Devoted to Managers and those that seek to improve their management skills

The announcement by Sony (SNE) BMG that it would start offering digital music downloads free of digital rights management (DRM) is a good study in unintended consequences within an entire industry.

As mentioned here, "The reasoning behind using DRM software was to keep people from illegally sharing songs on peer-to-peer networks. Rather than do that though, it infuriated consumers who paid for the music by making them burn it to a CD before they could upload it to play on their chosen device. The result was the quality of the music was degraded."

Another big problem which emerged was the urge to protect the old business model used in the industry drove music lovers to Apple iTunes (AAPL) and Steve Jobs, basically handing them the greatest amount of power for the distribution of music; which is the major game in the music industry today.

What DRM did was bind a consumer strongly to the music device the preferred to use, which was by far the Apple iPod. So instead of protecting their business model, the industry handed the new business model and power to Apple iTunes for the most part.

The result has been that Apple controls the direction of the music download industry at this time, because of their approximate 80 percent market share of legally downloaded music. So when the music industry pushed to offer music at different price points, Apple and Steve Jobs simply said no.

To me the most important thing to understand and learn from this is we must be careful as business leaders what we protect in our businesses. Protecting our brands is important, and is a battle that must be fought. On the other hand, protecting outdated and disappearing business models is not a battle that should be fought, and the unintended consequences experienced by the music industry shows what can happen.

Now they're in a long-term battle to regain control of the new business model they were extremely slow to embrace. Not only that, the control they're battling is the very power they've created themselves.

We need to be careful what battles we decide to fight. We could end up creating a competitor that didn't even exist before.

In whatever industry we're in, we need to understand what is changing and declining, and where the future lies. Knowing that is the determining factor in developing business battle strategies.

Fighting against where the industry is going is another way of not understanding the changing demands of consumers. To attempt to change their minds is like trying to paddle up a river rapids: it's futile. Understanding the difference between changing consumer behavior and old business models is the key to making these decisions.