During an entrepreneurship class earlier last year, we were presented with a thought exercise: would you rather be U2 or Pink Floyd? If you were shooting from the hip you would likely answer something to the effect of, "X because I like X's music better." But if you looked at this exercise through the lens that considers which band is more innovative/entrepreneurial, then the answer may surprisingly lie behind the reasons why bands break up.
The premise is basically this: people behave differently when they are rewarded equally than when they are not. Sounds simple and obvious enough, but it’s surprising how rarely it’s followed. Most bands that break up attribute their dissolution to “artistic differences” which sounds kind of like “the band members had differences in opinion on the direction for the band” but in fact really means “there was a dispute on the sharing of the spoils”. In other words, the revenues of the band were unsatisfactorily divided among the band members, perhaps based on the weighting of writing/producing/stage presence/performing, etc.
Pink Floyd, like many other disbanded musical troupes, had been dividing their revenues unequally among themselves, for whatever reasons that they had decided to at first. Over time, the band members who were getting paid less realized they deserved a bigger cut, hence sending the whole band into heated disputes and eventually into disbandment. U2, in contrast, had clearly delineated and equal divisions of revenues among the band members since their formation and have (coincidentally?) endured. They have relentlessly kept up with changing trends and musical tastes, experimented with genres and showmanship (they were they first band to broadcast a concert live on YouTube) and engineered a hugely successful world tour in 2010-2011.
The lesson? Rewards matter. The allocation of rewards matters even more.
Pink Floyd, like many other disbanded musical troupes, had been dividing their revenues unequally among themselves, for whatever reasons that they had decided to at first. Over time, the band members who were getting paid less realized they deserved a bigger cut, hence sending the whole band into heated disputes and eventually into disbandment. U2, in contrast, had clearly delineated and equal divisions of revenues among the band members since their formation and have (coincidentally?) endured. They have relentlessly kept up with changing trends and musical tastes, experimented with genres and showmanship (they were they first band to broadcast a concert live on YouTube) and engineered a hugely successful world tour in 2010-2011.
The lesson? Rewards matter. The allocation of rewards matters even more.
Adequate incentives and reward structures are needed in order to sustain innovation. When set up and agreed upon by all stakeholders from the beginning of an enterprise, whether it is the formation of a new rock band or the opening of a consulting firm, clear incentives can help lead that enterprise to long-lasting innovative success.
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