld researchh is still in its infancy and is considered a young field f of reseearch (Klewiitz and Han nsen 2014). It I has recenntly been stated thhat “studies on green innnovation arre still preliminary and that the subject lacks specifiic research with w empiricaal data from surveys and in-depth case stuudies” (Maçaaneiro et al. 2013, 2 p. 179)).

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Here our case study focuses on a creative industry where ecological issues appear to be important. A creative industry4 can be defined as “any industry that originates from individual creativity, skill and talent, and that has the potential to produce wealth and employment through the creation and exploitation of intellectual property”. The globalization of trade in goods and services, the questioning of the welfare state and technological developments (Internet, Netflix, etc.) are increasing the challenges faced by the creative industries (Bouquillon 2010). Indeed, these industries are experiencing significant growth, but also play a predominant role in the dissemination (preservation) of culture on a global scale. It seems interesting to us to add environmental issues that are often relayed to other industries (petrochemical, automotive, agri-food). In our case, we were specifically interested in the textile and clothing industry. 5.3.2. Data collection and processing The selection of the Tale Me case was made following an analysis of primary and secondary data within the textile industry. After a press study, participation in the Avenir congress (circular economy) and the Retex5 project study, the Tale Me case emerged as promising and at odds with existing production systems (economic and environmental). The secondary data collection process first led us to perform an analysis of the microblogging data (Twitter), in order to trace the history of Tale Me and to understand the evolutions and strategic choices made. Indeed, today Twitter is a great source of data that can offer valuable resources because of the spontaneity that this tool allows. This data has been enriched by a second database: Factiva. This database lists 79 articles about Tale Me since its inception (2014). We then supplemented this data with blog articles not present in this database with the Google search engine. We were able to collect interviews, such as that of the founder of a Belgian entrepreneurship blog (1819 Brussels). Finally, our research is based on primary data collected during semidirective interviews with the founder, a company manager and a user of the rental service. This data has allowed us to enrich our knowledge of the company’s history but also of the strategic choices made and to come. In 4 Source: http://unesco.org. 5 REthink, REinvent, REuse TEXtile, INTERREG RETEX project – support for the textile sector in the circular economy.

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addition to these interviews, there was a second series of interviews with three industry experts (the Director of Studies at the French Fashion Institute, the Retex Project Manager and a consultant to major textile groups), and two experts in environmental innovation (a circular economy engineer from ADEME (Agence de l’environnement et de la maîtrise de l’énergie) and a project manager at CD2E6). Respondents working in the start-up provide us with an empirical view of innovation strategies and allow us access to more accurate data about the innovation process. The “experts” profiles provide us with a more general and critical view. In the next two sections, we will first present the history and characteristics of the textile and clothing industry (section 5.4) and then focus on the case of the Tale Me company (section 5.5). 5.4. The textile and clothing industry 5.4.1. Historical landmarks Over the centuries, the world of textiles and clothing has undergone many changes. Today, textiles offer a very wide range of textures and finishes. The emergence of different textile fibers has encouraged the growth of this industry. There are natural materials (cotton, linen, wool) and synthetic materials (polyester, cellulose), each with a specific operating chain (harvesting, stretching, combing, weaving, recycling). The evolution of production tools accelerated greatly in the 18th Century with the creation of the water frame spinning machine, patented by Richard Arkwright in 1768. This mechanical spinner marked the entry of the textile sector into the industrial era. The French economic landscape is diversified. We can find high fashion, ready-to-wear or mass distribution brands. The term “haute couture” appeared in France in the post-war period (1945), but the sector has existed for almost two centuries. Indeed, Charles Frederick Worth is considered to be the father of haute couture. This French fashion designer of British origin reinvented the marketing process (human model, fashion show) and founded the Chambre syndicale de la haute couture parisienne in 1968. Later on, new fashion houses were created on the same model. This very restrictive appellation now has only about fifteen permanent members (Chanel, Dior, etc.). Haute couture is defined by different characteristics, the main ones 6 Creation and development of eco-companies.

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being handwork, custom-made (unique pieces), the number of workshops (at least two), or a minimum of 25 passes per show (with at least two shows per year). Haute couture raised the textile sector to the rank of art while ready-towear began to industrialize the sector. Unlike haute couture, ready-to-wear emerged in the second half of the 20th Century. It was in 1950 that the term prêt-à-porter was imported into France by Jean-Claude Weill, although it was already present at the end of the 19th Century, as described in Émile Zola’s novel Au bonheur des Dames (1883). This phenomenon is characterized by products that are no longer tailor-made but standardized and mass-produced. It later led to the outsourcing of production, the emergence of sales shops and production by collection, but also the development of new skills such as cost calculation or inventory management inherent in the industrialization of the sector. However, there are two types of ready-to-wear: the one qualified as luxury (Hermès, LVMH), where haute couture brands offer standardized products, and the mass one embodied today by brands such as H&M, Zara or Uniqlo. This explanation leads us to a fourth type of change that is currently taking place in the world of textiles and clothing. Indeed, the rise of industrialization and mass consumption has had major environmental repercussions. This mass retail ready-to-wear product is currently known as fast fashion. This qualifier is created to reflect the consequences of the mass production and consumption of the fashion industry. It is an exacerbated mutation of the ready-to-wear model where everything is accelerated. Microcollections are renewed every two to three weeks. Brands like Zara or Primark do not hesitate to offer new products in their stores every day. This system is dependent on overconsumption and therefore the articles are designed for short-term use. On average, a person buys 60% more clothes and keeps them half as long as 15 years ago7. While some old clothing is collected and some is reused (second hand), few clothes are recycled and reused in new clothing. The players involved are invited to rethink all or part of the business, and to innovate to meet the environmental challenges and the economic imperatives that will now be described.

7 Fashion at the Crossroads – Greenpeace International, 2017.

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5.4.2. Textiles, the flagship of French industry Textile professions, although ancestral, are still very much present in our current societies. The fashion industry (textiles and clothing, perfume and cosmetics, optics, watchmaking, jeweler, leather goods and footwear) now represents €150 billion in France, a little more than the automotive and aeronautics industries combined. It also represents €36 billion in added value, or 1.7% of French GDP. Textiles and clothing largely dominate the other fashion industries with a turnover of €67 billion, or 45% of the fashion industry. It is also a huge employment pool, with nearly one million fashionrelated jobs, including 580,000 direct jobs8 (300,000 for textiles and clothing). The fashion sector ranges from creation/manufacturing (haute couture/ready-to-wear) to sales (retail, wholesale). Half of the turnover comes from retail sales (€74 billion). The textile and clothing industry is very complex. It covers all activities related to fiber processing, fabric production (preparation, spinning, weaving), processing (creation, design, production) and marketing. This sector includes many players scattered around the world. In developed countries, a large part of the productive labor force has been relocated to emerging economies to meet financial imperatives. However, we are witnessing some approximation of the productive tool in response to the renewal of the collections. For example, Zara, by introducing the fast fashion model, has chosen to have a large part of its collections produced in Portugal, Morocco or Eastern Europe because production in China, like its competitor H&M, would slow down the renewal of its store shelves. However, in France, for example, it is very difficult to produce on a large scale, because a large part of the skills has disappeared from the territory and production times are greatly affected. In emerging countries, there is a lot of room for growth, as is the case in China and India. Given the emergence of a middle class and the still relatively low per capita expenditure on textiles, growth prospects remain strong. Following a slowdown in the growth of cotton areas due to the limitation of imports in China (in order to liquidate domestic stocks), growth

8 Source: http://fhcm.paris.fr.

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is on the rise again with an increase in cotton prices9. Even so, the share of cotton in the use of synthetic fibers in the industry will continue to decline. However, the increase in production is not without consequences for the environment, as we will now point out. 5.4.3. Fashion is passing, waste remains10 As mentioned above, production and consumption systems are no longer sustainable. Indeed, the fashion industry has been classified as the second most polluting industry after petrochemistry, according to the Danish Fashion Institute. Over the past 15 years, clothing production has approximately doubled, driven by an increase in middle classes around the world and per capita sales in mature economies. This is the famous permanent renewal of products and ranges at a reduced price characteristic of the phenomenon that we nowadays call fast fashion. Upstream, we can see that the textile industry mainly feeds on fossil resources, such as oil, to produce synthetic fibers11. For natural resources, the situation is similar, as a study by the CNRS (Centre national de la recherche scientifique) reminds us. Conventional cotton cultivation uses huge amounts of water for land irrigation as well as large amounts of pesticides and fertilizers. During the production phase, large amounts of energy are also used to process the fibers and produce different textiles. In addition, we can blame textile companies for much of the water pollution that serves as dumpsites for various chemicals. Downstream, as described above, the garment use period is becoming shorter and shorter and consequently the garments produced have a lower durability. Clothing maintenance also causes water pollution and carbon emissions. In Europe, an inhabitant throws away an average of 10 kilos of clothes per year, and France and Belgium are still unable to collect half of them12. Most clothes are exported to Asia and Africa, where they will then end up in landfills. For the rest of the garments collected, the objective is recycling, but this remains technically very difficult for manufacturers, 9 Source: http://coface.fr. 10 Reference to Yves Saint-Laurent's famous quote: “Fashion fades, style is eternal.” 11 Ellen MacArthur Foundation (2017). A new textiles economy: Redesigning fashion’s future. 12 Congrès Avenir, Villeneuve D’Asq, 2017.

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due to the different fibers (synthetic, natural) present in the same garment, each of which requires specific treatment. In addition, large volumes of homogeneous materials are not common, and it remains difficult to operate in a circular economy: textile to textile. Thus, it is necessary to cross the boundaries of industries in order to give a second life to certain materials, as illustrated by the Métisse insulating material13 produced by Le Relais. In a report entitled “A New Textiles Economy: Redesigning Fashion’s Future”, the MacArthur Foundation highlights, through a comparison, the sole impact of the industry’s greenhouse gases in these terms: In 2015, greenhouse gas (GHG) emissions from textiles production totaled 1.2 billion tons of CO2 equivalent, more than those of all international flights and maritime shipping combined. The analysis is clear: textile players must innovate in order to reduce their impact on the environment and perpetuate their business. We will now describe the innovative strategy of Tale Me, a company that is reinventing the way clothing is consumed. 5.5. Ready to rent 5.5.1. Tale Me and clothing rental We have seen that the fashion world is very competitive. Indeed, in addition to entry barriers such as the haute couture label, or the size of large retail ready-to-wear companies, the various players operating in the sector must be creative (renewing their collection several times a year). Like Netflix in the audiovisual industry, or Velib’s Metropole with its self-service bicycle system in the Paris region, Tale Me is innovative because it presents itself as the first shared and responsible collection for motherhood and childhood (both subject to rapid morphological evolution). In order to innovate in the textile industry, it may be interesting to propose a new way of consuming, in order to create a market and jointly reduce the sector’s environmental footprint. After a brief description of the Tale Me concept, we will show the answers that this model provides to environmental questions. 13 Métisse® insulation is the first French bio-sourced insulation, backed by a complete textile recycling chain.

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5.5.1.1. The clothing library We think it is important to look back at the history of Tale Me (see Figure 5.3), from the birth of the idea to the creation of a new structure: Nowner. The idea was born from Anne Balez when she became a mother. Balez did not want to dress her son in clothes produced by large chains and loaded with chemicals. On the other hand, she noted that responsible clothing was difficult to access given its price compared to conventional clothing. Her idea of renting clothes made it possible to overcome this problem by offering organic cotton products, responsibly produced and made in Europe, at a reduced price. Indeed, ecological products are often offered at higher prices than conventional products. The interest of renting is not only limited to price, it also makes it possible to remedy a major barrier to green fashion, as an expert at the French Fashion Institute reminds us: “Ecological fashion, for consumers it’s ugly.”

Figure 5.3. The timeline of Tale Me

The Tale Me concept makes it possible to reconcile ecology and fashion. The rental system meets the consumers’ expectations by giving them the possibility to multiply the use of several aesthetic items during the year. In concrete terms, expectant mothers and young parents subscribe for a predetermined period of time (initially) and select a number of items they

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wish to receive at home. Today, the company offers a subscription at €19 and another at €29. Customers receive three or five pieces per month respectively. Users remain free to increase the number of clothes for rent for an additional seven or five euros depending on the subscription chosen. The company ensures the maintenance of clothing (stains, holes), which represents a significant asset. The rental offer makes sense for these two target customers (pregnant women and young children), because even if one pregnancy follows another, fashion changes; this is also the case for children. To meet this requirement, the company designs its own clothing. Designers are originally selected by the founder to create patterns from which the clothes are made. Production then takes place mainly in Europe. Four years later, the bet was successful, because as Mrs. Balez tells us, the products stand the test of time: Our products have a lifespan of 24 months or more, but after all we have only been around for 4 years, so there are many changes that we have implemented, but we cannot see the results yet. The model, although still marginal, managed to convince ten thousand people and enabled the company to generate a turnover of €700,000 in 2017. This “online clothing library” is a response to the climate change induced by the sector. 5.5.1.2. When degradation goes hand in hand with innovation Environmental damage can be a source of innovation and strategic renewal. The pollution generated by the industry throughout the supply chain can be the subject of many innovations (see Figure 5.4). Thus, in response to the pollution generated during fiber production, a decision was made to select mainly organic or environmentally friendly fibers in order to reduce the use of chemicals. Similarly, the founder refuses to use chemicals during the design phase of her products. In the industry, there is an increase in organic farming, a focus on ecodesign, the integration of recycled fibers (waste, regenerated fibers), but few actors are involved in the downstream part of the supply chain and in the use of products. It is during the use phase that Tale Me stands out from the

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“green”” textile playyers. The heaart of the Talle Me innovvation lies in this last aspect, but b is not lim mited to it.

Figure 5.4. Environm mental impactss in the textile sector (sourcce: adapted fro om Ellen hur Foundation n (2017). A ne ew textiles eco onomy: Redessigning fashion n’s future) MacArth

The lifespan off products iss at the heaart of the buusiness moddel. This implies,, among othher things, ann eco-design n of its prodducts. On siite, local know-how (seamstrresses) is moobilized to wash and repaair clothes uppon their d their diisposal. Even n washing cllothes is a source of return inn order to delay ecologiccal improveement becauuse clothes care is energy consum ming and pollutinng. To overccome this, Tale T Me uses ecologicall products annd more environmentally frieendly cleaninng processes. As far f as the post-use p phaase is concerned, it would w seem that the companny has not yet y found thee solution to o “wrap up” its businesss model. Clothingg is indeed repaired, r butt there comees a time (affter about tw wo years) when cllothes lose tooo many of their t propertiies and no loonger meet thhe needs of userss (protect customers and make them look more beautiful, b etcc.). Fiber recyclinng is a very complexx process as a explainedd above (m materials, technoloogies). The heterogeneity h y of the com mpany’s item ms, materials and low volumess (10,000 iteems in circuulation14) does not (yet) make it possible to ensure the t recyclingg of clothing,, as one of th he company’ss employees tells us: Today, they are stored because theere is no ideal T i solutioon. R Recycling com mpanies wouuld not take the t clothes, since s you havve 14 Sourcee: http://stories..lalibre.be.

