The Spotify Culture Shuffle - A skip through its culture history
Recently Spotify’s culture journey has felt as chaotic as my own Spotify playlists. One minute it’s been celebrating the high vibes of growth and expansion, and the next it’s been a soulful session of misery and grief.
As the news broke that Spotify plans to cut 6% of its workforce, blaming pandemic fallout and economic downturn as the key causes; it got me wondering, what happened?
Spotify was once up there as a world-famous tech brand with yet another progressive company culture to learn from. It was a change-maker to alternative ways of working, and a leader in transforming the agile approach.
Now, I don’t like to pick over the remains of any culture fall out, but taking a step back and learning from the biggest brands very public mistakes gives any business an opportunity to avoid the same pitfalls. And we must remember. In order to grow and evolve, everything has to be treated as a learning opportunity.
To understand how Spotify got themselves into this culture shuffle. You first have to understand where it began, and how Spotify became synonymous with progressive work.
Where Spotify began
Spotify was founded in 2006 by Daniel Ek and Martin Lorentzon in Stockholm, Sweden. The company officially launched in October 2008, and quickly gained popularity for its innovative music streaming approach, allowing users to listen to music for free with advertisements, or for a small fee with no ads and additional features.
In 2011, Spotify expanded to the United States and quickly gained a large audience. The company went public in 2018 and has continued to expand its offerings to include podcasts and other audio content. Spotify has also been a pioneer in the use of data and algorithms to personalise music recommendations for users, which has helped the company to stand out in an extremely crowded market.
The secret sauce behind Spotify was revealed in 2012, when Henrik Kniberg and Anders Ivarsson published the whitepaper, Scaling Agile @ Spotify. The whitepaper introduced the radical way in which Spotify approached agility. In particular revealing the unique and progressive way it built teams. Far from the traditional org chart, Spotify was organised through Squads, Tribes, Chapters and Guilds. It was this whitepaper that caused a serious buzz in the tech world and became popular as an approach to agile transformation.
Of course many other tech companies tried to copy Spotify’s approach, as it appeared they had impressively managed to scale without much of the bureaucracies and layers of management that ends up crippling most technology corporations.
Spotify is one brand that doesn’t shy away from the fact that they’re always evolving. Their much more humble approach to organising, has meant they are far more eager to learn and move forward than many of their tech-peers.
For example, when their agile approach was released to the world, they were very clear that this is something that is always evolving. What they were sharing then, doesn’t mean it would be the same a year on.
It’s this underlying growth mindset that has ultimately led them to scale in such a conscious and considerate way to begin with.
True to the theme of being a music streaming service, Spotify refers to its team as a ‘band’. On their website, you’ll find their manifesto, which clearly explains their mission, beliefs, culture and values.
The main values highlighted on their site are:
- Innovative – we move fast and take risks
- Sincere – We have no time for internal politics
- Passionate – We revel in what we do
- Collaborative – We recognise that we’re all in this together
- Playful – We don’t take ourselves too seriously
Of course their values play into everything they do, and how they operate. Spotify is not a company that sticks values on a wall and does the opposite.
Let’s take innovative as an example.
I’ve lost count of the amount of companies who have ‘innovative’ as a company value, but have so many silos, autocratic leaders and rigid processes in their cultures that innovation not only doesn’t exist, but it’s practically strangled out of existence.
Spotify chose their way or structuring for a reason – because it unleashes innovation.
It’s not just their regular ‘hack days’ that label it as a true culture of innovation. Any company can have a hack day and start labelling themselves as innovative. Spotify’s difference is in the way they organise.
Spotify’s squads are designed to feel like a mini-startup within the larger organisation. Which means teams design, develop, test, and release to production all within their squad. This is summarized in the slogan “Think it, build it, ship it, tweak it”.
A touch of self-management
While Spotify isn’t a fully self-organising company, it does have pockets where self-management exists. It’s a great example of how you don’t need to go completely self-mananged to benefit from adding some practices and principles to your organisation.
For clarity, Spotify prefers to use the term of its org design as a matrix.
Spotify’s model of operating includes enabling Squads to decide how the work gets done. There is autonomy and creativity which encourages fast movement and innovation. The Squad gets to decide whether they ship to software or change direction.
The model focusses on decentralising decision making and transferring that responsibility to Squads, Tribes, Chapters and Guilds.
Spotify’s way of working increases transparency of the work being done, as well provides cross-pollination of learning between teams. In cultures such as this experimentation grows because there’s a high trust environment.
Is Spotify any different from the other tech layoffs?
From the deep dive into the way Spotify operates, you should know by now that ultimately it’s designed to enable agility.
Agility doesn’t mean that it’s always going to get it right, and it certainly doesn’t mean that layoffs aren’t possible.
Although it may feel like Spotify is yet another brand joining the tech-massacre, I don’t think it should be too quickly tarred with the same brush.
In a public statement issued on the company’s website, CEO Daniel Ek, takes full accountability for the layoffs. Stating that “In hindsight, I was too ambitious in investing ahead of our revenue growth.”
While it’s a humbling statement from Ek, something we’re certainly not used to seeing from tech leaders, it also points to the fact that we can’t make any predictions about business. From an outsiders perspective, it does also appear that this is another case of decisions at the top not being the best decision for the company.
In 2019, they reported $7.576B in revenue. Fast forward a few years and the financials show that for the twelve months ending September 30, 2022, Spotify’s revenue was $12.184B, which is an 11.57% increase year-over-year. Overall, it was reported that third-quarter revenue grew by 21% to 3 billion euros.
However, the company reported losses which claimed 228 million euros. This substantial loss was blamed on headcount growth and higher advertising costs for growth initiatives.
So was this spending a wise move? Or a greedy one?
Of course, no decision is ever perfect. But what too often happens at the top, is big decisions are made by one person which impact everyone else, including the health of the company.
It’s yet another example of how broken our businesses become, when we let one person take control of decision-making. Could this have been avoided if there was more collective decision-making at Spotify? Who knows. But at least with more democratic decision making in place, more people can contribute to the outcome, rather than it solely relying on one person’s outlook.
Rising costs is one thing, but exponential people growth without conscious consideration, is a pitfall for all too many organisations, one we wouldn’t have expected from the progressive approach of Spotify.
A human-approach to redundancy
In Spotify’s statement, they reveal that one-to-one’s will take place with those who will be impacted by a job cut. Considering the rife habit of sackings by email or memos that are notorious in the tech industry, it’s a relief to see that the human approach hasn’t been lost entirely.
Of course, redundancy conversations are never comfortable to have. But allowing the time and space for someone to process this news, and get the answers they need to move on, is far more a human approach than executing someone by email.
Uncomfortable conversations are a necessary part of our growth for both company and individual.
Spotify has clearly learnt from its tech peers in how not to make layoffs. There have been enough horror stories in the press over the past few months that not only create a PR nightmare, but also begin to establish brands as awful employers. Something you can’t afford when tech talent is hard to come by.
In a bid to fully support people in leaving Spotify in the best way possible, it’s been revealed that Spotify will not only pay 5 months of severance, but also continue healthcare cover, and provide career support to ensure people are placed.
What’s next for Spotify?
The band may just need to re-organise at Spotify, and I think the company is fully aware of this. In order to be agile you have to adapt, which means we may see another iteration of their re-organisation revealed once these layoffs are complete.
Could we see a more progressive Spotify in 2023?