It’s a good thing Pandora didn’t listen to that nonsense about “failing fast”; the company built and serviced a 70 million-person monthly user base, grew to a half a billion in revenue, and went public

It’s a good thing Pandora didn’t listen to that nonsense about “failing fast”

By Max Nisen @MaxNisen February 7, 2014

Many entrepreneurs and tech companies laud the idea of rapidly trying new things and failing fast. But it’s a luxury that most companies can’t afford as well as a waste of time, according to Pandora CTO Tom Conrad.

Since the company pays out a large amount of money to the companies it licenses music from, Pandora had to ruthlessly prioritize. Here’s how Conrad explained it at a talk at venture capital firm First Round Review’s recent CTO Summit:

“There’s this motto in our industry that says fail fast and fail often. But none of us can actually do that right? We have all kinds of constituents — employees, investors, users — they are expecting you to do smart things, not dumb things. So one of the first things I said was let’s not pretend we can just try things and some will work out and some won’t. That’s not winning, that’s losing.”

Instead the company built and serviced a 70 million-person monthly user base, grew to a half a billion in revenue, and went public with only 40 engineers.

Pandora developed an efficient system to prioritize engineering tasks: Projects and planning were limited to 90 days in advance since longer time frames lead to slower reactions. Conrad would start by asking “What would it be stupid not to do in the next 90 days?” and then source ideas from throughout the company. Then, he estimated total engineering capacity, and assigned it a dollar value—$5, for example, would represent a feature that takes an engineer a month, so a 10 engineer team would create a $50 dollar budget.

A team of decision makers then voted with a budget based on engineering capacity. After a period of discussion, consolidation and advocacy, the short list of ideas that got fully “funded” would move forward.

The system, which Pandora has used for 8 years, is an excellent example of the power of constraint. More work, and more important work, was accomplished because projects were precisely mapped to the available budget and supply of engineering talent.

If people aren’t honest about their productivity the system can fail. And adding more hours or people to a task doesn’t always make it better. But assigning value to time, and strictly limiting it, means less gets wasted.

 

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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