The Subtle Yet Startling Revelation in Spotify’s Layoff Announcement
Last week Spotify continued the 2023 corporate downsizing hit parade by announcing a 17% reduction in headcount. What makes this downsizing noteworthy is the undertone in CEO Daniel Ek’s refreshingly blunt announcement. He states that over the past two years Spotify has been “more productive but less efficient”. He also revealed that too many people were “doing work around the work rather than contributing to opportunities.”
Agile since its founding, Spotify is seen as an Agile flagship company. Their rapid and sustained success has often been attributed to the productivity gains enabled by their Agile-based culture. It is Spotify’s Agile foundation that makes Ek’s revelation so noteworthy. Based on the context, productivity refers to the output generated by specific resources. Efficiency, on the other hand, refers to the impact those resources have had on achieving specific outcomes. For a mature Agile company to openly state that they have been “more productive but less efficient” is eye popping! Why hasn’t the productivity enabled by Agile translated into efficiency?
The answer likely has to do with clarity on outcomes. Agile productivity gains can enable teams to build more in less time, but productivity gains only translate to efficiency if teams are building the things that drive desired outcomes. Most Agile transformations are inherently output-centric. Consider the metrics often used to measure success — they tend to be output-based (velocity, story points per sprint, burndown charts, etc.). These metrics measure how fast outputs are delivered (productivity), but they don’t measure the value created or realized for the audience and/or the business (efficiency).
Usage of the product is not the end for the user. The product is a means to an end, the end for the user is an outcome. It is through this outcome that value is realized. Cost effectively enabling desired outcomes is the essence of efficiency. Teams need to be grounded in the understanding that their users are not using the product because they want to use it, they are using it for a desired outcome that has value. To move beyond productivity and into efficiency, Agile transformations need to be infused with an outcomes-based mindset, or better known as a Product Mindset. The Product Mindset demands more than rapid delivery of outputs, it dictates that teams develop a deep understanding and a relentless focus on the outcomes their audience seek, and the business requires.
To move beyond productivity and become truly efficient, teams need to embody a Product Mindset, ensuring that the intended outcome shapes every product decision. They must think and work in a way that aligns the continuous delivery of Agile with continuous discovery and continuous validation in a hypothesis-driven cycle toward a clearly defined outcome. When teams align through a Product Mindset, it creates nimbleness and flexibility throughout the product development process. This alignment enables teams to dynamically manage priorities while accelerating value creation by rapidly iterating toward outcomes. It also ensures that products continually evolve to efficiently solve problems that exist, are pervasive, and for which a solution has value.
Sustainably ensuring a deep understanding and a relentless focus on the outcomes is the foundation for innovation. This deep understanding and relentless focus enable the product to evolve to the true reason the audience is using it: the outcome! Had that been the case then it likely would have prevented Spotify from being “more productive but less efficient” while directing the focus on impactful work rather than “doing work around the work”.