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to have a fairly large volume. So today, we haven’t reached the necessary volume to be able to bring the clothes to be recycled, so they are stored for the moment. And even so, recycling would not necessarily be the ideal solution since it still requires a lot of energy, for example it requires a lot of water and electricity to transform clothes. So, for the moment they are stored. However, through certain partnerships, Tale Me is trying to promote an approach like the one used by the company 1083. Used jeans are left in Tale Me shops. They will then be recycled in a spinning mill into new fibers that will in turn be used to make new jeans15. Tale Me greenlights the textile sector at different levels, however the concept faces psychological reluctance on the part of users. As the founder mentioned in an interview: When we present what we propose, everyone thinks it’s a good idea, that it’s great, but there’s a culture of ownership that is very, very strong. It requires people to change their habits, it’s a violent thing. In fact, we propose to reconsider the choices made by the company to extend its hold on the clothing market. 5.5.2. Tale Me casts off The ready-to-wear model has been well established in our societies for nearly a century. Although the rental concept is innovative and embodies a significant number of benefits for consumers and the environment, it is taking hold slowly. The patterns of (over)consumption are very entrenched and possession remains very important to consumers. 5.5.2.1. Towards blue horizons Tale Me offers its users the opportunity to dress in quality clothing at a very affordable price. As the entrepreneur explains in one of her interviews16: 15 Source: http://leparisien.fr. 16 Source: http://1819.brussels.fr.

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Inn subscribingg to our servvice, a consu umer will sppend about thhe saame amount on clothing for their chilldren aged 0 to 4 as if theey h bought thhe clothes in a large, welll-known chaain. Of coursse, had itt is a rental,, but we offfer very high h-quality cloothes: we reent exxpensive cloothes (store value betweeen 50 and 100 euros pper ittem) for 11 euros. e This system makkes it possibble to offer quality q parts at a lower pprice, as i Figure 5.5. shown in

Figure 5.5. Tale Me’’s strategy can nvas (source: adapted from (Kim and Mau uborgne v of thiss figure, see www.iste.co.uk/ w k/pellegrin/cultu ural.zip 2004))). For a color version

This model appeears to be a response to environmenntal issues. T Thus, the o stop the sppiral of fast fashion. numberr of collectioons is greatlyy reduced to Therefoore, there is a small team m of designerrs who take care c of the ddesign of the colllections. Thiis scheme alllows the com mpany to im mprove the aactivities that it considers c im mportant (parrticipative, collaborative,, etc.). It alsso offers the posssibility of geenerating savvings on actiivities that are a too highlyy valued by comppetitors, suchh as marketiing, which generates g verry high costs in mass distribuution and reeady-to-wearr as well as haute-coouture modeels. The companny can thereefore take addvantage off this opporttunity to offfer good quality products, p as the managerr explains:

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Tale Me uses the brand to bring together small creators, people that we discover, who do not necessarily have the possibility of manufacturing in large production [...] this is not a serious problem, because with the rental model, they can give us only a few items. But it is also an opportunity to create new values in order to sail towards a blue ocean, as we can see on the right in Figure 5.5. It is worth noting that Tale Me has succeeded in establishing new performance criteria, which are characteristic of the blue oceans. In this new strategic space, the lack of competition gives the “exploring” firm the ability to dictate the new strategic rules for this market. The founder describes it in these terms: At first it was my own desire and maybe that’s where I may have made a mistake, I don’t think it’s a mistake actually [...], but usually when you start a start-up you say all the time that you have to respond to the clichés and that you don’t have to create a new market. There, we simply created a new market, with all the complications and advantages that this entails. This idea, in complete break with the usual modes of production and consumption, is still very profitable today. Tale Me is responsible for convincing non-customers (thrift-store customers, second-hand clothing customers, etc.) and those dissatisfied by the industry (haute couture and ready-to-wear). For example, the company offers numerous on-site events (six per month on average) to raise awareness among its customers and noncustomers about various themes (environmental, prenatal, etc.) and integrate them into this new system. These new performance criteria are giving rise to a new system that may be able to change the status quo. 5.5.2.2. Towards profound changes in the system We were able to highlight the characteristics that make Tale Me a green innovation. We would now like to show to the reader the radical, if not disruptive, nature of this innovation. Indeed, the new system proposed by the start-up implies modifications or at least the implementation of a parallel sector with its own dimensions (geographical, environmental, economic). Tale Me’s innovation cannot be described as end-of-pipe because the

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resources mobilized are not the same as in the so-called conventional sector. If this were the case, the company’s business would be limited to the rental of existing goods without any change (rental of ready-to-wear or haute couture clothing with the option to purchase, following the example of car leasing). A system with these characteristics would be subject to strong rebound effects, as it would further increase clothing consumption due to the lower prices it implies. What are the effects of the Tale Me innovation? Does innovation induce systemic change? Or on the contrary, does it remain confined to the linear model? In any case, the rental system induces a “relative” circularity within the sector. Indeed, the company’s ability to keep garments alive through maintenance and repair processes is similar to a loop on a stage of the production process, as shown in Figure 5.6. Today, the effects generated by Tale Me are too early to make definitive comments on this point. But it is possible for us to speculate on this subject, in view of the founder’s recent ambitions. Indeed, it seems that different ideas are maturing in society. We have seen that the company has aspired for a time to continue its geographical expansion towards northern Europe (Berlin, Amsterdam) while preserving its current model17, but no announcement about an opening date has been made recently. FIBER PRODUCTION

CLOTHING PRODUCTION

USE

AFTER USE

CLOTHING PRODUCTION

USE

AFTER USE

CLOTHING PRODUCTION

USE

AFTER USE

TALE ME FIBER PRODUCTION TALE ME AND 1083

FIBER PRODUCTION

NOWNER

Figure 5.6. Developing circularity in the textile sector

17 Source [Online]. Available at: lalibre.be. [Accessed October 2018].

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Another avenue mentioned involved extending the project to adult women and men: It is a system designed for a specific category: men who wear three to five shirts a week. These beautiful quality shirts will arrive washed, ironed and hung in their wardrobes every Sunday evening. No need to take care of dry cleaning! But this project is no longer the responsibility of Tale Me, as the manager reveals to us: Yes, we tried [talking about men’s rental], but now Nowner [a new project detailed below] changes a lot of things. Tale Me will really focus on children and pregnant women. In fact, if Rives [a tailor-made men’s brand] wants to rent, they will go through Nowner [...] because we think it’s not up to us, Tale Me, to own the whole market. There are people who know how to make clothes much better than us and we have been learning for four years, by being a manufacturer, by being a repairer, to make clothes that last, and so that’s what we’re going to pass on as knowledge to people who know their brand well, who know their market well, who are fashion specialists [...] so I think Nowner is a real answer to that [....] I think it’s the key to this system. This new project, Nowner, aims to make the skills developed within Tale Me available to the giants of the textile industry18: My dream is that, in five years’ time, these big fast fashion brands will start making eco-designed clothes that last a long time so they can be rented. Because clothes will be worn more. And these brands will realize that you can make more money by renting than by selling. Nowner is currently working on the logistics management of this future platform. Tale Me may then be only the embryo of deeper systemic changes. In the last section of this study on green innovations in the textile industry,

18 (L’avenir 2018). La fin de la fast fashion. L’avenir June 16, 2018.

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we propose to return to the concepts presented at the beginning of this chapter, in order to suggest ways of improving them. 5.6. Case lessons and good practices 5.6.1. “From cradle to plateau” Linear production systems are mainly criticized for the lack of support for their end-of-life production. The expression “from cradle to grave” is used as an analogy to these systems where goods are transformed into waste. In contrast, circular savings are illustrated with the statement “from cradle to cradle”. If the so-called eco-effectiveness green innovations involve the most radical changes in the system, it seems that the different degrees of change deserve to be refined. Indeed, incremental innovations (end-of-pipe) are only remedial and are therefore positioned downstream of the supply chain, while the most radical ones require a redesign of the system as a whole. Green innovations in the interstitial space (see Figure 5.1) can take various forms. For example, we were able to highlight the circularity that Tale Me offers to the textile sector. Although incomplete, it extends the life of clothing and increases the efficiency of its use. In response to previous analogies, we could define this system of production with incomplete circularity as “from cradle to plateau”. Indeed, Tale Me, and also many other firms with a strong environmental conviction, are struggling against a system that seems unshakeable, by proposing a fragmentary overhaul of the sector, even if the Nowner project gives hope for a broader change in the system. According to the classification suggested by Carrillo-Hermosilla et al. (2010), the impact of Tale Me is too marginal. Is it because of the size of the industry today? Or is this an underlying problem? We believe that the latter has the potential to change the system in depth. It would therefore be interesting to determine the process(es) by which these innovations could become more radical. In other words, how can the impact of green innovation within the industry be increased? The Tale Me case gives us something to think about. Indeed, it is possible to increase the impacts of green innovation through collaboration in two ways: horizontal and vertical development. The first solution is to set up partnerships with companies that also offer green innovations with incomplete circularity. For example, the project set

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up between Tale Me and the company 1083 made it possible to extend the loop’s influence on the textile sector, as shown in Figure 5.6. Indeed, the company 1083 is also integrated into a circular production model. However, the green innovation of 1083 mainly affects the production stage of goods, whereas Tale Me focuses on the use of these goods. The association of these two start-ups has made it possible to extend their respective effects along the supply chain. However, even if the model is becoming more radical, it does not seem to increase its impact significantly (no increase in sales). Indeed, the combination of these two innovations accentuates the degree of radicality of the new offer by proposing to pool the use of the products recycled by the company 1083 and owned by Tale Me. The circularity of the model extends horizontally from the production of goods to their use, but it does not lead to a profound change in the industry. We should recall that we are only at the beginning of these functional models and that the effects are likely to change. If these partnerships were to become permanent and multiply along the textile sector, we assume that their models would become more radical. Ultimately, they could lead to systemic change by converting more and more industry players. The other hypothetical solution would be the choice of higher impact collaboration (Figure 5.6). The Nowner project is a perfect example. Successfully convincing the major players in the industry would quickly increase the impact of a green innovation without changing the essence of the innovation. This time, this collaboration serves a completely different purpose. It is no longer a question of extending the effects of innovation along the supply chain, but rather of intensifying its effects. With these partnerships, Nowner is seeking to convert traditional industry players to its model, and therefore to accentuate the effects of its innovation, that is clothing rental. The circularity of innovation is limited this time to the use of products, but it extends vertically by integrating traditional actors into its model. A multiplication of these partnerships would certainly lead to a less extensive (use) but more profound changes in the industry. The positive effects of innovation should then be greater in the short term, as the number of users is expected to increase. However, leasing alone will not be sufficient to make significant environmental improvements. Indeed, changes in practices on the part of existing actors are required. Can we talk about green innovation if the rented clothes are not more environmentally friendly? Fast fashion clothing is not originally designed to last. These partnerships should then encourage traditional companies to change their production model accordingly. As a result, new challenges in supply and inventory

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management, to name only the most obvious, will have to be addressed by Tale Me and its partners. These two development methods are not mutually exclusive, as attested by the case of the company Tale Me, which is involved in these two approaches. Thus, the radicality of the changes induced by a green innovation is not only dependent on their initial characteristics, but also on their modes of dissemination. The establishment of strategic partnerships can bring about broad and profound changes in the industry and thus allow these innovations to move beyond the “plateau”, which limits the influence of the changes generated by these innovations on the production system. It seems that the system changes implied by green innovations are mainly based on a company’s ability to integrate the various players in its sector (environmentally sensitive or not). In other words, the case study invites the companies involved in the development of green innovations to establish key partnerships according to their environmental objectives: – intensifying the radicality of green innovation (change of the broader subsystem), horizontal development; – intensifying the impacts of green innovation on the industry (change of the deeper subsystem), vertical development; – intensifying the radicality and effects of green innovation (systemic change in innovation), vertical and horizontal development. 5.6.2. Green Ocean strategy We think it is important to recall that a firm’s strategic choices do not only respond to environmental (and/or social) issues, but also to economic imperatives. Indeed, a radical green innovation, whatever it may be, will not be able to succeed without meeting the challenges of profitability. That is why we will try to add an environmental dimension to the Blue Ocean strategy concept to identify the effects within the market, and no longer within the industry. The main benefit of the Blue Ocean strategy is to move in the direction of a new market space. The companies operating in this new strategic space can choose their objective: to defend it by erecting entry barriers or by innovating again in order to create a new blue ocean and so on. The interests here are exclusively financial and business-oriented. However, when

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environmental considerations come into play, do the rules remain the same? Indeed, the pursuit of environmental issues raises questions about the objectives pursued by the Blue Ocean strategies, particularly with regard to relations with competitors and consumers. In Table 5.1, we propose a new reading of the blue ocean/red ocean dichotomy. For us, the green ocean is not a blue ocean with new specific characteristics, but a strategy in its own right. Red Ocean Strategy

Blue Ocean Strategy

Act within the existing strategic space

Create a new strategic space

Outperform the competition Leverage existing demand Accept the trade-off between value and cost domination Bring all the company’s activities into line with its strategic choice of differentiation or cost domination

Put competition out of the game Create and conquer new demand Get out of the trade-off between value and cost domination Bring all the company’s activities into line with its strategic choice of differentiation and cost domination

Green Ocean Strategy Promote a new strategic space, in order to attract other actors Attract competition Convince existing demand Integrate a green value Bring all the company’s activities into line with its strategic choice of environmental differentiation

Table 5.1. Blue Ocean strategy or Green Ocean strategy? (source: adapted from Kim and Mauborgne 2004)

If financial objectives guide Blue Ocean strategies, then environmental issues encourage Green Ocean strategies. Therefore, the goal is no longer limited to capturing non-customers, but it also involves persuading existing customers. The quest can be summed up in the search for a fairly convincing offer, both environmentally and economically speaking, to make consumers migrate towards this new offer. Nevertheless, the green strategy does not seem to be representative of green economy companies that combine both economic and environmental objectives. Indeed, economic and ecological issues merge and evolve as these firms develop. If environmental motivations outweigh economic imperatives, we can assume that the difficulty will lie in involving existing competitors and establishing a balanced price between the firm’s environmental ambitions and the price to be paid by consumers. On the contrary, in the event that economic incentives

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take precedence over ecological considerations, a company must be able to exploit the green value created without degrading it. It is difficult to find the right compromise between the pursuit of different interests. Tale Me, for example, seeks to redraw the lines for its own reasons (protection of the environment, the impact of treatments on the skin of young children). The company’s clothing rental model is profitable. The company attracts customers who are dissatisfied with existing models. However, environmental ambitions can lead companies to modify their offer to reach a much larger number of customers. Nowner, for example, aims to extend Tale Me’s offer to all consumers in order to increase the impact of its innovation through its volume of activity rather than through its characteristics. The environmental offer can then be reasonably degraded in order to attract a larger number of customers, through a lower price. Capturing these customers will reduce the environmental footprint of the textile industry through the volume of activity even if the original innovation is somewhat altered. For example, unlike Tale Me, Nowner will be able to offer nonorganic clothing for rent, but if these goods are designed to last, then the environmental benefit will be greater due to the exponential increase in the number of users. The challenge now is to find a satisfactory balance between a company’s economic and environmental aspirations and the target market (niche, mass, etc.). To do this, the founder of the first library of clothing for children and pregnant women chose to develop two distinct organizations: Tale Me and Nowner. The first one proposes a green offer involving more significant systemic changes, but it is limited to a niche market, whereas Nowner seeks to reach the main market through an offer involving more marginal system changes. The Tale Me experiment shows the advantage of splitting organizations according to the targeted markets. It will therefore be possible to develop the offer and adapt the strategy of these companies according to the targeted markets: a Blue Ocean strategy for Tale Me, and a Green Ocean strategy for Nowner. This approach is all the more important in the fashion industry where the consumption of goods is closely linked to brand identity. 5.7. Conclusion The objective of this chapter was to describe the mechanisms used to introduce green innovation into a creative industry. We illustrated our

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comments through the case of Tale Me, a young company that is changing the rules of the textile industry through the rental of clothing. This case shows that the textile sector in its entirety is affected by environmental issues, hence the need to act on several levels: end-of-pipe, eco-efficiency, and eco-effectiveness (Carrillo-Hermosilla et al. 2010). Tale Me aims to reduce the waste generated by the fast fashion system set up by supermarket ready-to-wear companies. Nevertheless, we were able to highlight the difficulties encountered by the founder in developing her concept of a “clothing library” (technical, psychological, financial, etc.). We have looked at the degree of radicality of this innovation, in order to determine its present, potential impact on the current production system. The case highlights the value of using partnerships to increase the impact of green innovations within the industry. This young firm has the potential to overhaul production systems. The rental model is at odds with existing models as described through the strategic framework proposed in this chapter. The company thus evolves in a virgin strategic space (Green Ocean) where it can set its own rules of the game. However, the project is facing difficulties in gaining recognition from as many people as possible. We explain that these obstacles are typical for the implementation of the Green Ocean strategy (in response to the work of Kim and Mauborgne 2004). Indeed, companies with economic and ecological objectives are faced with different paradoxes, which can freeze their development if their strategies are not adapted to the objectives pursued (economic and environmental). We assume that one of the keys to the diffusion of green innovation lies in the implementation of collaborative strategies. The founder’s new project, Nowner, aims to transpose the Tale Me model to industry players of all sizes, especially the most powerful ones. This unexpected association between David and Goliath may be the starting point for a more profound change in our consumption patterns. 5.8. References Berkhout, F. (2011). Eco-innovation: Reflections on an evolving research agenda. International Journal of Technology, Policy and Management, 11(3–4), 191– 197.

