{"id":16591,"date":"2016-11-17T21:25:17","date_gmt":"2016-11-18T02:25:17","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/the-digital-concert-pianist\/"},"modified":"2016-11-20T16:23:35","modified_gmt":"2016-11-20T21:23:35","slug":"the-digital-concert-pianist-how-new-digital-norms-challenge-our-traditional-views-of-craftsmanship","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-digital-concert-pianist-how-new-digital-norms-challenge-our-traditional-views-of-craftsmanship\/","title":{"rendered":"The Digital Concert Pianist: How new digital norms challenge our traditional views of craftsmanship"},"content":{"rendered":"<p>For almost two centuries, Steinway has been the\u00a0hallmark of the acoustic\u00a0piano industry. The\u00a0craftsmanship required\u00a0to produce one\u00a0instrument\u00a0at one of their two workshops in New York and Hamburg is globally renowned and is the genesis of\u00a0every\u00a0instrument&#8217;s\u00a0incredible depth and variation in tone as well as the speed and sensitivity of its mechanical action, making\u00a0it the darling of professional musicians. In 1953 Steinway &amp; Sons stated its goal was \u201cto build the best piano possible, sell it for the lowest price consistent with quality.\u201d<a href=\"#_ftn1\" name=\"_ftnref1\">[1]<\/a> But their manufacturing process, which involves 12,116 individual parts and throughput times of a year per instrument, has a retail price to match with a starting point of around $100,000.<a href=\"#_ftn2\" name=\"_ftnref2\">[2]<\/a> Steinway\u2019s unparalleled quality value proposition led to high penetration in the professional segment of the market. With a thoughtful approach to branding including product placement in concert halls and dissemination by word of mouth to the lower retail segments, Steinway created significant barriers to entry for both its grand and cheaper upright ranges<a href=\"#_ftn3\" name=\"_ftnref3\">[3]<\/a>.<\/p>\n<p><iframe loading=\"lazy\" title=\"The Making of a Steinway - A Steinway &amp; Sons Factory Tour Narrated by John Steinway\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/jAInt7hIZlU?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>But with the advent of advanced digital music technology and a consumer with a digital habit, the piano and keyboard market has witnessed the ascendance of comparatively inexpensive digital disrupters, of which Yamaha is the most prominent. Rather than seeking to modernise by simply adding digital ancillary products for the acoustic piano<a href=\"#_ftn4\" name=\"_ftnref4\">[4]<\/a> as Steinway has, Yamaha is digitalising acoustic pianos at the higher end of the market with sophisticated hybrid pianos.<\/p>\n<p>Many have been sceptical of a digital instrument\u2019s ability to compete with the craftsmanship of the more traditional manufacturing methods at Steinway. This is partly a result of the fact digital keyboards have historically underperformed on most metrics: sound quality (depth and range of tone), action (sensitivity, key repeat speed), and aesthetics. But that is changing. The greatest competitive threat to Steinway yet may now be Yamaha\u2019s TransAcoustic technology, described as sounding \u201clike an acoustic piano with volume control, or a digital piano with strings.\u201d<a href=\"#_ftn5\" name=\"_ftnref5\">[5]<\/a> It currently competes on all metrics outlined above and is likely to outperform acoustic instruments before long, Steinway included. Where Yamaha\u2019s greatest value proposition lies over and above this is digital connectivity: its hybrid pianos are linked to smartphone applications allowing the user to record themselves, share their recording with other users online or play along with pre-recorded ensembles, inter alia. Rather than simply optimising for existing metrics, Yamaha is expanding the scope of possibility and capturing additional value for the consumer.<\/p>\n<p><iframe loading=\"lazy\" title=\"AvantGrand Piano - David Pogue Review\" width=\"640\" height=\"360\" src=\"https:\/\/www.youtube.com\/embed\/RF48i0gS-Uo?feature=oembed\" frameborder=\"0\" allow=\"accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share\" referrerpolicy=\"strict-origin-when-cross-origin\" allowfullscreen><\/iframe><\/p>\n<p>Yamaha describes itself as \u201cthe one and only comprehensive musical manufacturer\u201d <a href=\"#_ftn6\" name=\"_ftnref6\">[6]<\/a>, combining acoustic and digital expertise. Though focused on what it calls \u201csound and music\u201d, its operational model is divided into four sub groups<a href=\"#_ftn7\" name=\"_ftnref7\">[7]<\/a>:<\/p>\n<p>(1)\u00a0\u00a0\u00a0 Acoustic musical instruments<\/p>\n<p>(2)\u00a0\u00a0\u00a0 Electronics<\/p>\n<p>(3)\u00a0\u00a0\u00a0 Education and leisure<\/p>\n<p>(4)\u00a0\u00a0\u00a0 Industrial parts and machinery<\/p>\n<p>Where Steinway innovated gradually across one product group, Yamaha&#8217;s product range and international presence allows it to lever a multitude of design principles and optimise supply chains to deliver a larger number of cheaper innovative acoustic cum digital instruments starting from $3-5,000. These in turn are compatible with a range of Yamaha\u2019s digital audio equipment. The corporation has cornered the technological part of the instrumental market and is primed to benefit from the ongoing shift towards digital functionality across product classes.