The streaming service Spotify was founded in 2006 and now has revenues of more than 4 billion euros and has 3,000 employees. This success story can be attributed to a variety of factors. One of them is The Agile Organizational Form of Spotify, which is now taken as a model by many companies.

Reading tip: Spotify model in classic companies

Spotify model – what does it look like in practice?

If you look at current magazines, you will find the following headline: “ING – a bank on speed“. Ing DIBA is aiming for an agile transformation along the lines of Spotify through a major restructuring.

In addition, the IT of the German Telekom also includes squads, tribes and chapters from the Spotify model. Telekom currently has about 15 squads, which are spread over four tribes. Quote from an agile coach of Telekom is: “We adapted the Spotify model for us. The challenge is that the structure has not grown organically, as with Spotify. It’s been put on and we as agile coaches need to make it work.’

A final example is the company Rewe, which is now also looking for Chapters, Tribes and Squadleads with the spin-off Rewe Digital (e.g. Rewe Lieferservice). The 150 employees are divided into squads and tribes, which work according to the Scrum methodology.

Spotify model – how does it work?

But how does this model work, which large corporations take as a model? I would like to explain the basic building blocks. The model is divided into squads. These are loose groups that have a specific purpose and work agilely. Each squad has a chosen squadlead that represents the interests of the team.

Different squads are combined into a Tribe that has a Tribelead. In order to make professional exchange possible, chapters are provided. A chapter is like a user group. This deals with a specific topic, e.g. databases and defines standards and technologies in the company. There are also guilds for certain special cases.

On the website of the Spotify model, of course, there are many other principles and best practices. However, this first explanation for my assessment is enough to say something about the agility of the model. I would just like to mention the guilds, which are something like usergroups for the exchange of knowledge.

Spotify model – what are the advantages?

The great advantage of this model is scaling. By creating autonomous squads, you can easily scale various topics. Examples are:

  • Rewards can be allocated to the squads and they divide them into
  • The squad can be allocated a salary budget, which can be distributed by the squad itself
  • The squad can determine the squadlead itself
  • Each squad can have a different working methodology (classic, scrum, kanban)
  • Squads can be controlled via targets or OKRS

You realize that the squads can be controlled quite agilely and you can save a lot of management effort. I can imagine that a company with 100 employees can consist of 2-3 boards and 10-12 squads. This extremely flat hierarchy promises efficiency and speed.

Flat hierarchy through the Spotify model – own representation

Spotify model – how do I cut my squads?

The important thing is that you can cut your squads quickly and well. Many companies are obviously struggling. Spotify itself has made the division by function on the website. Other possibilities would be divisions according to:

  • Industries (service providers)
  • Customers (e.g. IT service providers)
  • Products (Product House)
  • Functions (IT-Haus)
  • Divisions (e.g. Group)
Spotify
How Spotify is cutting its squads: Image source: Spotify

Spotify model – what is my experience?

I am fortunate that my company is currently implementing this model in a department and that I was instrumental in the change. I would therefore like to tell you from my first experiences how agile this model is in my opinion. The department has 28 employees.

The first thing I have to say is that we have aligned our squads by customers, not products or features, and we’ve targeted each Squad 1-3 customer. We have 5 squads and 3 chapters across the board that exchange information about technologies. Because of the small size, we have only one Tribe and no guilds. We also try to implement the values of Scrum.

  • Focus: Each squad has a customer
  • Openness: Every squad is open to its customers
  • Courage: each squad has direct contact with the customer and has the courage to stand up for their ideas
  • Respect: We respect our customer and the success of the customer
  • Commitment: Our customer is the focus

By the way, you can read a super comprehensive example of how I implemented a Spotify model.

Reading tip: Spotify model in classic companies

Spotify model – how agile is it?

I have to say that this model is very suitable for us and we have achieved an improvement in customer satisfaction especially in the DevOps and Scrum way of working. The employees also rave about the numerous possibilities through the self-organization of the squads. I therefore consider this model to be a really good alternative and believe that companies should definitely take an example of it. We have had good experiences throughout and the model is easy to understand. Also, Spotify’s best practices give great clues and it’s not a commercial framework.

Reading tip: Agility in service companies

Spotify model – what criticism is there?

The first criticism is that the model is already a bit older and the world has changed in the meantime. Furthermore, experts believe that the Spotify model only solves the problems of Spotify and thus cannot be transferred and thirdly, the model of Spotify has already been changed. Of course, you will never be able to copy a model like this, but certain impulses or ideas can be taken out of the model and implemented in your own organization.

Spotify model – how can I measure culture?

I can also tip that as a leader you have to pay particular attention to the adherence to the squadspirit as well as the values, because motivation and cohesion in the squad are absolutely crucial for the performance. There is also the Spotify Squad Healthcheck. You check the satisfaction of the individual squads based on various criteria.

My own Spotify Health model – adapted to selected criteria

Tip: Please download the template here and customize it!

What is the advantage of this model? You can quickly check the culture of your department. I would like to give an example of this. You ask for different criteria of your team.

health model
Evaluation of the Spotify Health model – own presentation

In the columns you can see the main differences between the different squads. Squad 2 is happy with pretty much everything. Squad 3 has many problems, but there is a positive trend on almost all points.

In the rows we can see systemic patterns. Every squad has fun at work (and the trend goes even higher!). Motivation does not seem to be a problem. However, the processes cause problems. Over time, this will certainly also affect the fun factor at work.

In the overall picture you can see that many arrows point upwards. This means that the improvement process (the most important process at all) works.

Conclusion

I think the idea of the Spotify model is a foundation to bring agility into a classic organization. Once you’ve established the squads, you can implement most of the agile best practices in your organization. So I see the idea of the model as a foundation to scale agility.

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Gender note: I have used the male form for easier reading. If no explicit distinction is made, women, miscellaneous and men as well as people of any origin and nation are always meant. Read more.

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I blog about the impact of digitalization on our working environment. For this purpose, I present content from science in a practical way and show helpful tips from my everyday work. I am a manager in an SME myself and I wrote my doctoral thesis at the University of Erlangen-Nuremberg at the chair of IT Management.

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