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Bouquillion, P., Miège, B., Moeglin, P. (2013). L’industrialisation des biens symboliques  : Les industries créatives en regard des industries culturelles. Presses universitaires de Grenoble, Grenoble. Carrillo-Hermosilla, J., del Río, P., Könnölä, T. (2010). Diversity of ecoinnovations: reflections from selected case studies. Journal of Cleaner Production, 18(10–11), 1073–1083. Chen, Y.-S. (2008). The driver of green innovation and green image – Green core competence. Journal of Business Ethics, 81(3), 531–43. Debref, R. (2018). Environmental Innovation and Ecodesign: Certainties and Controversies. ISTE Ltd., London, and John Wiley & Sons, New York. Díaz-García, C., González-Moreno, Á., Sáez-Martínez, F.J. (2015a). Ecoinnovation: Insights from a literature review. Innovation, 17(1), 6–23. Edmondson, A.C., McManus, S.E. (2007). Methodological fit in management field research. Academy of management review, 32(4), 1246–1264. Eisenhardt, K.M. (1989). Building theories from case study research. The Academy of Management Review, 14(4), 532. Gaglio, G., Lauriol, J., du Tertre, C. (2011). L’économie de la fonctionnalité  : une voie nouvelle vers un développement durable  ? Octarès Éditions, Toulouse. Horbach, J. (2008).  Determinants of environmental innovation – New evidence from German panel data sources. Research Policy, 37(1), 163–73. Kemp, R. (2010). Eco-innovation: Definition, measurement and open research issues. Economia politica, 27(3), 397–420. Kemp, R., Oltra, V. (2011). Research insights and challenges on eco-innovation dynamics. Industry & Innovation, 18(3), 249–53. Kemp, R., Pearson, P. (2007). Final report MEI project about measuring ecoinnovation. UM Merit, Maastricht, 10. Kim, W.C., Mauborgne, R. (2004). Blue Ocean Strategy: How to Create Uncontested Market Space and Make the Competition Irrelevant. Harvard Business Review Press, Boston. Kim, K.H., Kim, M., Qian, C. (2018). Effects of corporate social responsibility on corporate financial performance: A competitive-action perspective. Journal of Management, 44(3), 1097–1118. Klewitz, J., Hansen, E.G. (2014). Sustainability-oriented innovation of SMEs: A systematic review. Journal of Cleaner Production, 65 (February), 57–75. Maçaneiro, M.B., da Cunha, S.K., Balbinot, Z. (2013). Drivers of the adoption of eco-innovations in the pulp, paper, and paper products industry in Brazil. Latin American Business Review, 14(3–4), 179–208.

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McDonough, W. (2003). Cradle to Cradle: Remaking the Way We Make Things. Rodale Press, New York. Porter, M.E., Van Der Linde, C. (1995). Toward a new conception of the environment-competitiveness relationship. Journal of Economic Perspectives, 9(4), 97–118. Schiederig, T., Tietze, F., Herstatt, C. (2012). Green Innovation in technology and innovation management – An exploratory literature review. R&D Management, 42(2), 180–192. Van Den Bergh, J.C.J.M., Truffer, B., Kallis, G. (2011). Environmental innovation and societal transitions: Introduction and overview. Environmental Innovation and Societal Transitions, 1(1), 1–23. Xavier, A.F., Naveiro, R.M., Aoussat, A., Reyes, T. (2017). Systematic literature review of eco-innovation models: Opportunities and recommendations for future research. Journal of Cleaner Production, 149, 1278–1302. Yin, R.K. (1994). Case Study Research: Design and Methods, 2nd edition. Sage Publications, Thousand Oaks.

6 Identity for Innovation: The Strategies of Cinema Sites

6.1. Introduction Since the early 2000s, the film distribution context has undergone a real upheaval. The switch to digital has changed the economic model of the exhibition sector, making cinemas dependent on computers and their endless evolution, whereas the model of film rental by distributors imposed by Charles Pathé on the profession in 1908 had prevailed until then. Competition between cinemas is not the only problem for operators. The selection of the Cannes Film Festival in 2017 included two films produced by Netflix. Their destiny was to be strictly broadcast on the Internet platform without theatrical release: was this a scandal or did this choice merely take into account changes in film production and consumption? These developments include the explosion of streaming*1 (VOD* or peer-to-peer websites*), the development of the ubiquitous access* to films through subscriptions to distribution platforms, and one-upmanship in the production of television series that compete, particularly among the youngest customers, with the cinema offer. These developments raise the question of whether cinemas still have a place in the French landscape? Indeed, the overall figures show a healthy sector. In 25 years, French cinemas have seen a 52% increase in attendance in terms of number of Chapter written by Ève LAMENDOUR. 1 Terms followed by an asterisk are defined in the glossary at the end of the chapter (section 6.6).

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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tickets sold between 1993 and 2018 (CNC*, 2008 and 2019) and an increase in cinema attendance with 41 million viewers in 2018, a 40% increase compared to 1993. France had 2,040 cinema sites in 2018; this coverage of the territory represents a unique position in Europe. To give some elements of comparison, cinema attendance in the United Kingdom (the second largest European market) was 170.6 million in 2017 versus 209.4 million in France. There are currently 774 cinema sites for 4,264 screens in the UK versus 5,981 screens in France (BFI 2018; CNC 2019). In order to provide a more precise answer to the question of the future of the exhibition sector, it seems necessary to go beyond a macroeconomic vision to look at the strategies implemented by French exhibitors. The choice of a limited context seems the more revealing of what an exhibitor’s strategy would induce. Thus, this case study focuses on Nantes, a city that offers a wide variety of film festivals and cinemas. This will help understand the strategies of its different exhibitors according to their status: there are several establishments dependent on an integrated group active in film production and distribution (i.e. Gaumont cinemas in the city center and Pathé or UGC cinemas in the suburbs), arthouse cinemas either dependent on a private network (Katorza belonging to a larger exhibitor) or independent (Concorde) and finally non-commercial cinemas (Cinématographe, the Bonne Garde). In order to grasp the strategies of these different actors, a qualitative method was favored in order to gather the views of the individuals in charge of operating these cinema sites (section 6.2). The impact that this methodological choice has on the analysis will be explained, and then in section 6.3 I shall detail the recent developments in the film industry which prove to be significant and induce new constraints on cinema sites. Finally, in section 6.4, we will see how the strategies of these cinemas are the result of negotiations between these constraints and the identity of each institution, whose DNA is based on the programs offered. 6.2. Methodology Trained as an anthropologist, I do not view fieldwork as a way to test hypotheses. On the contrary, the practice of fieldwork allows me to develop an understanding of the world and possibly to develop concepts to reflect on it. This approach is not a new one in the field of social sciences. The sociological School of Chicago as well as the researchers associated with grounded theory have endorsed this methodology. For instance Glaser and

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Strauss developed the latter approach in a 1967 publication. Their suggestion is to start from the field to develop a conceptualization of social practices. Generating a theory from data means that most hypotheses and concepts not only come from data, but are systematically worked out in relation to the data during the course of the research. (Glaser and Strauss 1967, p. 6) In other words, this approach prevents abstract or decontextualized research. This study is rooted in the activities of cinemas in Nantes seen from the perspective of a moviegoer (from 1997 to today) and in my part as the supervisor for a student film club, developed in partnership with a cinema site in Nantes (between 2002 and 2008). This relative intimacy makes it possible to know the range of programs offered, to observe the diversity of viewers waiting in line, to note their behavior, to perceive some of the constraints weighing on the directors of these cinema sites, and to appreciate their enthusiasm. This knowledge of the field was supplemented by a series of semi-directive interviews with the directors of cinemas in Nantes between April and September 2018. The survey focused on the city’s film offer, as did some similar case studies, such as the one carried out by René Chaplain (2003). However, the strategies of cinema sites in Nantes can only be understood by taking into account the offer made available to the whole urban area (see Figure 6.1).

Key Movie theaters: Complex part of a group Private independent Associa ve

Figure 6.1. A map of the location of cinemas in Nantes and in the neighboring areas. For a color version of this figure, see www.iste.co.uk/pellegrin/cultural.zip

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The map, which indicates the location of the cinemas, shows how in Nantes there are three cinemas in the very center and two establishments, one independent and one community, easily accessible by public transport (located near a tramway line). These urban complexes are supplemented on an urban scale by two multiplexes in the immediate suburbs and various town center establishments (Saint-Herblain, Bouguenais) or shopping malls (located near a ring road leading to the town center). The whole urban area therefore includes 15 cinemas, six of which are non-commercial cinema sites with a single screen, six of which belong to groups (Gaumont-Pathé, UGC, Cinéville), two of which are independent, and one of which is municipal. I shall come back later on to this topography and the consumption practices it induces. This field survey was supplemented by documentary research mainly based on the data published by the CNC, which showed the global developments in France and in the Nantes urban area in relation to the distribution of films in cinemas. I have relied on the annual reports published by the CNC cataloging the data on cinema attendance between 2000 and 2018 (CNC 2001 to 2019) as well as on the summary produced by the French National Institute of Statistics, INSEE (Souquet 2017). As for the survey, all cinema sites in Nantes were initially asked to participate, then a first version of the analysis was submitted to the people interviewed (representing four of the five cinemas in the city) as well as to those managers who were unable or unwilling to take part in the first interview for the city or conurbation (three multiplexes). The analysis has been adapted to take into account the additions and remarks included in this plural review. This dynamic makes it possible to reinforce the fragile knowledge that would derive from an approach conducted by a single researcher. Such a field-based approach to strategy makes it possible to grasp a strategy in action. It makes it possible to perceive how it is elaborated by those who deploy it in a daily life made of long working hours and a multiplicity of tasks. The limitations of this method make it difficult or even impossible to draw a staff map of strategies according to a preestablished model. Before delving into the details that characterize these strategies on a daily basis, let us look at the context in which they are designed.

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6.3. A changing industry Cinema is an industry marked by the models defined at the turn of the 19th and 20th Centuries both in its economy and in the values of those who make it their profession. While some predicted its end in the early 1990s, when cinema attendance was at its lowest, it experienced a sustained rebound thanks to the momentum created by the development of multiplexes*. A quick look at the history of this industry allows us to understand some of its specific characteristics and to shed light on the very strong ethos that characterizes its main players – something that will be found in the cinema located in the Nantes area. This ethos reflects the longstanding and ever-active tension between art and industry that drives this sector of activity. We will come back to this point later. The film industry in France is organized according to a model established at the very beginning of the 20th Century under the impetus of the first major world firms, which were rapidly moving away from the economic model on which the inventors of the film industry had relied. The latter, the Lumière brothers, tried to protect their invention by opting for a commercialization in the form of a package offered to their commercial representatives all over the world. The use of the equipment (camera and films) would be rented to them, and an operator would be in charge of handling it in order to keep control of the patent and its exploitation. Their competitors, such as Léon Gaumont and Charles Pathé among many others, later moved towards a vertical diversification strategy that still defines the sector in three phases: film production, distribution, and then theatrical exhibition. Some players are specialized in one of these phases while others are present throughout the chain. Thus, the CGR group, created in 1966 in La Rochelle, has specialized in exhibition and is now a major player. Through the acquisition of Cap’Cinéma in 2017, the group includes 72 cinema sites, representing, according to Le Film français, “the leading French exhibitor in terms of number of establishments”2. Other historical players have maintained a vertical diversification strategy, such as the Pathé group, producer, film distributor, and owner of the Pathé and Gaumont cinema sites. In addition to these players, there are specialized companies, which are defined as niche players in business ecosystem analysis (Tellier 2015). These 2 Le Film français, November 16, 2017.

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are, for example, post-production companies or carriers (in the age of 35 mm film releases). Another type of legacy has recently been turned upside down: Charles Pathé had managed to maintain his dominant position on world film production in 1908 by imposing the rental of copies. A producer, instead of having to sell a very large number of film copies to cinemas, had then to develop a distribution activity by renting a limited number of copies that circulated in networks of cinemas, some of which benefited from the first exclusive exploitation of a film while other cinemas had to wait for the second exclusive or even later to be able to broadcast the film. Pathé was thus able to get rid of some of these competitors unable to adapt to market change. This led to the disappearance of Starfilm, Georges Méliés’s company3. The arrival of digital technology and its deployment, which was completed in 2014, had a major impact when all 2,020 French cinemas were equipped with at least one screen for digital broadcasting. Rental of a 35 mm copy was no longer necessary. Filming in 35 mm, making copies, as well as the work of specialized transporters and projectionists have become obsolete. Cinema sites, which until then had sometimes relied on old projectors, were very autonomous in the maintenance of the equipment, which required mechanical skills within the projectionists’ reach. Technological alteration is significantly changing the situation for cinema sites by making them dependent on software and hardware suppliers (Le Blanc 2006; Sorrel 2014). The entire sector and the public authorities that co-managed it in France have taken into consideration these upheavals (Demil and Leca 2003). It led in particular to the implementation of a financial support measure for cinema sites via the virtual copy fee system (or VPF*). This new resource seems to have a rather uneven impact on the exhibitors’ revenues depending on the size of the establishment and the date of the digital switchover: the measure benefits groups more than independents and more those who have delayed digitization than early innovators (Souquet 2017). This industry in France can be described as a bipolar system that opposes the actors of a pure business model and actors who support cinema. The

3 We refer in particular to Léon Gaumont’s letters commenting on the revolution brought about by Pathé and witnessing the collapse of Starfilm. BIFI Archives (Bibliothèque du Film). That was the subject of Martin Scorcese’s 3D film Hugo in 2011.