<\/p>\n<p>What are Steinway\u2019s options? Innovate or face obsolescence? Partner with Yamaha? Horizontally integrate by consolidating the upper end of the more atomised acoustic market?<a href=\"#_ftn8\" name=\"_ftnref8\">[8]<\/a> Bought by\u00a0Paulson &amp; Co\u00a0in 2013, Steinway was debt laden with a debt covenant specifying a maximum debt-to-earnings ratio of 5.5x compared to actual leverage of around 5.48x at the time of acquisition. This was partly the result of significant capex relating to \u201cSpirio\u201d \u2013 a technology allowing users to select tunes for their Steinway to play autonomously, i.e. to listen to\u00a0music played on an actual piano rather than to\u00a0a recording. So Steinway is innovating. But is it innovating correctly? Spirio\u2019s combined hardware and software is priced at around $110,000 and is surprisingly gimmicky<a href=\"#_ftn9\" name=\"_ftnref9\">[9]<\/a>. If\u00a0Paulson &amp; Co\u00a0need volumes to grow their way out of Steinway\u2019s financial woes, it\u00a0is paramount\u00a0to digitally address the middle to lower end of the market. It is hard to see how they will stop Yamaha\u2019s inexorable drive to market without doing so.<\/p>\n<p>&nbsp;<\/p>\n<p>Word Count: 800<\/p>\n<p>Sources:<\/p>\n<p><a href=\"#_ftnref1\" name=\"_ftn1\">[1]<\/a> <a href=\"http:\/\/www.steinwaypianos.com\/159-facts-about-steinway-and-the-pianos-they-build\">http:\/\/www.steinwaypianos.com\/159-facts-about-steinway-and-the-pianos-they-build<\/a><\/p>\n<p><a href=\"#_ftnref2\" name=\"_ftn2\">[2]<\/a> <a href=\"http:\/\/www.steinwaypianos.com\/159-facts-about-steinway-and-the-pianos-they-build\">http:\/\/www.steinwaypianos.com\/159-facts-about-steinway-and-the-pianos-they-build<\/a><\/p>\n<p><a href=\"#_ftnref3\" name=\"_ftn3\">[3]<\/a> Their product suite includes 6 grand and 3 upright models with total output of 2,500 instruments per annum across both factories. Famous for their design innovation over the last 150 years, Steinway at one time owned over 126 patents pertaining to every part of the instrument from the soundboard to their hammers.<\/p>\n<p><a href=\"#_ftnref4\" name=\"_ftn4\">[4]<\/a> <a href=\"http:\/\/www.steinway.com\/news\/articles\/steinways-new-suite-of-digital-tools-for-the-21st-century\/\">http:\/\/www.steinway.com\/news\/articles\/steinways-new-suite-of-digital-tools-for-the-21st-century\/<\/a><\/p>\n<p><a href=\"#_ftnref5\" name=\"_ftn5\">[5]<\/a> Yamaha Corporation, Analyst and Investor Briefing on the Fiscal Year Ended March 31, 2016 (FY2016.3)<\/p>\n<p><a href=\"#_ftnref6\" name=\"_ftn6\">[6]<\/a> Yamaha Corporation, Annual Report Fiscal Year Ended March 31, 2016<\/p>\n<p><a href=\"#_ftnref7\" name=\"_ftn7\">[7]<\/a> Yamaha Corporation, Annual Report Fiscal Year Ended March 31, 2016<\/p>\n<p><a href=\"#_ftnref8\" name=\"_ftn8\">[8]<\/a> E.g. Fazioli.<\/p>\n<p><a href=\"#_ftnref9\" name=\"_ftn9\">[9]<\/a> <a href=\"https:\/\/www.wired.com\/2015\/04\/steinways-new-piano-can-play-perfect-concerto\/\">https:\/\/www.wired.com\/2015\/04\/steinways-new-piano-can-play-perfect-concerto\/<\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>For almost two centuries, Steinway has been the\u00a0hallmark of the acoustic\u00a0piano industry. The\u00a0craftsmanship required\u00a0to produce one\u00a0instrument\u00a0at one of their two workshops in New York and Hamburg is globally renowned and is the genesis of\u00a0every\u00a0instrument&#8217;s\u00a0incredible depth and variation in tone as [&hellip;]<\/p>\n","protected":false},"author":1865,"featured_media":16599,"comment_status":"open","ping_status":"closed","template":"","categories":[],"class_list":["post-16591","hck-submission","type-hck-submission","status-publish","has-post-thumbnail","hentry"],"connected_submission_link":"https:\/\/d3.harvard.edu\/platform-rctom\/assignment\/digitization-challenge-2016\/","yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v27.3 - https:\/\/yoast.com\/product\/yoast-seo-wordpress\/ -->\n<title>The Digital Concert Pianist: How new digital norms challenge our traditional views of craftsmanship - Technology and Operations Management<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/the-digital-concert-pianist-how-new-digital-norms-challenge-our-traditional-views-of-craftsmanship\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"The Digital Concert Pianist: How new digital norms challenge our traditional views of craftsmanship - Technology and Operations Management\" \/>\n<meta property=\"og:description\" content=\"For almost two centuries, Steinway has been the\u00a0hallmark of the acoustic\u00a0piano industry. 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