You’d expect a quick and nimble approach at digital music service Spotify, but patience also has its place.
Digital music streaming is a dynamic business. The recent headlines about Spotify, one of the biggest streamers in the game, illustrate the opportunities and challenges that play out daily.
In the weeks leading up to our meeting with Sunita Kaur, Spotify’s Asia managing director, journalists were writing about music streaming rival Apple after it announced a new streaming service that would go head to head with Spotify. At the same time, business writers covered the co-branding deal between Spotify and Starbucks, which lets customers in 7000 coffee stores across the US (and soon elsewhere) play a role in the crowdsourcing of their store’s playlist, via Spotify.
The third story, the most technologically impressive for current users of Spotify, was about the launch of Spotify Running. This piece of functionality for joggers means that songs are automatically chosen to match the user’s running pace. In other words, the music tempo matches the jogging tempo.
Each story demonstrated in its own way the opportunities, innovations and threats Spotify faces daily. Music has been probably the most disrupted industry of the past few decades. It’s no small task to build a career at its leading edge, and in the world’s largest web market. (A Statista survey from March 2015 put China at more than 478 million internet users, with the US a distant second with 202 million.) Yet Singapore-based Kaur says there is nowhere else she’d rather be.
Lessons from Facebook
“When I worked for Facebook for just over three years, there were seven of us in a tiny little serviced office in Singapore trying to figure out what social media meant for those in the Asian region in 2009,” Kaur says.
“I think we did a pretty good job of figuring that out. But that is also where I learned that failing is not a bad thing. That was one of Mark Zuckerberg’s mantras, to ‘fail harder’.”
At Spotify, Kaur’s strategic challenges have included launching a service typically paid for by credit card into the Philippines – a nation where credit card penetration is in the single digits.
“I remember having to present the strategy to the Spotify board, and in doing so I had to explain that there was no ‘Asia strategy’,” she recalls, smiling. “There was a Singapore strategy, a Malaysia strategy, a Hong Kong strategy and a Philippines strategy.
“Each of those markets had unique challenges. The first thing we learned when beginning to set strategy in Asia was the need for diversity. Music that people enjoy in this part of the world is incredibly close to their local music scene, so finding the correct catalogue was vital.”
So how did Kaur overcome the credit card issue in the Philippines? Through the power of partnership.
“With almost anything you do in business it’s important to realise that sometimes you can’t do it alone. We started to reach out to different payment gateways,” she says. “One of our most successful partnerships, not just in Asia but around the world, has been the telco partnership. All of a sudden you could pay for your subscription through your telco bill. This was a win-win situation because data is an important revenue stream for telcos. It worked out beautifully.”
Setting the strategy
So how does Kaur decide on a strategy within a specific region? During weekly meetings, she says, the team first discusses long-term goals (“We want Spotify to be in every country around the globe”) and from them develops short-term goals (“We need to increase our business in this territory by 20 per cent”), which then lead to actionable items.
“Strategy is always a team decision,” she explains. “Clear strategy creates buy-in. It makes people’s roles and purpose extremely clear. It helps people see where we need to be, where we need to go.”
Yet pressure is constantly increasing in the fast-moving music world. Delivery deadlines are drawing ever closer, from quarterly to monthly, and sometimes weekly, and a new attitude is required to cope with it.
“Someone once said to me that you have to be comfortable with being uncomfortable. Facebook taught me that. It means that if you succeed, you’re driven. And if you fail, you’re driven. It pushes you and builds you as a person. We need to be humbled by failure every once in a while.
“We live in a world now where we have so much access to data. Gone are the days where you had meetings upon meetings before forming a decision, implementing it, then waiting six months for a result. Now what you do is get together, make a decision and try it.
“The next step is two-pronged. If you succeed, you repeat. If you fail, you revise. In the span of a month you could easily try something and fail twice but succeed the third time, then push ahead fast rather than waiting six months before you find out whether you failed or not.”
Kaur stresses that learning from failure doesn’t mean there’s a lack of due diligence. Successful strategy comes from a delicate mix of risk, experience and knowledge.
“We’re constantly asked why Spotify is not all over the world already. Strategy needs to be quick and nimble, but you have to add to that the power of patience. It is so tempting to roll out the business into every country in Asia, but you need to stop and think about whether that’s the right thing to do.
“We have seen a lot of companies roll out really quickly without being prepared. It drains a tremendous amount of resources and finances, then you fail. That’s not the kind of ‘fail harder’ that Mark Zuckerberg taught me about.”
Kaur laughs when she thinks back to the first decade of her career in the magazine industry, first at AsiaWeek and then with Singapore Press Holdings. The highest-pressure decision she and her colleagues used to make, she says, was what type of paper stock they should use next year. Yet Kaur was keenly aware that the media landscape was changing.
“I thought, if I don’t learn about this thing called ‘the internet’ I am going to be obsolete in 10 years,” she says.
After deciding to take the leap from print publishing to online media in 2005, as advertising director at Forbes.com, Kaur realised very quickly she was in over her head.
“I was an immigrant to this digital world,” she says. “I was in my 30s, so I was not a [digital] native. I spent my first few months sitting in meetings with people in their early 20s and they were speaking a language I did not understand.”
One of her managers at Forbes.com recommended she find a mentor who could teach her everything she needed to know. So Kaur approached one of her friend’s teenage children.
“I literally borrowed a child for six months,” she says. “They taught me how to use the internet. They taught me everything, even down to how to search most effectively on Google to find exactly what you need, immediately. It was amazing. It was life-changing for me.”
Her next move was to a senior role on Microsoft’s Singapore-based sales team. Then came the Facebook experience, which shaped so much of her ability to think strategically in such a fast-moving environment.
The innovation conundrum
Any innovation at Spotify comes up against a strategic test – the balance of risk and reward. Will the innovation be worthwhile? What will it cost the business? Will the end user understand it? Is it possible to be too innovative?
“I was having a conversation yesterday with a friend who works in the tech space. We were discussing the perfect innovation timeline, where the innovation amazes the customer but is not so sci-fi that they can’t get their head around it,” she says. “How do you build something incredible that is still within reach of consumers?
“Think of our recent announcement around music and running. In the past, when we got up to go for a run we laced up our shoes, stuck in our headphones, picked our running playlist and hit the road. Two weeks ago we launched Spotify Running which means you lace up your shoes, stick in your headphones, pick your genre of music and hit the road.
“The app serves you music according to how fast you’re running. The idea is not too foreign, although it might have been a few years ago. We are taking something old and making it new. We are taking something people know and turning it into a new, better experience. That is a great strategy.”
Music by numbers
Spotify is in 58 territories around the globe, being enjoyed by more than 20 million subscribers and over 75 million active users. The service includes more than 30 million songs.
Users play music directly from the cloud. The service is free if you accept a stream that includes advertising. Subscribers pay a monthly fee and avoid the ads; they can also download tunes and listen to them offline. The business is headquartered in London, with a research and development hub in Stockholm and another 16 offices around the world.
Since launching in October 2008, Spotify has paid US$3 billion to rights holders.
This article is from the October issue of INTHEBLACK