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former category includes groups operating multiplexes for which the income from a secondary activity, that is selling candy, which accounts for around 10 to 15% of turnover, generates a significant margin. There are also cinemas operated by groups active in film production. This vertical integration makes it possible to make films produced in-house and kept on the screens of a group’s multiplexes profitable. It secures their success in cinemas and reduces access to the screenings of films produced by competitors. Among the latter, there are community, municipal and independent cinemas as well as arthouse cinemas* which belong to commercial groups (Bourgatte 2012). One may call them activists. This distinction may seem too simplistic. It echoes the opposed types of ethos mentioned above. The testimony of director Marcel L’Herbier more makes it possible to grasp the constancy of these antagonistic stances. In a 1937 interview4, L’Herbier, mortified, recalled how Léon Gaumont compared his activity as a film producer/distributor to that of a macaroni merchant. L’Herbier’s reaction was in line with the positions taken by a group of film professionals seven decades later. Indeed, in 2008, a French collective, which included a scriptwriter and directors, producers, distributors and exhibitors, signed a petition under the name of “the Club des 13”. Their aim was to denounce the excesses of the film industry. Their remarks expressed a rejection, similar to L’Herbier’s, of industrial culture and its supporters: The public’s relationship to artworks has changed profoundly over the past 10 or 15 years. And we are witnessing forms of acculturation that are one with an ambient anti-intellectualism and a progressive transformation of all cultural objects into products of rapid consumption.5 The existence of these two radicalized positions does not exclude that the various actors in the industry share a taste for films, but it does reflect significant differences in behavior. Thus, speaking up does not seem to be part of the prerogatives of multiplex directors. On the contrary, it is still a common practice in the community movement maintained through the training offered to the staff of the community cinemas as part of film

4 L’Époque, August 30, 1937 in BIFI, fonds Gaumont LG42 B12. 5 Le Club des 13, 2008, p. 151.

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education. Clearly, supporters of cinema as art have something to say about cinema when other actors in the industry do not want to join the conversation. Thus, out of the actors we asked to interview during this survey, only the activists were available6. This specific dimension of the activists is far from exceptional in the French landscape where 56% of establishments are non-profit7. However, the militant aspect cannot be reduced to the corporate status of cinema sites. And the private cinema directors I met testify to the same commitment. What does one see in French cinemas? Here again, the offer remains quite distinct in terms of diversity from what can be observed abroad, despite a clear increase in the market share of American films: 52% of tickets sold in 2015 compared to 36% of tickets sold for French films and 12% for films from other nationalities. This development can be understood in part in relation to the increase in the number of annual releases. There were 693 unpublished films released in 2017 compared to 544 in 2000 (CNC data). This acceleration in the competition between films makes it more difficult for cinema sites to access films that do not benefit from significant advertising support. It also significantly reduces the screening period of films in cinemas (with the exception of films produced by integrated groups with their own exhibition network). It affects in particular what some have called “middle-of-the-road films” (Le Club des 13, 2008), meaning films that are neither blockbusters or elitist films. In this context, “a cinema is no longer a goal but a means, a showcase aimed at future exploitation on other media”8. How do these complex power relations play out at the local level? This is what the Nantes case will help us understand. Indeed, for the study, Nantes has the advantage of having a particular cinematographic history.

6 The directors of multiplexes in the city and the Parisian headquarters did not answer my requests when the director of the multiplex in the city center indicated that she was not qualified to answer as she had no power to take decisions about the policies of her cinema. 7 (Souquet 2017). The number of non-profit cinemas increased by 4% between 2005 and 2015. Often single-screen and more established in rural areas, these cinemas represent less than 15% of tickets sold, but their number is increasing. 8 Le Club des 13, op. cit. , p. 196.

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6.4. The identity and strategy of cinema sites: tensions in Nantes Lola goes to the cinema one afternoon in Jacques Demy’s eponymous film. It is 1961, she is beautiful, and she is going to the Katorza. At the end of the 1960s, there were still 21 cinema sites in Nantes. In 2016, the CNC listed five cinemas in Nantes and 24 screens. If access to films appears to be the same despite the population movements that have contributed to the strong development of this urban area, practices have changed. Three themes account for the strategies implemented: the polarization of film practice, the tangible reality of cinema sites, and their programs. 6.4.1. The tension between city-center and periphery Cinema sites in the city have a strong identity linked to their age. The Katorza, which Demy’s film echoes, dates from 1920 but was founded as a fairground cinema in 1898. The downtown Apollo UGC, which closed in 2003, was inaugurated in 1908 and the Bonne Garde is a cinema established in 1927 (see Table 6.1). In the suburbs there are two types of cinema sites: community or municipal cinemas versus multiplexes. It is the latter type of cinema that attracts the vast majority of cinema audiences. Thus, the attendance index (the number of tickets sold per inhabitant) changes very clearly depending on whether one considers the city (3.65 tickets sold per inhabitant per year in 2016) or the urban area (6.04). This consumption gap is explained in particular by the offer of multiplexes oriented towards mainstream films and by the appeal of these cinemas for young audiences. You’ll never get Fast and Furious 6 at the Gaumont downtown. I think there is also a tacit agreement with the city of Nantes – well, nobody minds that the Fast and Furious 6 viewers are not in the city center.9 (Director, a downtown cinema) The audience in downtown Gaumont is not the same as in the suburbs. It’s not the Pôle Sud. I don’t know what movie it was anymore. There was a film that was worse than the Ch’ti family: The magic Tuche10, which is still the rock bottom of cinema. The magic Tuche at the Pôle Sud cinema sites did… Well,

9 All the verbatim excerpts are based on the interviews conducted as part of this study. 10 French title: Les Tuches 3. Released in 2018.

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when we sell 5,000 tickets a week, that’s a good week. I think they sold 5,000 tickets on the first day. Well, that’s crazy. Pôle Sud is an independent multiplex opened in September 2003 on the initiative of a manager who owns a hypermarket affiliated with the Leclerc brand. The gap between the city and the suburbs can be observed in the distribution of the audience. While the city and the urban area are growing in terms of population, the number of tickets sold decreased by 41% between 2000 and 2016 in Nantes, whereas it increased by 14% over the entire urban area to reach 3.7 million tickets sold in 2016, thus benefiting the cinema sites in the suburbs. The opposition between the commercial logic of cinema and the militant commitment embodied in the Gaumont-L’Herbier quarrel seems to play out again here in the radicality of the positions expressed by the actors. The notable opposition heard during the interviews is geographic11 (the center versus the suburbs), social (the inhabitants of the city center – students, executives, retirees versus the people living the suburbs – families, young people), and cultural (cinephiles versus consumers). The two areas, the center and the suburbs, seem to have increasingly less porous borders. Thus, one of the multiplexes in the suburbs seems to deploy an atypical strategy that aims to reconcile the two positions, without success in the eyes of other managers. I also heard that the UGC was going to move, that it wanted to stay in Nantes but change its location because the area there apparently is more and more complicated. It’s in front of the Pathé, you see. It’s not an easy location. More arthouse than the Pathé there evidently. Nothing to do with it. But who’s going there? So, they actually played the original-language card, but they haven’t found their audience at all. The UGC group was active in downtown Nantes, after the transformation of the Apollo into a five-screen complex in 1976. But it closed this cinema site in 2003 (see Table 6.1). At the same time, the group opened a multiplex in the Atlantis commercial area west of the city in 1996, while its competitor 11 For implementation strategies, see Roy (2008).

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Pathé did the same thing. Its possible future move also corresponds to the movements of French supermarkets, which sell food and cleaning products: the brands have left city centers to open hypermarkets in the suburbs before renewing the offer of supermarkets in city centers in recent years. The independent director of the Concorde draws a parallel between cinemas and mass distribution, before continuing: The offer of very large cinemas is no longer valid today. [...] The major exhibitors are carrying out this analysis, and we see many projects developing in this direction. The strategy of these groups in city centers is to buy out independent cinemas. They will dry up the economy of independent cinemas and then proceed with the buyout. The fate of Caen’s last independent cinema is an example of this. Cinema

Number of screens

Number of seats

Establishment

Status

Attendance 2017

Bonne Garde

1

300

1927

Association

23,000

1

146

1908

Association

53,000

4

286

1916

Independent

120,000

1 820

1963

PathéGaumont Group

6

886

1920 (1898: barrack)

Soredic Group (Cinéville)

253,000

1 in 1908

1,700 in 1908

1908

UGC Group

Closed on 30/11/2003

Cinématographe

Concorde

1 in 1963 Gaumont

Katorza

UGC Apollo

6 in 1977 12 in 1995

5 in 1976

1,230 in 1976

Table 6.1. Cinemas in the city center (sources: CNC except attendance in 2017: statement by venue directors)

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The city’s cinephile culture is noticed by the venue directors and is even at the center of a paternity claim: What struck me when I arrived was the cinephilia. That’s the level of love of cinema here. [...] It is greatly supported by the fact that cinema is part of the city’s cultural policy. And there is this festival policy that keeps the audience curious about films that are not advertised or less advertised. (Director, the Katorza) Question: Do we have a Nantes love of cinema? Answer: I think so and I hope that – I think that we are a little bit responsible for it. When we receive guests, they are always surprised by the type of audience they have in front of them. We have a younger audience than anywhere else. Every guest tells us that. (Director, Cinématographe) This culture is perceptible in the good reception of the offer of films broadcast in their original version and in the multiplicity of festivals partly hosted by teams of volunteers, the Univerciné festivals developed by the university (i.e. the British film festival, the German or Italian film festival, etc), the Festival des Trois Continents, the Spanish Film Festival, the CinéPride, etc. 6.4.2. The magic of cinema sites In such an urban context, the positioning of cinema sites is based on two main criteria: the physical location of a cinema and the choice of films offered. The Gaumont is the only downtown multiplex, and the comfort it offers to its audience is outstanding (screen size, sound quality, seating comfort). Like the multiplexes in the suburbs, it offers a cinema experience that involves taking care of the audience from the payment points at the entrance and includes the consumption of sweets and drinks. This standardized care, regularly evaluated by mystery shopper studies, corresponds to the expectations of some audiences who are not aware of the codes of moviebuffs and expect a service like that offered in a franchised store, which does not represent a symbolic risk. The “no-entry” effect related to the unawareness of the codes plays a major role in terms of access to cultural

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and/or commercial sites. For example, it is noticeable during film festivals where the accreditation badges worn by some viewers have a stifling effect on others: “We wonder if it’s actually for us12”. Gaumont responds to these fears with a calibrated offer and an ideal location (immediate proximity to the tramway, a car park, and stores such as FNAC13, whose purpose is to reduce the complexity of access to culture). Five minutes’ walk from this cinema, there are two emblematic establishments of Nantes’s love of cinema. On the one hand, there’s the Katorza, an arthouse cinema belonging to the SOREDIC group of multiplexes Cinéville and on the other hand, the Cinématographe, a community cinema. The former has six screens, half as many as the Gaumont, while the latter has only one screen and does not have a real entrance hall. Located on the edge of the pedestrian district, the Katorza is masked by an imposing 19th Century opera house. This cinema often remains unknown or inaccessible to some of the city’s 54,000 or so students14, although a third of its audience is in the 15–35 age group15. It has a positive reputation among cinephile audiences made up of regulars, half of whom are over 50 years old. This is “a much more assiduous audience than the national average, fond of the Katorza experience”, where “40% of the audience participate in at least one Katorza event over the year”. The attachment of the audience was particularly evident when the frescoes on the façade of the cinema were changed. It’s funny, the emotional attachment to the Katorza. When they [street artists] just painted the walls white, a 20 minutes16 journalist took a picture that was posted on the newspaper’s website. It generated an outcry. I had to post the picture on our Facebook page and say, ‘Don’t worry, we’re preparing the fresco.’ There were 9,000 people who responded. This is the

12 Survey of festival-goers (Lamendour 2015). 13 The French equivalent of HMV or Virgin stores. 14 Fig. 2016, City of Nantes. 15 According to the audience study conducted at the request of the cinema in 2017. The following figures and quotes are from this survey. 16 A free daily newspaper in French, financed exclusively by advertisement.

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most popular post on our Facebook page. (Director, the Katorza) Currently situated in the triangle formed by the Bouffay district, the castle and the cathedral, the Cinématographe benefits from a cinema site that is as much a constraint as an emblem. Located in a former Carmelite chapel, this cinema is the very expression of a hallowed cinema. The audience walks in through the facade of a place of worship to watch landmark films. As the cinema is limited to a single screen, the association in charge is planning a future move to show its programs on two screens. ... We’re at saturation point. Saturation indicators have been flashing red for five years. (Director, Cinématographe) Question: There is a public attachment to this cinema that is very particular? Answer: Yeah, it’s going to be complicated when we move. That’ll be what we have to deliver. We think that the essence of the Cinématographe is what is on the screen. So, we always say that we will only regret the building. It will be better for us, for the viewers, for everyone. Theoretically, there will be a decent entrance hall so that people will be able to queue up without having to stand in the rain or being run over by cars when they stand in the street. Being able to talk in the lobby when a movie is on is not bad either. There you go. I often take the example of the Cinémathèque [in Paris], when they left Chaillot, everyone was against the move, it was a scandal, and six months later no one was talking about it anymore. (Director, Cinématographe) Two neighborhood cinemas are still open in Nantes, i.e. the Concorde and the Bonne Garde. The first, like the Cinématographe but on another economic model, has now reached saturation point and has no room for improvement in terms of occupancy rates. A family cinema, according to a model that is becoming increasingly rare in France, the Concorde, bought in 1984 by the Clochard family, is now run by their son and his wife. Its location near the tramway line that serves the northwestern districts of the city and the Atlantis shopping center, where two multiplexes are located, makes the Concorde feel like the last neighborhood cinema before the

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suburbs. For a long time, people getting off the tramway were faced with large graffiti that read: “Culture is expensive? Try ignorance.” Probably unrelated to cinema, the slogan set the tone for what the Concorde offers: a place to meet, “a cinema in the city as a catalyst for debate” as defined by its director. Its audience covers a wider spectrum than the neighborhood. Its profile is older, more qualified and wealthier than average. The Katorza shares some of this audience. The desire to involve the audience in the life of cinema is strong. Finally, Le Bonne Garde is a neighborhood cinema in the south of the Loire that competes with the Saint-Paul in Rezé. The association has 80 volunteers and one employee. The cinema has a dual purpose, serving both as a cinema and a variety show that finances the association’s other activities. “Ten to fifteen people run the cinema. And, despite the fact that the cinema site has to share the screen with a second activity (i.e. cabaret), its film audience has increased significantly in two years, from 13,000 to 20,000 tickets sold in 2017. The neighborhood’s audience is diverse, it includes more women, and its members are ‘definitely older’. All age groups regularly go to the cinema except teenagers and young parents.” 6.4.3. Programs, the DNA of cinema sites Programs are at the heart of the identity of cinema sites and their strategy. They are based on a triple type of logic: the choice of films, the option to show original versions or the dubbed French version, and the broadcasting schedules (see Table 6.2). Cinemas

Gaumont

Choice of films

o.v./F.v./F.v.F.s17

Evening schedules

Mainstream + arthouse

Change of strategy at the national level around 2006/2008: F.v. + o.v.

Standard 8pm/10pm schedule

17 The meaning of the abbreviations is as follows: o.v. original version; F.v. French version; F.v.F.s: French version French subtitles.

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Katorza

Arthouse + mainstream

o.v.

Concorde

Arthouse + documentary + mainstream

o.v.

Cinématographe

Landmark films + “School and cinema”

Bonne Garde

Movies released 5 weeks beforehand + “School and cinema”

o.v.

Progressive transition at 7pm/9pm 6:45pm/8:45pm no shows at 10pm 6:30pm/8:30pm– 8:45pm 7pm/9pm

o.v. “adult-only audience” Deaf and hard of hearing shows (F.v.F.s.)

