Building One with Tomer Cohen: Building Spotify with Gustav Söderström

Episode Release Date: July 9, 2024

Introduction

In the inaugural episode of Building One, LinkedIn's Chief Product Officer, Tomer Cohen, engages in an in-depth conversation with Gustav Söderström, Spotify's Co-President and Chief Product Officer. This episode explores Gustav's professional journey, the challenges of building Spotify, and the innovative solutions the company has implemented to stay ahead in the competitive music streaming industry.

Gustav's Career Path and Entrepreneurial Journey

Transition from Engineering to Entrepreneurship

Gustav begins by sharing his early career aspirations and the unexpected turn that led him to entrepreneurship. Originally an electrical engineering and data science enthusiast aiming to work in a large corporation, Gustav found himself without job opportunities during the IT crash. This predicament pushed him to co-found a mobile data messaging company, marking his involuntary entry into the entrepreneurial world.

"I became an entrepreneur, but involuntarily it was the only thing I could do, because you couldn't get a job when you just had a fresh degree."
— Gustav Söderström [04:27]

Developing a Broad Skill Set

Gustav emphasizes the importance of wearing multiple hats during his entrepreneurial ventures. Operating as both founder and CEO, he had to master various aspects of business, from incorporating a company to negotiating with venture capitalists.

"Having that role even for a few years forces you to learn everything, have that sort of helicopter perspective and the ultimate responsibility for everything."
— Gustav Söderström [05:12]

Building Spotify: Navigating Complex Business Models

Initial Challenges and Contrarian Strategies

When Gustav joined Spotify in 2009, the company was grappling with the complexities of the music industry dominated by piracy. Spotify's initial model was a free, ad-supported desktop product aimed at countering piracy by offering on-demand streaming. However, Gustav and his team recognized the limitations of mobile streaming at the time due to poor network infrastructures.

"We had to rethink the entire thing... We actually came up with something that at the time was very contrarian."
— Gustav Söderström [09:20]

Innovative Licensing Model

To address mobile streaming challenges, Spotify shifted from streaming to a sync-based model. This involved allowing offline syncing of up to 10,000 songs for a month with encrypted local storage, ensuring that users couldn’t export the files unlawfully. This strategic pivot required negotiating favorable terms with music labels, balancing user desires to pay a reasonable fee against the labels' expectations.

"Users wanted to pay for this, and it became $10 a month."
— Gustav Söderström [10:17]

Cultivating a Unique Organizational Culture

Long-Term Thinking and Patience

Gustav attributes Spotify’s sustained success to its culture of patience and long-term thinking, supported by the company’s high employee retention rates. Unlike Silicon Valley's rapid turnover, Spotify's stable workforce allows for long-term bets and gradual product development.

"If your horizon is one and a half, at the most three years, you’re just not going to attempt to build a product that's going to take four years."
— Gustav Söderström [17:48]

Deliberation Over Speed

Contrary to the "move fast and break things" mantra prevalent in Silicon Valley, Spotify prioritizes deliberation and strategic decision-making. Gustav highlights that the high cost of potential mistakes in licensing agreements necessitates a more thoughtful approach.

"Talk is cheap, so we should do more of it because it's much cheaper than writing code and certainly much more cheap than shipping the wrong thing and rolling it back for six months."
— Gustav Söderström [19:16]

Product Development Philosophies

Holistic Problem-Solving

Gustav discusses his preference for solving entire problems rather than focusing narrowly on specific aspects. This holistic approach ensures that product development considers technology, user interface, and business model simultaneously.

"I don’t enjoy the problem as much if I can’t see the entire problem. It’s the beauty of solving the entire problem."
— Gustav Söderström [06:55]

Importance of Explanations

Emphasizing the value of clear explanations, Gustav advocates for leaders to articulate their decision-making processes. This practice fosters understanding and alignment within the team, even when disagreements arise.

