How Pandora hit reset and became a success

Pandora CEO Joe Kennedy: It's uncommon that the founding idea is right on the money

In this segment of Lessons Learned, Bambi Francisco interviewed Joe Kennedy, CEO of Pandora, a personalized radio station that creates music stations based on personal preferences.

BF: You started Pandora when it was Savage Beast Technologies and there were 12 people there at the time. You were actually undergoing a restart. Many people are nervous about starting a company and having to hit the reset button. But it was a good thing for Pandora. 

JK: Pandora is a recapitalization, or revision, which started in January of 2000. There still is a core music genome project that is still a part of that. But the core business is entirely different. One piece of advice that I would give to entrepreneurs is that it is incredibly common that it's very rare that the founding idea turns out to be right on the money. There are almost always pretty considerable twists and turns. That's just part of the reality.

BF: So you shouldn't fear a restart or a recap.

JK: I wouldn't fear it. I'd expect it. You need to keep your eyes open on what is working and what is not working in the earliest stages of the game. There is a great paradox in that your greatest capability as a young company is that you need to be maniacally focused on one thing and be better than the rest of the world but every once in a while you need to ask yourself if you're really on the right track. You need to make some course corrections. But at the same time, you need to maintain focus and not scattered into four things. You've got to maintain being focused and periodically have perspective about what's working and what isn't working and make the coarse correction.

BF: But be nimble...

JK: To be nimble and focused at the same time is the challenge.

BF: I know you weren't there in 2000, but went wrong from the start? What was the lesson behind Savage Beast Technologies and why did it had to reorganize?

JK: Founding idea in terms of intellectual property development, like the music genome project, was fantastic. Founding ideas in terms of business model will help people sell music was not really such a great idea.

BF: It was to get people to sell more music.

JK: Yes, it was really to be a recommendation engine. The early business was like powering kiosks in Borders and Best Buy. The software in the kiosks was provided by what was then called Savage Beast Technologies. The problem is though that music sales are declining big time and so you can't chase after a business opportunity in a market that's falling off a cliff. That's pretty fundamentally flawed.

BF: So you're saying that it wasn't really the timing. The business wouldn't even make sense today.

JF: It was bad timing and the timing only got worse. It was a mediocre idea with terrible timing. I think also what is vitally important in a young company is founding sense of purpose. We wanted to enable people to discover and enjoy music that they love. That was the founding purpose. And we never moved away from that. I think it is an important distinction of understanding what brought you together to start the company. It's so hard to found a company. In almost in any case there is a deep passion about solving a problem. You need to hold on to that fundamental purpose although there may be course corrections on the business model but that is all part of the art of a great startup. You cannot be all over the map where you and your team have lost your fundamental purpose.

BF: Have you had any failure that you've had specifically that has made you a better CEO at Pandora?

JF: There is so much to choose from. When we came out of revisioning the company around what everyone knows is Pandora. The truth is that when we were just getting around to launch the product, we were running out of money, and none of us had experience running an ad-supported business. We were slow to see that ad supported was a big opportunity partly because it wasn't our experience that we were afraid to see ad supported as a big opportunity. Fortunately along came a new investor who not only brought the money but brought the perspective that the big opportunity is ad supported.

BF: They helped you understand?

JK: Yes. They helped us understand that and overcome the fact that you don't want to be driven by just your own experiences. The fact that none of us had experience should not drive us away from the opportunity. You don't want to be driven by your own experiences. The right thing to do is have someone join the team with that key experience of the business because now we have a great success story.We went through a period of anxiety in terms of going after what history has proved is really the right opportunity. We were hesitant when there was danger in being hesitant.

BF: Well, it looks like you're doing great today, so you've learned a lot. Thank you so much for sharing your insights.