6pm/8pm or 8:30pm

Table 6.2. Strategic choices

The Gaumont cinemas’ aggressive strategy on a national scale has had a significant impact in Nantes. The end of the 2000s saw the disappearance of what seemed to be a gentleman agreement, namely the distribution of films in the province between arthouse cinemas that had the quasi-monopoly of o.v. and mainstream cinemas whose programs included for the most part F.v. films, as Parisian audiences already had access to o.v. movies regardless of the cinema sites. Thus, the Gaumont cinemas managed to appeal to an audience of o.v. lovers. Katorza is the cinema that has been most affected by this change. The switch to digital has since then accentuated this offer by allowing cinemas to screen films in both French and original versions without increasing the number of copies. The Katorza saw a decrease of 40,000 tickets sold, a figure that has slightly improved since. [...] At one point the main exhibitors said to themselves: “Arthouse films are like a cake, we have to have our slice.” (Director, the Katorza) An example helps to shed light on the Gaumont’s strategy: over a week of school holidays, this cinema shows, among other things, the fantastic film

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Venom in o.v., F.v., 3D and 2D in five daily showings alongside the Cold War drama by Polish director Pawlikovsky in o.v. over six daily showings and the French comedy Nothing to Hide18, which also includes six daily showings. In addition, the Gaumont offers two evening showings, at 8 pm and 10 pm, in accordance with the French programming practice which is, however, evolving in all the other cinemas in Nantes. Besides, the choice of schedules has changed, and the Katorza has followed this trend, which is global today, i.e. 10 pm showings no longer work. [...] The Gaumont continues to offer “late” showings even if this costs, because it is not profitable. Today, the same film can be found in o.v. at the Katorza and Gaumont, so in locations five minutes away from each other. It’s also going to be a scheduling battle. Very simply put, for me today, as a moviegoer, leaving the cinema at 11:30 pm is too late. I prefer an 8:00 pm showing. So, if I have a choice, I’ll go to Gaumont’s for the same film, whereas I prefer to go to the Katorza. This strategy destabilizes competition by cutting back on the arthouse positioning of private cinemas, which must balance their balance sheets. The evolution of the Katorza is in this sense a strategy of reaction. This is a cinema classified as arthouse, and its director considers that it has “much less visibility in terms of broadcasting policy” because of the Gaumont’s programs and, upstream, because of the choices of distributors who negotiate the release of their films nationally with Gaumont, Pathé, and UGC before thinking of Cinédiffusion, which is in charge of the programs of Soredic cinemas, among which the Katorza is the cultural and arthouse exception. The identity of the cinema is determined by its reputation and by initiatives that cover a wide spectrum: from showings for young parents accompanied by babies to Absurdist shows on Thursday evenings, to Univerciné festivals organized in collaboration with volunteer university students and lecturers, to the publication of a monthly magazine called Rosebud. People who want to see movies by Ken Loach in Nantes go to the Katorza, not the Gaumont. It’s the same for Almodóvar. 18 French title: Le Jeu, release in 2018.

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However, it’s not that the Gaumont doesn’t sell any tickets, but this is the way it is. (Director, the Katorza) The Katorza benefits from two subsidies linked to its programs, that is the “Art & Essai” (arthouse) and the “Europa cinemas” subsidies. However, its programs have been restructured with the aim of finding some middle ground, including fewer documentaries and films that are “more accessible” or less on the fringes of cinema. [...] We are attacked on the left by the Concorde, on the right by the Gaumont. Well, not attacked but stung. The only ones who attack us ideologically are those that we’re not really in competition with, the Cinématographe. (Director, the Katorza) Economically, it’s very difficult to find a happy medium for this cinema site. But really, I think that to make this cinema profitable, they said to themselves, “We can make a little more money on the commercial side, come on, we’ll do that, but our image is so solid that we won’t lose out.” And this cinema knows how to be welcoming enough that people can go with their parents or with her children. (Former Director) For the past 3 years, it seems that we’ve crossed the 250,000 mark again, so programs involve pretty delicate balances. Because the economic structure of the Katorza is based on two subsidies. It’s the arthouse one and the Europa cinemas one. And that represents 10% of turnover for the Katorza, whereas my colleagues working at the multiplexes have 0% subsidies but receive 15% of their revenue from selling sweets. (Current Director) In this context, Le Concorde, whose director is also a programmer for independent cinemas in France, has developed an active offer that is visible to the public and distributors alike. It involves “responding to what people want to see and making people discover things they don’t want to see”. In its program, we can see less the taste of the programmer-director – as is the case for the Cinématographe – than a personal conviction that it is necessary to show films that would have no such luck elsewhere.

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I screen a lot of movies that I don’t like. There is no censorship. (Director, the Concorde) Films that are a bit less mainstream, but not that much either, will be shown be at the Concorde. That’s a real change. (Former Director, the Katorza) Thus, the Icelandic film Rams, winner of the prize Un Certain Regard at Cannes in 2015, sold 2,000 tickets when it was screened at the Concorde, which is a unique figure for the film’s national release. This example shows how this cinema has built credibility in the eyes of distributors. However, its director stresses the fact that there is “no negotiating ability, just a balance of power” in a context where the number of films released increases to over 700 films per year while the number of screens does not increase. Then, this balance of power involves “bullying in both directions”: cinemas pressuring distributors to get the films, and distributors pressuring cinemas to ensure the release of the films. UGC, Gaumont-Pathé, and Studio Canal give priority to their main customers. Studio Canal sells 80% of its tickets with the five major French operating groups. Resisting the strength of large groups is a lot of work. (Director, the Concorde) To support this proactive programming policy, the Concorde has developed a sustained programming policy. The strategy of community cinema is different. Escaping the diktat of the market, they contribute to the diversity of the offer in Nantes by offering particularly low admission prices and keeping a very active network alive: the Bonne Garde is thus a member of the Cinématographe’s board of directors as well as one of the 35 member cinemas of SCALA (Salles de cinéma associatives de Loire-Atlantique, or community cinema sites in the local French department) which promotes the dissemination of arthouse, landmark, and children’s films across the region. This mission of the Departmental Council has been entrusted to the Cinématographe since 2006. The Bonne Garde thus benefits from the previews organized by SCALA every two months over a period of one to three days. Thus, the Bonne Garde relies on a programming committee composed of eight people between the ages of 18 and 70 who meet monthly to determine the choice of films. The team says they “watch a lot of movies”: six films a day during previews, two

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to three a day during festivals and at least once a week in cinema sites. With the support of a broadcaster, Cinédiffusion (Soredic group), this cinema offers “an addition to the Nantes landscape”: The identity of cinema is us, it’s not the broadcaster. [...] We are getting our way more and more often. We have a lot independence, it’s great. (A member of the programming committee) The program is “modest and different”, oriented in particular towards young audiences through the choice of films (for 2- to 12-year-olds) and as part of the School and Film initiative. It also addresses environmental issues through film debates, it reaches 30- to 40-year-olds with a range of quirky films, and it manages to attract 20- to 30-year-olds to events, such as the monthly cycle Un film-une mousse (one film-one beer) or film nights like OSS 117, Fight Club or Delusions of Grandeur. It also offers viewers the opportunity to catch up on films that they may have missed during their initial release by showing films in their second release, that is, with a fiveweek delay compared to the main cinemas in the city center. Finally, the Cinématographe claims a role as a hothouse for cinema in Nantes. Its programs dedicated to landmark films give it a specific positioning, “a very specialized niche”: Nantes is the leading city in France for landmark cinema. So that’s clearly us. In fact, last year, the CNC released a study on landmark cinema. Which they had never done before. So, we didn’t know we had been first for 10 years. We learned this there, when we saw that the gap that separates us from Paris and Rennes has widened in the past 10 years. (Director, Cinématographe) The other aspect of the Cinématographe’s programs is their focus on children, a niche in which it faces more competition, particularly because one of the perks of being ranked as an arthouse cinema site is dependent on the ability to attract young audiences: Film education has been part of our initial project from the getgo, since our official subtitle is “film education for the public”, so this is an integral part of the association. But we became the

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École et cinéma (School and cinema) coordinator in 2005 and the Collège au cinema (High school and cinema) coordinator in 2008 or 2006, I can’t remember. Coordinating the École et cinéma initiative reinforces their role as film mediator and allows them to prevent the Katorza from taking part in this initiative. The programs of the Cinématographe, a place for cinema fans, are designed by a commission of fifteen people who meet monthly. Their structure is meant to be flexible and vague, and recruitment is by cooptation. The recent change in direction has boosted the programs, whose orientation towards a school audience tended to be repetitive year after year: We are a group. We have a programming committee, of which I am obviously a member, and I implement what is decided there. The basic principle is that a film that is shown on our screen is supported by at least one person from the commission. With this system, we consider that we only show films that we like. (Director, Cinématographe) 6.5. Conclusion Do we still need a place to watch films? The overall figures seem to confirm this: more than 201 million tickets were sold in France in 2018, up from 166 million in 2000. Counter revenues of €1.336 billion are shared between 2,040 institutions, one-tenth of which correspond to multiplexes. Digitization and thus reducing copy management has increased the possibility of varying the number of showings from 5,219 in 2000 to 8,012 in 2016. Behind this progress lie diverging supply and consumption practices. The current situation in Nantes shows positions that are becoming more radical. For cinemas that follow an economic type of logic, this translates into a diversity of strategic choices at the city level. The Gaumont is deploying an innovative aggressive strategy to dry out its strongest and geographically closest competitor, the Katorza. While appearing to be risky at first, this strategy has proven to be effective in the distribution of films in their original version to a French audience perceived as resistant to this practice. It also brings this cinema towards a more arthouse offer, leaving

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very mainstream films to the multiplexes in the suburbs. The Katorza is responding with a strategy of reaction: holding its place by preserving its arthouse appeal and developing its profitability. The two aspects of this strategy are difficult to reconcile, while the Concorde has succeeded in strengthening its credibility as a cinema that makes a success of “fragile” films and develops a solid offer of documentary films. Finally, community actors play an important role in maintaining Nantes’ unique cinephile climate. The city thus sees two opposing ways of seeing cinema either as a market or as something to be hallowed. This local context shows that, despite limited room to maneuver, cinema directors have been able to develop innovative strategies to ensure the sustainability of their activities. The practices of these cinemas are likely to inspire cinema operators in other cities, but also actors in other sectors of activity who are experiencing similar developments. Bookshops, for example, are undergoing disruptive transformations linked to digital technology with, on the one hand, the development of a range of digital books and, on the other hand, competition from a key player in online sales, Amazon. As for independent bookstores, this competition should not make us forget about the competition of superstores, whose positioning is not unlike that of multiplexes in the suburbs. In terms of innovation, the Nantes case makes it possible to identify good practices that seem stimulating. I would like to mention three of them, which could be called the group card, heritage as positioning, the initiatory journey. The first model of innovation involves sharing the decision-making power and the ability to accept the timelines of the collective working process. It concerns the mode of organization. The second model is based on a distinctive specialized positioning, while the third model relates to the relationship with the public. These three models are not mutually exclusive. The group card: in an age where French society talks about sinking intermediate bodies (i.e. unions, political parties, media, professional bodies, etc.) and a desire for spontaneous citizen participation, some Nantes cinemas, which have chosen to play the collective participation card, seem to offer a constructive outlet for the desire to act. Thus, the Bonne Garde and the Cinématographe, as community structures, rely on groups to establish their programs. Decisions are made collectively and are based on volunteers who are members of the association or even fellow travelers, who choose to participate without joining. There are no fixed teams, and the groups move,

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evolve, and leave everyone the ability to choose their degree of involvement. And some, members of the board, salaried or volunteer, are involved on an ongoing basis whereas others participate on and off. The Concorde’s structuring project, which should be the topic to follow in the coming years, has a similar goal. The Concorde, a private cinema, indeed plans to rely on a cooperative type of logic to maintain its specific image as an independent cinema. In the medium term, this project aims to change the status of the venue to a new kind of co-operative company Société coopérative d’intérêt collectif (SCIC) in which both the public and the creators (directors and producers) are involved. This special cooperative status, created by Act 2001-624 of July 17, 2001, is interesting in that it meets the need to be heard and the expectations of citizen participation. It makes it possible to associate private persons (employees and viewers, for example) and legal persons (operators, distributors, producers, etc.). Heritage as positioning: while choosing a distinctive positioning is nothing new in itself, choosing only landmark films is a radical choice. The Cinématographe’s unique positioning at a time of overabundant contemporary film production may seem curiously stubborn. Enabled by institutional participation (of the Cinémathèque française for the conservation of films, and of national and local institutions for part of the funding), the effectiveness of this positioning is felt locally (level of saturation of the cinema, links with schools and with the Ciné-Sup preparatory class opened in 1987, etc.). This offer also affects cinemas in Nantes. It becomes a legitimate reality when an authority (here the CNC) measures the distribution and audience of landmark films on a national scale. Landmark films in the Cinématographe’s programs are not an end in themselves, nor are they a means (whereas they tend to become means in territorial development). They are the support of the exchange, the engine of excitement, and the starting point of the discussion. This explains the need for a cinema to develop networks to support this choice of program. The initiatory journey: the fact that viewers are encouraged to establish a strong link with cinema can be seen in the offer of several cinemas in Nantes, and it is also palpable in the plurality of the offer. The initiatory journey began with the very first film seen in theatres, whether it was Bambi in 1942 or Kirikou and the Sorceress in 1998: the red seats, the darkness in the room, the big screen, the emotions felt, the laughter or tears shared with the other viewers, the light that comes back on at the end. All these elements

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are the markers of the hallowed cinema whose magic is renewed with each screening. This first memorable experience is only the starting point of what can be a life with cinema. The École et cinéma initiative, led locally by the Cinématographe, takes young viewers by the hand so that they can continue this journey. The Katorza offers the same experience, beginning with Screen Tasters for children, followed by the Absurdist showing which targets the groups of students and young adults who come on Thursday evenings. This means that the practice of cinema, initiated by one of the parents, is kept alive at school with class showings, and then continues as students become independent. The cinemas in Nantes have developed an entertainment policy that brings this journey to life for viewers throughout their life. We could also have quoted the offers of the Bonne Garde or Concorde here. The moment in life that marks the greatest loss of interest in cinema, often the time of adulthood when individuals are active and have to take care of dependent children, that is, when they are between 35 and 50 years old, does not prevent them from coming back to the cinema afterwards. To maintain the link with this age group, the Katorza, with the Bébé au cinema offer (Children at the Cinema), allows young parents to keep going to the cinema and in turn hand down this love of cinema to their children. However, these innovations must not blind us to developments in the sector. In particular, it seems that what cinema as a market induces should be explored: the main issue should be a substantial point in the evolution of major groups’ strategies. The fragility of the economy of all kinds of cinema sites is likely to be confirmed by the arrival of new players, linked to digitization, equipment manufacturers, and third-party investors, with strong appetites. The loss of independence linked to digitization and due to the loss of control of work tools is amplified by the phenomenon of forced obsolescence, changing the projection standard every two years. A bottomless pit seems to have opened to swallow cinemas: It’s really a loss of independence for the moment, of the technical independence of our work tool. That is to say, beforehand a good projectionist could solve 80% of the breakdowns and for the remaining 20%, he called the guy who was in charge of his equipment maintenance for 400 euros a year. Now a good projectionist can solve 20% of the breakdowns, and only if he has negotiated beforehand the authorization to go that far. And it’s hotlines that are taking over. (Director, the Katzora)