"Everyone deserves an explanation, and you as a leader, have to explain yourself."
— Gustav Söderström [21:33]

Integrating AI into Spotify’s Ecosystem

Enhancing Music Discovery

Gustav highlights the transformative role of AI in enhancing music discovery. By leveraging vast playlisting data and semantic understanding through acquisitions like Econest, Spotify can offer personalized and contextually relevant music recommendations.

"Once we had [semantic understanding], then we could start building great sessions where we could actually promise you that this is going to be Swedish pop."
— Gustav Söderström [30:41]

Future Visions with AI

Looking ahead, Gustav envisions AI transforming Spotify into a personal music trainer, capable of dynamically adapting to users' activities and emotions. This includes potential integrations with biometric data to curate music that matches users' real-time states, such as workout intensity.

"A dream scenario would be you walk down the street in Manhattan, you hear a voice, you know, and you're like, oh, that's Spotify."
— Gustav Söderström [35:17]

Organizational Structure Aligned with Product Strategy

Centralizing Functionality

Gustav explains the strategic decision to maintain a single app for music, podcasts, and audiobooks. This approach optimizes distribution and fosters a unified user experience, as opposed to fragmenting services into separate applications.

"We chose to bet on adaptive UI and we chose to bet on our existing distribution."
— Gustav Söderström [37:17]

Balancing Recommendations Globally

Spotify’s organizational structure includes a centralized personalization team that balances recommendations across different content types (music, podcasts, audiobooks). This ensures that users receive tailored content without the complexities of managing separate ecosystems.

"We have one that we call the PCM personalization organization under a single leader that tries to balance the user recommendations globally."
— Gustav Söderström [40:52]

The Future of AI in Music and Beyond

Dynamic and Personalized Experiences

Gustav is excited about the potential of AI to create truly personalized and dynamic user experiences. By reducing the cost of coding and enabling real-time adaptations, AI can facilitate highly customized interactions that were previously impractical.

"With AI now, you can start personalizing the product."
— Gustav Söderström [41:08]

AI as a Friend

Envisioning a future where AI becomes an integral part of users' daily lives, Gustav imagines Spotify evolving from a utility app to a personal friend that interacts with users in meaningful ways.

"I think it’s entirely possible that some of these products actually become your friend."
— Gustav Söderström [34:51]

Key Takeaways

1. Nature vs. Nurture in Career Development: Gustav's transition from a focused engineer to a versatile leader was driven by necessity, highlighting the importance of adaptability and broad skill acquisition in entrepreneurial success.

2. Resisting Labels for Greater Innovation: Avoiding strict role definitions allows leaders like Gustav to explore and integrate diverse aspects of business, from technology to marketing, fostering a more innovative environment.

3. Long-Term Thinking Over Rapid Iteration: Spotify’s culture of patience and long tenure enables the company to pursue ambitious, long-term projects that might not yield immediate results but are foundational for sustained success.

4. Strategic Deliberation Over Speed: In high-stakes environments like Spotify, careful planning and strategic decision-making are prioritized over the fast-paced experimentation common in other tech sectors.

5. Value of Clear Explanations: Encouraging transparent communication and rational explanations within the team enhances understanding, alignment, and the overall effectiveness of leadership decisions.

6. AI’s Transformative Potential: AI is set to revolutionize personalized user experiences, enabling dynamic and context-aware interactions that can significantly enhance product offerings.

7. Organizational Structure Aligned with Product Goals: Spotify’s centralized approach to managing diverse content types ensures a cohesive user experience and effective distribution, setting it apart from competitors with fragmented services.

Conclusion

The conversation between Tomer Cohen and Gustav Söderström offers valuable insights into building a successful product in a complex industry. Gustav's emphasis on patience, strategic deliberation, and the integration of AI presents a blueprint for sustainable innovation. Spotify's unique culture and organizational structure demonstrate how long-term thinking and adaptability can lead to groundbreaking achievements in the music streaming landscape.

For further insights and discussions on product development and leadership, connect with Tomer Cohen on LinkedIn.