How Pandora ruthlessly prioritizes and how our template can help

As product people at TPO Agency, we strive to continuously search for new ways to build the right products efficiently. That is how we stumbled upon Pandora’s story during one of our research sessions.

For those who’ve never heard of Pandora, Pandora is a music streaming service based in the United States. The company was founded in 2000 with a B2B business model, and in 2005, they shifted to a B2C model, where they launched as an internet radio product.

After Pandora went public in 2011, it went on to build products for 70 million monthly users spread across multiple platforms. The company generated half a billion in revenue, and today, it is valued at $7 billion. Surely, this is not unusual. At first glance, you’d think this is just another vast enterprise. But what if I told you that Pandora accomplished all of this with approximately 40 software engineers? Their secret? They figured out how to build the right things fast by using a prioritization process.

Pandora’s prioritization process

Pandora’s prioritization process was invented by their CTO Tom Conrad when he came on board of the company in 2004. Conrad came up with the process by understanding the company’s limits. That is why he based the process on the following three essential rules:

• Time and money are constraints
• Don’t commit to long-term roadmaps
• Do the most valuable work at any given time

With those three rules in mind, Tom Conrad went to work and designed a model that allowed the company to create maximum value with limited capacity.

At TPO Agency, we strongly believe in the value of Pandora’s Prioritization Process (PPP). We decided to put the process to the test and use it for one of our products. To make it easier to apply the model, we decided to put it in a matrix and a template, which you can consult in the Miroverse here.

You can use the matrix as a quick overview of the different actions, deliverables, and team compositions for each process step.

The 7 steps of prioritizing

Pandora’s Prioritization Process exists of 7 steps:

• Step 1: Brainstorm → Organize a brainstorming session with all relevant parties. Come up with ideas that would be stupid not to do in the next 90 days. Everyone in the company can join the brainstorming session, but make sure it stays manageable. The goal is to come up with between 60 and 80 ideas.
• Step 2: Define & Scope → Everyone writes out the ideas gathered in step 1 on a presentation slide. Define metrics that describe what success would look like and how it would impact the business. Afterward, define the scope of each idea in euros (or in dollars, ponds, yenns, whatever currency you prefer).

How to calculate the scope in euro?

A feature that takes one engineer one month to complete is worth €5. If the same feature takes them two months, it’s €10, €15 for three months, and so forth. If you’re going to put two engineers on it, that’s €10, €20, €30, and so on.

• Step 3: Pick the team → Now that all the ideas for this period have been described and scoped, it’s time for the prioritization team to bid on the ideas. The prioritization team consists of people on the highest level of the company who have the health of the whole company in mind. The team may include the CEO, CFO, VP of business development, CRO, VP of HR, and so on.
• Step 4: Buy ideas → The prioritization team bids on the ideas that they like the most. Calculate the engineering capacity and distribute the (fake) bills accordingly. Let each team member bid on all the ideas they like until they run out of money. Each member gets the same amount of bills. Note that each member can spend more than one bill on an idea they like.

How to calculate the engineering capacity?

Decide how many developers you have on the team who are available to work on the ideas. For example, if you have ten developers available, each for €5 per month (ref. step 2), and for three months (ref. step 1), this gives you an engineering capacity of €150.

How to distribute the bills?

E.g. The engineering capacity is €150 and the prioritization team consists of 5 people. Each member then gets €30 (6 bills) to spend on ideas.

• Step 5: Discuss, consolidate & re-scope → Re-distribute the bills based on dialogues. Only keep the ideas with the best scope-to-bills ratio, taking into account the engineering capacity.
• Step 6: Deploy → By now you should end up with a manageable amount of ideas which means it’s time to start building the ideas. Make sure everyone in the company knows how the decisions were made. Make prioritization a part of your culture.
• Step 7: Repeat → Repeat the process every 90 days from scratch. Never reuse the ideas that previously didn’t make it in step 5.

Note that all steps should be repeated every 90 days. However, this may vary, depending on the size of the company and the flexibility and skills of the developers. You can shorten the period to two months or even one month. After all, you will see for yourself what is feasible for you. The basic rule is that the period should not exceed three months.

PPP Template

Aside from the matrix, we also created a ready-to-use template. All seven steps are included as well as a pre-filled example.

Since we like to share our insights with other product-minded people, we want to share this matrix and template so that you can try out Pandora’s Prioritization Process as well. You can find the link for the matrix and the template shortly on the Miroverse. Can’t wait? Send us a PM and we will deliver it to you shortly.

We’re very curious how you will use this template and for which products it helps you! So feel free to use it and share your insights.

In the next blog article, we will share our findings on the PPP model after applying it to one of our own products.