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The balances have been reestablished. It’s always an oligopoly with the problems this poses. There are only three or four actors like in telephony. Of course, all you have to do is get along a little bit and everything is fine. For them. (Director, Cinématographe) The VPF benefits three actors who are financial structures that must employ a maximum of eighty people. This outlines a future research program. This investigation should be considered as a milestone. The ultimate project is to interview all the managers of cinemas in the Nantes urban area in order to refine the understanding of the strategies implemented at the operational level. It seems essential to also meet programmers, because it is them who ultimately develop what constitutes the DNA of cinemas. 6.6. Glossary of terms Arthouse: the classification of an establishment as an arthouse cinema marks the establishment’s commitment to the distribution of films considered “often difficult” by the CNC and the implementation of an entertainment policy around these films. The ranking gives access to public subsidies. Before 2001, the classification was assigned to a screen, today it is assigned to a cinema site: 1,204 establishments, representing nearly 60% of the French total, were classified as arthouse in 2017. CNC: French national film center. A public institution created in 1946, whose purpose is to reconcile the interests of professionals in the sector. Multiplex: an establishment with at least eight screens. Peer-to-peer: a mode of exchange between peers of content (music, films, series) via dedicated sites. Streaming: a mode of viewing a film or online program that is either VOD or peer-to-peer sites. Ubiquitous access to film: the fact of having access via an Internet subscription to content which is not limited to a physical address and a

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connected television screen but travels with the connected objects (computer, tablet, mobile phone) of a subscriber. VOD (video on demand) and SVOD (subscription video on demand): forms of home video stores. The first model makes it possible, via Internet operators (Orange, for example), to rent a film on an occasional basis, whereas the second model involves a subscription that gives unlimited access to a catalogue (Netflix, for example). VPF: the virtual print fee corresponds to a subsidy mechanism intended for cinemas and defined by the “law no. 2010-1149 of 30 September 2010 relating to the digital equipment of cinematographic entertainment establishments [which] amended the film and moving image code by making it mandatory for the various users of digital projection equipment to contribute to their financing”. 6.7. Sources and archives BFI Statistical yearbook 2018. BIFI – Fonds Gaumont LG42 B12. CNC (2000), Info no. 281 – Géographie du cinéma. CNC (2001), Info no. 284 – Géographie du cinéma. CNC (2003), Info no. 292 – Géographie du cinéma. CNC (2004), Dossier no. 296 – Géographie du cinéma. CNC (2005), Dossier no. 300 – Géographie du cinéma. CNC (2006), Dossier no. 304 – Géographie du cinéma. CNC (2007), Dossier no. 308 – Géographie du cinéma. CNC (2008), Dossier no. 312 – Géographie du cinéma. CNC (2009), Dossier no. 316 – Géographie du cinéma. CNC (2010), Dossier no. 320 – Géographie du cinéma. CNC (2011), Dossier no. 323 – Géographie du cinéma. CNC (2012), Dossier no. 327 – Géographie du cinéma. CNC (2013), Dossier no. 331 – Géographie du cinéma. CNC (2014), Dossier no. 333 – Géographie du cinéma.

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CNC (2016), La Géographie du cinéma. CNC (July 2008), Evolution du public des salles de cinéma 1993–2007. CNC (2002), Exploitation – Données par commune. CNC (2015), Exploitation – Données par commune. CNC (2019), Les principaux chiffres du cinéma en 2018.

6.8. References Bourgatte, M. (2012). Le cinéma d’Art et Essai : un label de qualité institutionnelle mis à l’épreuve de l’expertise ordinaire. Communication et langages, 174(4), 109–122. Chaplain, R. (2003). Les exploitants de salles de cinéma lyonnaises. Des origines à la Seconde Guerre mondiale. Vingtième siècle. Revue d’histoire, 79(3), 19–35. Demil, B., Leca, B. (2003). Architecture de marché et régulation dans l’exploitation cinématographique française. Revue française de gestion, 142(1), 229–252. Glaser, B.G., Strauss, A.L. (1967). The discovery of grounded theory. Strategies for qualitative research. Aldine de Gruyter, New York. Lamendour, E. (2015). Film festivals: A journey to one’s own identity. 11e Conférence de l’AFIS, La Rochelle, 21-2. Le Blanc, G. (2006). Innovations numériques, distribution et différenciation : le cas de la projection numérique dans le cinema. Entreprises et histoire, 43(2), 82–92. Le Club des 13 (2008). Le milieu n’est plus un pont mais une faille. Stock, Paris. Roy, P. (2008). Une lecture spatiale des stratégies concurrentielles des salles de cinéma. Entreprises et histoire, 53(4), 68–79. Sorrel, V. (2014). La numérisation des salles de cinéma en France : l’impensé culturel d’une transition technologique. Communication et langages, 3(181), 99– 114. Souquet, C. (2017). La projection cinématographique : une croissance tirée par les multiplexes. INSEE Première, 1677, 1–4. Tellier, A. (2015). Le déclin des écosystèmes d’affaires. Revue française de gestion, 3(248), 23–39. Yami, S., Castaldo, S., Dagnino, G.B, Le Roy, F. (2010). Coopetition: Winning Strategies for the 21st Century, Edward Elgar, Cheltenham. Yin, R.K. (1994). Case Study Research: Design and Methods. Sage, Thousand Oaks.

7 Coopetition Between Architects: Designing Innovative Projects with Competitors

7.1. Introduction Over the past 20 years, many companies have been creative in defining and implementing their market strategy. Faced with the new challenges of the 21st Century, such as the weight of technology, the increasing internationalization of activities and new forms of competition, managers have been forced to redefine their strategic approaches. Among the trends observed in many industries, coopetition has gradually emerged as a new way of creating value. This combination of cooperation and competition (Brandenburger and Nalebuff 1996; Bengtsson and Kock 1999) makes it possible to “play both sides” and optimize the strategic gains associated with these two poles. Indeed, coopetition makes it possible to benefit from the advantages of cooperation (sharing resources, cost savings, learning, etc.) while maintaining the virtues of competition (stimulation and questioning, improvement of individual performance, etc.). To date, most strategic research on coopetition has focused on high-tech activities (Gnyawali and Park 2009) such as aerospace, pharmaceuticals or electronics. Based on the results observed in these industries, we are convinced that coopetition can also embody a successful strategy in a greater diversity of activities and, in particular, within the creative industries.

Chapter written by Estelle PELLEGRIN-BOUCHER and Pierre ROY.

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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Indeed, recent developments in the creative industries (new technologies, sociological changes, increased competition, etc.) imply that the construction of competitive advantage can also be achieved through cooperation with competitors. Coopetition thus embodies a stimulating strategic perspective for the creative industries as it enables them to generate innovations at the product/service, production and/or distribution process and managerial level. This chapter aims to explore these different benefits of coopetition based on a qualitative case study conducted within the architecture sector. Section 7.2 provides a summary of the existing literature on the concept of coopetition and its strategic challenges for companies. Then, our methodological choices are presented in section 7.3, and in section 7.4 we have presented the characteristics of the architecture sector (profession and value chain, protagonists, current developments). Section 7.5 explains the results of our empirical study. We show how coopetition allows architects to improve their commercial prospecting, reduce the geographical distance with clients, and even optimize the management of a project from A to Z. Finally, in section 7.6, we take a step back from the innovative strategies observed among architects and try to suggest good cooperative practices for managers working in the creative industries. 7.2. Coopetition: an example of an innovative strategy 7.2.1. Presentation and definition of coopetition strategies The concept of coopetition was developed in the late 1990s in the United States, when researchers showed that companies could pursue both competitive and cooperative strategies with the same partners, and that these strategies were particularly successful (Brandenburger and Nalebuff 1996; Lado et al. 1997). Brandenburger and Nalebuff (1996) refer to a valuable network to describe coopetition relationships as sources of profit for the various stakeholders in a given industry. Through game theory, they highlight the higher sums earned by companies that cooperate with a set of competitors compared to those that remain solely in confrontational strategies. In Europe, from the 2000s onwards, Bengtsson and Kock (1999; 2000) provide a closer definition of coopetition, describing it as a relationship between at least two competing firms that simultaneously

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combine cooperation and competition, but at different levels in the value chain (e.g. R&D cooperation and market competition). Over the past decade, coopetition has become the focus of an increasing number of international publications, reflecting the growing interest of researchers in this type of strategy and their development in practice, especially in innovative and high-tech industries (Gnyawali and Park 2009; Yami et al. 2010). In particular, research shows that coopetition enables companies to develop new products more quickly, reduce costs, diversify their activities and achieve a high level of customer satisfaction (Bengtsson and Kock 1999; Pellegrin-Boucher et al. 2013). 7.2.2. Different types of coopetition The majority of publications dedicated to coopetition have thus focused on cooperative projects in R&D in high-tech sectors, as well as on product innovation. In particular, there is a strong consensus that coopetition improves companies’ capabilities and innovation performance (Arranz and Arroyabe 2008; Ritala 2012). Competitors with good knowledge of markets and technologies are able to create new knowledge and new products and services together more quickly (Dussauge et al. 2000; Belderbos et al. 2004). Few studies highlight the other contributions of coopetition, particularly in terms of process innovation, commercial innovation or managerial innovation. However, managerial innovations (Damampour et al. 1989; Mol and Birkinshaw 2009; Damampourt and Aravind 2012) are often linked to product innovations because research shows that managerial innovations are the work of companies that are innovative in terms of products or services (Damanpour et al. 1989; Alange et al. 1998; Ayerbe 2006). Ayerbe (2006) also shows that there are mutual influences between different types of innovations. We believe that research related to coopetition relationships has not focused enough on these types of innovation or on other types of innovative coopetition strategies, such as process coopetition or commercial coopetition. In addition, the creative industries sector has so far been poorly investigated by strategy researchers. Admittedly, coopetition is a strategy that has existed for many years in the IT industry or in other types of industries such as the pharmaceutical or automotive industries, but even in these sectors, the cooperative relationships between competitors are still unknown, particularly by players in the field.

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Moreover, in some sectors, such as the cultural and creative industries, managers do not necessarily have the keys to understand and control this type of complex and paradoxical relationship. The interest of this research is therefore to study a phenomenon that has so far been little explored in the creative sectors, whereas collaboration between competitors may appear to be a major challenge for creation. In this chapter, we will highlight, on the basis of a case study, the different types of coopetition set up by architectural firms, which will make it possible to highlight success factors for the other sectors. 7.3. Methodological choices We carried out a qualitative case study in accordance with the principles of a methodological posture often used in the field of strategy research (Yin 1994). Choosing to analyze the case of architectural firms is justified by two arguments: the identification of coopetition strategies between architects during a preliminary research phase and the absence of strategic management work in this industry. Indeed, this creative industry has been the subject of very few empirical investigations in management sciences and, to our knowledge, none in the field of strategy. From a geographical point of view, our research focused on architectural projects in Montpellier and Paris. In addition to the question of the proximity to the research site, the choice of Montpellier is justified by the very strong architectural dynamism of the city. Montpellier’s strong urban growth and attractiveness make it one of the most architecturally ambitious European cities (New York Times 2012). Then, we chose Paris as a second phase of field research, allowing us to compare our first empirical results and to investigate larger-scale cooperative projects. In accordance with the principles of the case study, we collected primary and secondary data to understand coopetition strategies between architectural firms. Primary data were collected through fourteen semi-directive interviews with partners and employees from three different firms in Montpellier and a project structure in Paris. An interview guide was developed around the key factors, modalities and implications of coopetition. These interviews were recorded and coded according to the principles of the thematic analysis set out by Miles and Huberman (1994). A thematic dictionary allowed us to sort, classify and select case highlights to build our empirical results. Secondary data come from various pre-existing sources, such as press articles on the

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architectural projects studied, public sector studies and information found on the website of the Association of Architects. 7.4. Presentation of the architecture sector 7.4.1. Architecture as a profession Architecture embodies a major creative and cultural industry. Indeed, the product located at the heart of this industry has a strong artistic dimension both in its design and in the lasting visual imprint it leaves once produced. The sector has a great diversity of outputs since the work of architects can range from a simple single-family home to very large-scale projects such as airports or museums. But whatever the type of project concerned, there is an artistic dimension to the design process of a building and the construction of a project. As in other creative industries, architecture is a combination of artistic logic (creativity of the process, image, aesthetics, etc.) and an economic dimension (costs, competition between firms, client satisfaction, etc.). France has a historical competence in architecture that can be associated with the exceptional architectural heritage of the country, the quality of training in this field and the high international reputation of French architects. For the contemporary period, we can think in particular of the significant mark left by architects such as Le Corbusier or, more recently, Christian de Portzamparc or the great Jean Nouvel. Beyond these big names and their respective firms, the French architectural sector has a wide variety of profiles in the size of the firms and the type of projects on which the architects work. Among the 30,000 architects operating in the French market, the general trend in recent years has been to do less and less freelance work and more and more as part of firms that include several architects. This change in the business is justified in particular by the acceleration of competition and the need to pool certain operating costs and “weigh” more in order to win calls for tenders. From an economic point of view, the architectural sector is part of a more global industry, that is, the building industry. The latter generates a total turnover of €123 billion (2010 data) in which the share of value created by architects is estimated at around 44%1. 1 Source: the website of the Ordre des architectes.

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The creation of value generated by architects is divided into two roughly equivalent parts, associated with the two links in the value chain of an architectural firm: the design of the project and then the site monitoring. The design phase concerns the design of a project. It is during this first stage that the creative and artistic dimension comes into play. Here, an architect conceives the structure and plan of a building by simultaneously taking into account artistic, technical and economic aspects. Then, the site monitoring aims to ensure the smooth running of the construction by coordinating the various trades involved on the site and ensuring compliance with the specifications designed upstream. The architecture market is divided into several sub-markets according to the type of client and/or construction project. First of all, it is necessary to distinguish the private customer segment (BtoC), which essentially involves individual home projects, from the professional, public or private segment (BtoB), which is oriented towards a wide variety of projects (residential buildings, offices, shops, schools, transport infrastructure, etc.). The latter, at the heart of our research, naturally represents a higher volume of business for firms and necessitates greater technical complexity. They often require the implementation of a tendering procedure, allowing the client to put several firms in competition and select the best candidate. 7.4.2. Recent developments in the sector Over the past 20 years, the architectural sector has undergone several transformations of different and varied kinds. First, the internationalization of the business has led to a change in the face of competition and has had a significant impact on the firms’ strategies. As a result, companies in the sector are increasingly considering projects outside their close geographical area or even, for large firms, outside their home country. Directly related to this first development, the second point concerns the rise of a “brand” phenomenon, which is taking off with the emergence of major names in architecture (“starchitects”) who have become highly regarded international brands and whose past project successes have attracted the attention of future clients. The prestige associated with their signature is an essential criterion for their attractiveness for large-scale projects (museums, airports, stations, libraries, high-rise residential buildings, etc.). For example, we can mention the large firms associated with

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starchitects such as Norman Foster, Jean Nouvel, Zaha Hadid, Renzo Piano or Frank Gehry. Third, architecture has recently been impacted by the growth of issues related to environmental issues. Thus, the materials used and concerns about the energy aspects of buildings (both in their construction and in their use) have become more important in recent years. These issues concern, for example, the presence of solar panels, rainwater harvesting or the use of materials that capture and reuse thermal heat. Thus, firms must develop new skills, since the majority of clients are now sensitive to these ecological considerations. Finally, architecture has, like many other professions, been impacted by the rise of information and communication technologies. As this is a profession strongly oriented towards visual aesthetics, architects have become aware of the importance associated with the image conveyed by their creations and its enhancement. In particular, websites and presence on social networks – the agency’s showcase – have become essential tools for the visibility of an architectural firm and the prospecting of new clients. The strong competition in the sector tends to reinforce the importance of this commercial dimension, which is quite far from the core competence and training programs for architects. The growth of architectural firms makes it possible to finance costs associated with this commercial dimension, which has become essential to attract clients. 7.5. The different types of coopetition between architects 7.5.1. Type 1: improving commercial prospecting The analysis of the data revealed that coopetition is a strategy that is developing in the practice of this sector. During the interviews, architects systematically mentioned the generalization of the strategy that involves responding together, between competing firms, to certain competitions or calls for tenders while simultaneously competing on other projects. Indeed, competition in the sector is intensifying, and it is becoming necessary for smaller firms to join forces to reach a critical size. Moreover, as projects become more complex and increasingly more technical, it is almost impossible – even for a large agency – to gather all the necessary skills to satisfy a client’s expectations.

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In the sector studied, coopetition thus consists in collaborating with competitors to carry out new quality projects at a faster pace. Some firms seek to offer better expertise to clients and to acquire certain key resources that they lack. We were able to observe this phenomenon through the study of secondary data describing the success of projects carried out collectively, but also during the analysis of primary data (interviews). Primary and secondary data have indeed made it possible to highlight several examples of coopetition projects that have been sources of profit for the agencies concerned. This was the case for a medical laboratory created in Montpellier by a Montpellier architectural firm and an architectural agency based in Lyon. One of the partners of the Montpellier architectural firm explains the role of coopetition as follows: Contracting authorities are looking for expertise. For architectural agencies this means that they need guarantees, they need to inspire confidence. For example, when the Montpellier hospital wanted to build a laboratory, they wanted a practice that had already designed this type of project. We didn’t have that expertise, but they wanted us anyway, because they knew us and they knew our achievements. So, we looked for a specialized firm in Lyon that had this expertise. Coopetition can thus develop before a project is carried out, when an architectural firm contacts a counterpart in order to pool certain resources to have a better chance of winning a competition against other competitors. Our study reveals that there is a pre-project period during which architects try to create and maintain a professional relationship network. Cooperation between competitors can be promoted, for example, by belonging to common professional networks (trade union chamber, networks of leaders, professional clubs, expert committees, training, etc.). The knowledge gained from these meetings then makes it easier to contact a competitor in order to respond to a joint call for tenders, or to prospect new projects together. This coopetitive commercial prospecting has different dimensions, at the local, regional, national and even international level, due to increased competition at the global level for major projects. One of the partners of a large Montpellier architectural firm mentioned one of his initiatives: I get along very well with the partner of an Alsatian architectural firm. In the past, we have competed on some

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tenders. Today, I know that if I have to respond to a call for tenders in their region, I will take them as a partner, even if they are smaller, because I know they work very well. We appreciate and respect each other, even if we are competitors. We have never worked together before, but we know that one day we will. With this in mind, we maintain links, we call each other, we exchange information on calls for tenders. This coopetitive prospecting can take the form of monitoring carried out locally or nationally, as is the case for the Montpellier agency with the firm based in Strasbourg. Some large firms also conduct international prospecting because the agencies’ activities are increasingly going beyond national borders. These meetings create links that will be useful in the future. Indeed, these relationships encourage reactivity as new competition or a potential new market emerges. Collaboration during the design and implementation phase will also be facilitated. A partner in a Montpellier architectural firm told us this: It’s easier to collaborate when you already know each other, when you know what the other can really bring and that you can communicate more easily. It also makes it possible to be more responsive during the design and response phase of a call for tenders. Knowledge of the other and trust help reduce the tensions associated with these paradoxical strategies (mistrust, blockages, risk of losing knowledge, etc.). Finally, this preliminary commercial coopetition, or coopetition prospecting phase, makes it possible to carry out competitive monitoring and more effective market opportunity studies, as the majority of architectural firms have few resources in this field. Yet this is a crucial asset today for organizations in the sector: At the moment, we need communicators, but also people who monitor new markets to identify opportunities. Small firms like ours have difficulty investing in this type of resource, so we take interns, cooperate with our peers, and maintain our

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professional network in search of opportunities, because this becomes the nerve center of the war. (A Montpellier architect) 7.5.2. Type 2: reducing geographical distance Coopetition may also be considered when a contract has already been signed between a client and a firm. In this case, a firm alone wins a contract and then approaches a competitor to join forces on the project in question. The company that uses this type of process is looking for a partner who has additional resources to carry out certain tasks that will be delegated to it. This relationship is sometimes similar to a subcontracting relationship between competitors. One of the main motivations in this type of coopetition is the reduction of geographical distance. The aim is to identify a potential coopetitor who is geographically close to the client in order to provide better service to the latter, particularly in site monitoring. For example, following its selection for a project located in Aurillac, a large Montpellier firm approached a small firm of architects from Lozère, which was initially its competitor in the call for tenders and which refused to propose a joint bid with the former, preferring to try its chances alone. The small firm that lost the project finally agreed to cooperate with its competitor for site monitoring. This allowed the Montpellier company to delegate part of the client relationship to this local firm and to continue to invest in other projects. The interest is threefold for the person delegating to a competitor: to conserve resources to respond to other calls for tenders, to concentrate on activities with higher added value and, finally, to reduce the costs linked to geographical distance (journeys, offices, etc.) by taking a partner on site. For the partner, this makes it possible to accept an offer without having to prospect, to easily acquire knowledge from the competitor, to win a new customer contact or, as was the case in our example, to be reimbursed for the costs invested to respond to the initial call for tenders. The case of the new Montpellier town hall also illustrates this type of coopetition. The choice to build a new town hall in 2007 was made by a prestigious architect of international renown, Jean Nouvel, in association with a Montpellier architect, François Fontès. This example confirms the general trend identified by our study in the sector. Indeed, public organizations (cities, urban communities, regions, etc.), as well as private organizations (companies, associations, foundations), are paying more and

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more attention to their image and reputation, and they use renowned architects to do so, which gives projects a greater impact in the media. This is how the reputation of internationally renowned great architects such as Philippe Starck, Ricardo Bofill, Zaha Hadid, or Jean Nouvel has left the mark on several projects in the city of Montpellier. Less famous firms therefore have an interest in collaborating with a “big name” in the sector in order to stand a better chance of winning some large-scale tenders. Thus, the architect François Fontès participated in the urban restructuring of the city of Nîmes in 1984 with Jean Nouvel, Norman Foster and Kisho Kurokawa. And since the 1990s, his agency has regularly responded to national and international calls for tenders with leading names in architecture. In 2007, the François Fontès Architecture agency was associated with the Ateliers Jean Nouvel for the new building of the Montpellier City Hall, inaugurated on November 12, 2011. This building, which cost €130 million, is a 40m high, 27,000 m2 glass and metal building that dominates a 120m long square. To carry out this project, the teams of the François Fontès agency collaborated with those of Jean Nouvel for the design of the project and its implementation. The expertise of the François Fontès firm, the personal style of this architect, and his professional proximity to Jean Nouvel certainly explain a large part of the success of this coopetition strategy. However, we can also mention the geographical proximity with the client as a key factor in this association, as it was very useful for Ateliers Jean Nouvel to have a partner on site to manage the client and the work once the concept and design phases had been completed. It was the François Fontès agency that took charge of all the site supervision. 7.5.3. Type 3: a successful project from A to Z Another case allowed us to consider coopetition between architects from a different angle: the project that aims to rehabilitate the unique skyscraper within the city of Paris, that is, the 210-meter-high Montparnasse tower. Indeed, this project, which involves transforming the current tower, has been entrusted to an organization called “Nouvelle AOM”2 following the merger of five architects from three competing firms: Franklin Azzi, Frédéric Chartier and Pascale Dalix, and Mathurin Hardel and Cyrille Le Bihan. The 2 In reference to the architectural agency Operation Maine-Montparnasse, which had built the tower in 1973.

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five architects in charge of the project were all born in the early 1970s, around the same time as the tower (which was built in 1973). The project, which will be launched before the 2024 Paris Olympic Games and is based on a budget of €300 million, has been selected from 700 applications. Among the seven finalist projects in 2017 were three French firms and the American Jeanne Gang. The analysis of the case reveals several interests associated with the coopetition between architects. First, it seems that coopetition has been a key success factor in winning the contract and that, from the outset, these architects have considered it as a strong point of their bid. The initiative took shape in June 2016, when the architect Franklin Azzi contacted his colleagues Chartier/Dalix on the one hand, and then Hardel/Le Bihan on the other hand, to suggest the submission of a joint application. According to him, the project “deserved more humility than any other [...] this unique subject deserved more than a single signature”. The scale of the project thus played a key role in the desire to cooperate, as one of the five architects recalled: “This subject required an association [...] The tower as it exists is already the result of collective work.” The choice of coopetition partners is no coincidence, however. Coming from the same generation and some of them sharing bonds of friendship, the five architects present common values and a similar vision of the project (in particular the fact that they all like the tower). In terms of innovation, this coopetition project is first and foremost a source of managerial innovation for the architects concerned. Indeed, the creation of the Nouvelle AOM entity led to the establishment of the coopetition team on premises dedicated to the coopetition project and directly located on the site concerned (on the 44th floor of the Montparnasse tower). The architects from the three competing firms then got about 10 collaborators “on board” in order to appoint them specifically to the preparation of the competition. In addition, new employees have been recruited specifically for this atypical project and a dedicated branch manager has been appointed for its management. The location of offices on site has a twofold objective. First, it allowed the actors to get a better grasp of the technical characteristics of the tower and its history. Second, the pooling of resources between competitors on a site external to the agencies’ respective premises appears here as a managerial innovation. Indeed, competitors develop their coopetition project in a place that is “neutral” in relation to their own premises, which allows them to build stronger

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cooperation and stimulate the collective's creativity, as one architect points out: “It requires us to be more precise, more relevant and more convincing.” In concrete terms, this collective creativity is illustrated, for example, in the production of a video aimed at promoting their project and having a teambuilding impact on the collective of architects. In addition, the case reveals another managerial innovation in the form of a charter drawn up by the five cooperative architects to arbitrate on the management of future projects. The document thus sets out the framework within which future competitions will be addressed, namely alone (competition) or as part of the Nouvelle AOM collective (cooperation). This charter embodies an innovative management of coopetition since the coopetitors formalize a “contractual” framework aimed at avoiding any conflict between them. One of the architects explains this initiative: We often found ourselves in competition, which is not surprising. On the other hand, since there is a New AOM, we have had to define rules and criteria to either respond to these competitions together or, on the contrary, to give ourselves the freedom to make individual applications [...] We felt it was essential to share these rules so that there would be no problems between us [...] What was also useful in this work was to define what the Nouvelle AOM was and what it was intended for in terms of projects, in what way it was more relevant than our individual agencies... The three criteria we defined are: first, projects that involve a project already in place because we had the capacity in the competition to analyze and diagnose the existing building. The second criterion is to address topics in which programming or reprogramming is important. And the third criterion is to work on somewhat emblematic buildings which people are attached to, historic buildings, which require you to talk to a lot of people. The fact of being a collective is an asset in these cases [...]. Overall, the share of objectivity is greater, we are stronger as a group for these types of projects. The case also illustrates how coopetition can contribute to product innovation. The Montparnasse tower renovation project carried out by the team presented above benefits from the collective creativity in the service of the innovation created. Thus, the architectural challenge linked to the very nature of the project (a rehabilitation of an existing tower) prompted the

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architects to consider an innovative transformation of the building based on its current characteristics dating back to the 1970s. To this end, the coopetition context has allowed a sharing of views and resources which, in the end, has stimulated the innovative nature of the proposal. As one of the architects of the project points out: The metamorphosis will be complete: from opaque, energy consuming, built with asbestos, and mono-functional, the tower will become clear, low-carbon, economical and capable of offering new uses […]. The idea is to make it a destination, an iconic place that tourists and Parisians will come to photograph, a tower they would like to go up just by looking at it... We have kept the plan and the shape, with its two curves and its angles on each side, which are unique in the world. We had to make a nod to history, like the name of our collective, despite the extreme nature of this innovation. In short, product innovation here consists in reinventing the tower both in its characteristics (aesthetics, materials, green spaces, etc.) and in its use for visitors (integration of restaurants, shops, gardens and a hotel). 7.6. Lessons learned and good practices 7.6.1. Choosing coopetitors Several lessons can be drawn from our study of architects. First, our results shed light on how coopetition is conceived and conducted by architectural firms and, in particular, how managers choose their coopetitor(s). On this point, our empirical study offers three main answers that can, beyond architects, serve as advice for managers working in the creative industries. First, the different cases observed in our study suggest that coopetition can be implemented at different points along the value chain. Indeed, a cooperation strategy with a competitor can take place both before and after the creation and design of projects. Upstream, coopetition concerns, for example, commercial or marketing activities such as opportunity studies or competitive intelligence and joint communication strategies. It also implies building professional relationships to identify potential partners for future projects. As for conceiving the work, connections are often established to

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develop joint cultural or creative offers. One can consider in particular the collective development of a video game by two competing publishers on this market. Coopetition can also take place further downstream from value creation, that is close to customers. In this case, it concerns activities such as distribution, marketing, sales or services. In the music industry, for example, it may involve two competing production companies that join forces to design a tour with several artists from these competing production structures. Depending on the nature of the activity, the costs generated by each stage of the value chain and the overall functioning of the industry, coopetition can thus embody a strategy relevant to a particular link in the chain. Second, a key issue is the profile of the preferred coopetitor. In other words: who to turn to when we want to set up a cooperation strategy? While it seems difficult to answer this question categorically, several insights are present in our study based on the three types of coopetition identified. For type 1 (coopetition to improve business development), several profiles of coopetitors can be considered as long as a company identifies a potential gain in the relationship. This may include synergies, new knowledge, access to information or new customers. For type 2 (coopetition to reduce geographical distance), it is naturally preferable to favor a coopetitor who is geographically close to the client. In addition, our study suggests that asymmetry of size and/or complementarity of skills may also be criteria for choice in this case. Concerning type 3 (coopetition from A to Z), it appears that coopetition is easier to manage when the coopetitors are similar in relation to different criteria: size of companies, nature of expertise, values and cultural profiles of employees, etc. These different points make it possible to facilitate cooperation and limit the risks of a coopetitor’s domination, diverging expectations or conflicts in the conduct of the creative project from its conception to its realization. The existence of links between partners prior to the start of a coopetition is also a facilitating element for the smooth running of the coopetition. A final question relating to the choice of partner concerns their number. Thus, it appears in our study about architects and, beyond that, in the literature on coopetition, that this strategy can be carried out by two or more cooperators. The case of the Montparnasse tower is an illustration of a multiple type of coopetition, since three competing agencies are involved in the project. The challenges associated with multiple cooperation are naturally more numerous (coordination costs, risks of opportunism, sharing a common vision of the project, etc.) but the benefits can also be multiplied

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(cost savings, knowledge sharing, increased creativity, high customer satisfaction, new opportunities for future projects, etc.). 7.6.2. Managing coopetition The second set of lessons that can be drawn from the coopetition practices of architects focuses on how this relationship is managed. The main difficulty lies in the ambiguous nature of the relationship since the coopetitors cooperate on one (or more) project(s) but remain competitors elsewhere. The case study provides insights on two points related to this management of coopetition: the choice of the location of teams and the question of the framework delimiting coopetition. With regard to the first point, our empirical observations show that coopetition can take place at a distance, within the framework of existing offices owned by the coopetitors or within the framework of new offices specifically dedicated to the coopetition project. The choice between these three options generally depends on the nature of the coopetition and the type of project concerned. For example, in the context of a minimum coopetition, or type 1 coopetition (commercial prospecting), the relationship can be managed remotely and does not necessarily require the sharing of common offices. When coopetition is motivated by the criterion of geographical distance from the client (type 2), the existing offices of the two coopetitors generally serve as the host structure for the project. Finally, in the context of a kind of coopetition going from A to Z (type no. 3), the creation of ex nihilo offices dedicated to the management of the coopetition project appears to be a key success factor. In the latter case, the fact of favoring a new location that is separate from the coopetitors’ existing resources makes it possible to work in a neutral context. Coopetitors do not then have to protect knowledge and information related to other projects in which they are competitors in the workplace. The recruitment of new human resources specifically dedicated to the coopetition project also appears to be a good practice in this case of coopetition covering the entire value chain. Concerning the framework accompanying the coopetition relationship, a great diversity of practices seems to be present among architectural firms. However, the case of the renovation of the Montparnasse tower has enabled us to identify a technique that can embody good practice in this area and goes beyond the case of architects alone. The coopetitors involved in this

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coopetition project from A to Z wanted to establish a formal framework in the form of a written charter. This defines the framework for coopetition by specifying the criteria according to which the coopetitors will cooperate on projects in the future or, conversely, compete with each other. Based on three criteria relating to the type of architectural project, this charter thus limits the risk of potential conflict between the cooperative dimension (responding together to a competition) and the competitive dimension (responding alone via one’s own agency) of the coopetition. It seems that the formalization of a framework by the coopetitors is a good practice to make the coopetition relationship stable and sustainable. The fact of prioritizing this formalization of the framework from the outset of the project appears to be a key factor for success. 7.6.3. Exploiting the benefits Coopetition is a strategy that is becoming more widespread in the architecture sector and in cultural and creative activities, but also in the service sector, or in BtoB industries (IT, telephony, office equipment, training, consulting, etc.). It makes it possible to improve relations with customers and to respond more effectively to their expectations and specifications. Collaboration with other firms allows clients to access more resources and skills and better expertise from suppliers and prime contractors. In concrete terms, clients also benefit from better project monitoring when one of the partners is a local actor. The client has thus become a real driving force of the coopetition because he has everything to gain from it: quality, skills, proximity, multidimensionality of projects. He can also affect prices by putting coopetitors in competition with each other. For partner companies, coopetition provides access to new contracts, complementary knowledge, and the creation of new knowledge through synergies. Organizations exchange knowledge, and pool resources and skills such as software, technical expertise in different fields, and original knowhow. Coopetition also gives them access to new partners such as providers, influencers, advisors, etc. Finally, the creative part is multiplied, because co-design projects lead to the development of innovative technical or artistic concepts that make it possible to win tenders or competitions that organizations could not have won alone (as in the case of the Montparnasse tower or the Montpellier city hall).

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To achieve these results, it seems essential to maintain a network of potential coopetitors, either informally (professional and personal networks) or in a more concrete way during various professional projects (consultations, pre-projects, training, setting up commissions, subcontracting missions, etc.). This includes, for example, being an active member of a professional association or trade union and maintaining links with industry stakeholders. Sometimes, some personal links also lead to concrete projects. Trust and close relationships are indeed strategic factors for success, as they reduce tensions and accelerate the implementation of coopetition projects. Finally, performance seems to be linked to the development, within organizations, of a research and prospecting department (sometimes called commercial or competitive intelligence). In the context of the creative and cultural industries, this is an element not to be overlooked, especially since there is often a lack of resources and training in these policy areas. This situation seems to be linked in particular to an organizational culture that is more focused on creation and art than on strategy or marketing. It is therefore necessary to identify or recruit people capable of taking charge of this activity, to train them, and to devote a precise budget to it (budget including monitoring software, training, human resources and the time dedicated to this activity). 7.7. Conclusion “When two forces are combined, their effectiveness is twofold.” Isaac Newton Through the study of the architecture sector, we have highlighted in this chapter that coopetition strategies can represent an enriching perspective for the creative industries. Coopetition makes it possible to combine the advantages of cooperation and competition. The results obtained by the architectural firms show in particular that this paradoxical combination generates innovations at the level of products and services, creation and distribution processes as well as managerial innovations. This significantly increases the performance of projects and organizations. More precisely, coopetition allows architects to improve their commercial prospecting, reduce the geographical distance from the client, and finally optimize the management of a global project, as illustrated by the

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case of the Montparnasse tower in Paris. The analysis of the different types of coopetition provides a better understanding of how to implement these strategies, with which types of actors and for which benefits. Each situation is influenced by a specific context and corresponds to different project stages. However, it appears that the different cases observed – large and small firms, province and Paris, collaboration for the creation or monitoring of worksites – are equally adapted to coopetition relationships. This strategy thus appears as a possible solution for all actors and stages of the value chain. Finally, the good practices identified in the sector make it possible to take a step back from the case of architecture and imagine applications within other creative and cultural activities. These best practices concern both the choice of partners, the management of the coopetition, and the way to reap the benefits of this type of collaboration. These strategies can be applied in audiovisual production, the festival industry or video games. Within these sectors, the search for critical size, the question of costs, product innovation, but also access to new resources are indeed key issues. We believe that further and more detailed research would make it possible to deepen this first study and identify the specificities of these strategies in the case of the creative and cultural industries. 7.8. References Alange, S., Jacobsson, S., Jarnehammar, A. (1998). Some aspects of an analytical framework for studying the diffusion of organizational innovations. Technology Analysis and Strategic Management, 10, 3–21. Arranz, N., de Arroyabe, J.C.F. (2008). The choice of partners in R&D cooperation: An empirical analysis of Spanish firms. Technovation, 28(1–2), 88–100. Ayerbe, C. (2006). Innovations technologique et organisationnelle au sein de PME innovantes : complémentarité des processus, analyse comparative des mécanismes de diffusion. Revue internationale PME, 19(1), 9–34. Belderbos, R., Carree, M., Lokshin, B. (2004). Cooperative R&D and firm performance. Research policy, 33(10), 1477–1492. Bengtsson, M., Kock, S. (1999). Cooperation and competition in relationships between competitors in business networks. Journal of Business and Industrial Marketing, 14, 178–190.

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Bengtsson, M., Kock, S. (2000). Coopetition in business networks – to cooperate and compete simultaneously. Industrial Marketing Management, 29, 411–426. Brandenburger, A., Nalebuff, B. (1996). Co-opetition. Doubleday, New York. Damampour, F., Aravind, D. (2012). Managerial innovation: Conceptions, processes, and antecedents. Management & Organization, 8(2), 423–454. Damampour, F., Szabat, K.A., Evan, W.M. (1989). The relationship between types of innovation and organizational performance. Journal of Management Studies, 26(6), 587–602. Dussauge, P., Garrette, B., Mitchell, W. (2000). Learning from competing partners: Outcomes and duration of scale and link alliances in Europe, North America and Asia. Strategic Management Journal, 21, 99–126. Gnyawali, D.R., Park, B.-J. (2009). Coopetition and technological innovation in small and medium-sized enterprises: A multilevel conceptual model. Journal of Small Business Management, 47, 308–330. Lado, A.A., Boyd, N., Hanlon, S.C. (1997). Competition, cooperation, and the search for economic rents: A syncretic model. Academy of Management Review, 22(1), 110–141. Miles, B., Huberman, M. (1994). Qualitative Data Analysis: A Source Book of New Methods. Sage Publications, London. Mol, M.J., Birkinshaw, J. (2009). The sources of management innovation: When firms introduce new management practices. Journal of Business Research, 62(12), 1269–1280. Pellegrin-Boucher, E., Le Roy, F., Gurau, C. (2013). Coopetitive strategies in the ICT sector: Typology and stability. Technology Analysis & Strategic Management, 25, 71–89. Ritala, P. (2012). Coopetition strategy – when is it successful? Empirical evidence on innovation and market performance. British Journal of Management, 23(3), 307–324. Yami, S., Castaldo, S., Dagnino, G.B., Le Roy, F. (2010). Coopetition: Winning Strategies for the 21st Century. Edward Elgar, Cheltenham. Yin, R.K. (1994). Case Study Research: Design and Methods. Sage, Thousand Oaks.

List of Authors

Pascal AURÉGAN

Alexandre PERRIN

IAE Caen Caen-Normandy University France

Berklee College of Music Valence Spain

Arthur CARÉ Montpellier Management Institute University of Montpellier France

Ève LAMENDOUR IAE La Rochelle University of La Rochelle France

Carole POIREL IUT Aix-Marseille Aix-Marseille University France

Pierre ROY Montpellier Management Institute University of Montpellier France

Juliette PASSEBOIS-DUCROS IAE Bordeaux University of Bordeaux France

Estelle PELLEGRIN-BOUCHER

Albéric TELLIER IAE Caen Caen-Normandy University France

Montpellier Management Institute University of Montpellier France

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

Index

A aesthetic, 79, 163, 165, 172 architecture, 56, 57, 62, 67–69, 89, 157, 160, 163–166, 169, 172, 175– 177 value, 57, 64, 68 art, 34, 52, 64, 77, 80, 84, 86, 89–92, 98–100, 110, 135, 137, 143, 146, 155, 157, 176 house, 132, 137, 146, 149, 155 artist, 60, 62, 64, 65, 70, 82, 88 attendance, 84, 87, 96, 131, 134, 135, 139, 141 attractiveness, 77, 85, 86, 162, 164 audiovisual, 7, 84 author, 58, 59, 71, 73, 74, 82, 92, 145 authorities, 61, 85 B, C best practices, 122, 152, 160, 172, 177 Big Data, 78, 83, 93 books, 29, 30, 36–40, 42–44, 46 booksellers, 29, 30, 35, 36, 39, 42– 45, 47–50, 53 business model, 26, 31, 48, 52, 75, 93, 98, 103, 116

competition, 3, 4, 9, 19, 28, 36, 38, 40, 106, 119, 125, 131, 137, 138, 147, 150, 159, 160, 161, 163–166, 171, 175 console, 6, 8–17, 19–26, 28 consumer, 31, 32, 48, 78, 79, 81, 82, 94, 97, 100, 106, 118, 140 cooperation, 159–161, 166, 170–173, 176 coopetition, 48, 160–162, 167–169, 173–177 costs, 3, 20, 31–34, 39, 46, 57, 59, 61, 62, 68, 69, 104, 110, 118, 125, 159, 161, 163, 165, 168, 173, 177 creativity, 174 CRM, 31, 36, 42, 43, 44, 46, 51 crowdfunding, 65 cultural and creative industries, 75, 77, 82, 162 culture, 38, 52, 53, 84, 93, 100, 108, 112, 117, 137, 142, 143, 145, 176 customer, 4, 12, 22, 30–32, 41, 43, 44, 46, 47, 49, 50, 53, 79–83, 93, 94, 160, 163, 164, 168, 169, 173– 176 experience, 31, 51, 81, 83

Innovation in the Cultural and Creative Industries, First Edition. Edited by Estelle Pellegrin-Boucher Pierre Roy. © ISTE Ltd 2019. Published by ISTE Ltd and John Wiley & Sons, Inc.

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D digital, 38, 39, 46, 47, 51, 52, 55, 64, 77, 80, 82, 83, 90, 97, 131, 136, 146, 152, 157 disruption, 13, 14, 18, 63, 78, 92, 93, 108, 119, 127 distribution, 10, 30, 31, 32, 33, 34, 37, 38, 39, 40, 45, 48, 51, 52, 53, 62, 64, 67, 68, 71, 132, 135, 136, 141, 157, 160, 173, 176 E, F e-commerce, 29, 30, 33, 34, 38, 39, 48, 51, 52, 95 fashion, 17, 24, 36, 39, 68, 93, 101, 102, 109–114, 121, 126, 152, 155 fast fashion, 110–112, 118, 121, 123, 127 film or cinema, 8, 9, 62, 78, 84, 90, 131–133, 135, 136, 138–157 G, H, I GDP, 111 geography, 156, 157 haute couture, 101, 109, 110, 111, 113, 118, 119, 120 heritage, 77, 83–88, 91, 98, 144, 146, 150, 152, 153, 163 identity, 83 income, 7, 10, 57, 59, 60, 61, 62, 63, 64, 65, 66, 67, 69, 70, 85 innovation, 4, 5, 8, 9, 27, 28, 30, 31, 57, 65, 67–70, 78, 81, 83, 87, 91, 92, 95, 96, 98, 101–104, 107, 109, 115, 116, 119, 122–124, 126–129, 131, 152, 161, 170–172, 177, 178 green, 101–104, 107, 119, 122– 124, 126, 127 radical, 105, 119, 122, 124 sustainable, 103 intangible, 77, 86

internet, 30–34, 36–38, 41, 45, 49, 53, 59, 65, 66, 108, 131, 155, 156, 163, 165 K, L key success factors, 106 know-how, 88, 89, 91, 116, 175 label, 60, 64, 66, 68–70, 113, 157 large, 8, 13, 14, 27, 35, 62, 66, 70, 84, 85, 109–113, 118, 119, 127, 132, 139, 141, 159, 162–164, 168, 169, 174 distribution, 8, 109, 110, 113, 118, 127 superstores, 37, 38, 152 luxury, 70, 101, 110 M management, 6, 28, 30–32, 48, 51– 53, 55, 96, 98, 100, 127–129, 162, 171, 177, 178 market, 5, 39, 119, 121, 124, 136, 149, 157, 159, 173 media, 61, 87, 169 merchandising, 49, 60, 61 multichannel, 31, 38, 52 museums, 77, 78, 80, 84, 85, 87, 89, 100, 163, 164 music, 9, 39, 55–61, 62, 64–71, 74, 78, 155 N, O, P network, 11, 36, 40, 42–44, 47, 48, 50, 86, 132, 149, 160, 166, 167, 176 ocean, 87 blue, 1, 5, 18, 21–28, 103, 106, 119, 124 green, 125, 127 omnichannel, 30–33, 35, 36, 40, 42, 43, 45, 46, 48

Index

peer-to-peer, 55, 131, 155 performance, 4, 11, 12, 16, 19, 20, 29, 30, 32, 33, 48, 50, 61, 70, 104, 106, 119, 128, 159, 161, 176–178 pooling, 36, 43, 44, 48, 52, 170 positioning, 4, 20, 23, 43, 140, 142, 147, 150, 152, 153 price, 5, 9, 10, 12, 14, 16, 17, 19, 22, 24, 33, 35– 37, 41, 46, 56, 63, 82, 112, 114, 117, 118, 120, 125, 126, 149, 175 producer, 60, 62–64, 66, 68, 135–137 project, 15, 16, 19, 23, 26, 27, 39, 63, 69, 70, 80, 88, 89, 97, 108, 109, 121–123, 127, 153, 155, 160, 162– 164, 166–171, 173–176 Q, R, S, T qualitative study, 107 ready-to-wear, 109, 110, 111, 113, 117, 118, 119, 120, 127 recycling, 103, 113, 116 satisfaction, 31, 49, 50, 79, 81, 95, 99, 161, 174 services, 27, 30, 31, 33, 35, 38, 40– 42, 46, 51, 55, 56, 71, 80, 81, 89, 104, 108, 161, 175, 176

183

shopping, 34, 48, 52 start-up, 102, 107, 109, 119, 123 state, 40 strategy canvas, 3–5, 19, 21, 102, 106, 118, 127 streaming, 59–61, 131, 155 sustainable development, 102, 103, 128 technology, 10, 12, 19, 61, 81, 88, 92, 103, 159 textiles and clothing, 109-111 U, V, W user experience, 99, 100 value, 3–5, 12, 18–22, 24, 31, 40, 46, 56, 57, 63, 64, 67, 68, 79, 80, 83, 84, 86, 96, 111, 118, 125, 126, 159, 160, 163, 164, 168, 173 chain, 160, 161, 164, 172, 174, 177 video game, 28 web-to-store, 34, 36, 40, 45, 49, 51 work, 26, 42, 52, 58, 59, 62, 64, 83, 87, 88, 92, 103, 106, 111, 132, 151, 155, 159, 172, 175

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