Sonos CEO hears Big Tech behaving badly

BBefore the August recess, the US Senate may vote on a bill that seeks to curb anti-competitive behavior by the likes of Amazon, Google, Meta and other tech giants. Sonos CEO Patrick Spence lobbied aggressively for the measure, which would protect the premium audio maker and other small businesses.

The legislation would stop dominant players “from being able to simply leverage their power and balance sheets to destroy competition,” says Spence, a tech industry veteran known for speaking out for big tech companies.

Among other things, the antitrust bill would prevent platforms such as Google and Amazon from favoring their own products and services. Advocacy groups funded by big tech companies have spent tens of millions on ads to fight the proposal, saying it will kill popular resources like Google Maps. “They’re not going to spend millions upon millions of dollars to stop us if we don’t have the momentum,” Senator Amy Klobuchar (D.) noted. Supporters hope the proposed legislation will pass quickly in the full House as well.

Spence says Sonos, which offers wireless speakers, amplifiers, subwoofers, and related services, is a thriving underdog that has thrived despite competitive threats from big competitors since its inception in 2002. The company fought Google’s rise in smart speakers by filing a complaint to the US International Trade Commission. In January, the International Trade Center banned Google from importing products that use five Sonos patents.

The companies are still at odds. A Google spokesperson told TIME that the company is working hard to support the customers it shares with Sonos, but “Sonos now claims to own the technology that Google has developed.”

Born and raised in Canada, Spence once dreamed of becoming the country’s prime minister. He earned honors from the University of Western Ontario in Business and Management, then joined RIM shortly before launching the small Canadian company BlackBerry. The device drove the company’s growth, and by 2007 – the year Apple released its first iPhone – RIM was the world’s largest smartphone maker. Spence eventually led global sales and regional marketing. Sonos hired him as Chief Commercial Officer in 2012. He has held the position of CEO since 2017 and announced Sonos the following year.

Although he battles bigger rivals, Spence is comfortable with Sono’s place in the tech industry’s food chain. “Being an underdog makes you uniquely focused on innovation, competition, and customer service,” he adds.

Spence, 47, recently spoke with About a possible settlement of Google, its expansion plans, and dealing with supply chain issues.

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This interview has been shortened and edited for clarity.

How will your win at ITC help remove threats from tech giants to other small players?

It sends a message that they can’t just copy what startups are doing and they will either have to pay the licensing fee or not be in the market. We invested in intellectual property and were willing to stand up to Google. It cost us millions of dollars to go to the ITC. It was a good way for us to enforce that intellectual property. But it doesn’t change the rules of the game for startups the way pending antitrust law does.

In late June, the US Customs Service ruled that Google had violated the International Trade Center’s import ban by continuing to infringe certain Sonos home audio patents. To resolve issues involving both decisions, would you expect Google to eventually sign a patent licensing agreement with Sonos?

We’re still open to compromise, but it’s up to them. I will not comment on conversations with anyone. We have always been open to licensing our patents and today we have licensing agreements with two companies. We remain open to the future. We must make up for our inventions.

What do you value most in your 14 years at RIM?

I was initially the product manager for RIM’s Interactive Pager, an introduction to BlackBerry. With about 150 people there, no one really cared about the titles. It was a fast paced environment and an opportunity to leap forward in my career. Every two years, I’ve been doing a different job. I grew up inside that company.

In late 2008, RIM introduced an alternative to Apple’s iPhone known as the BlackBerry Storm, the first touchscreen device. I later said that this short-term move did not focus on RIM’s strengths and customer needs. What did the storm’s failure teach you about Sonos’ best strategy for competing effectively against giants?

In hindsight, RIM was supposed to make the next best BlackBerry device and not a response to the iPhone. With Storm, we shed a decade of customer loyalty and a lot of our reputation for great products. It made me paranoid about how Sonos would respond to competitive threats. When Amazon and Google jumped on the $25 mini speakers, there was a faction inside Sonos that said, “We can build a better $25 speaker out of those companies.” I said, “That’s exactly what we’re not going to do because I’ve seen this movie before.” So we didn’t want to compete directly with those companies and betray everything we’re about. Instead, we’ve taken advantage of the services they provide, such as offering voice assistants on a highly innovative Sonos speaker that can support multiple assistants.

Most large tech solutions are a mile wide and an inch deep. Big tech companies want to monetize all your data in different ways. We are a mile and an inch deep. We have enhanced the game in terms of privacy and speed. Instead of sending all of your data to the cloud, we focused on running the Sonos voice assistant locally in your home. This is how we respect what our customers want. We continue to grow and navigate giants because we have a unique niche in the market.

How have management experiences at RIM shaped your leadership style at Sonos?

At RIM, I believed getting involved in everything is a sign of strength and leadership. When I came to Sonos, I realized that great leadership requires putting the right people in the right positions. Today, I have nine first-hand reports from experts in their field. During our weekly two-way chats, I ask, “How can I help you be successful and move forward?” Every six months we agree on priorities. At RIM, I also tried to appear as leaders I read about. But Jack Welch is not who I am. Now I’m more comfortable bringing up the things I’ve learned through team sports, like how we should work together.

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I have described the current supply chain problems as crazy. Sonos expects supply challenges and component shortages to continue through fiscal year 2022, which ends September 30. How much damage is this shortage to your industry and Sonos?

Component availability remains a major challenge for any consumer electronics organization. We usually have two circuit board options for any product. Because of the shortage, we had to build seven different circuit boards to be used in some products, possibly indicating the involvement of dozens and dozens of suppliers. If we do not, we will not ship the product. It is a heroic effort on the part of our engineering teams.

Sonos has long focused on filling every home with music. However, it recently entered the motoring arena with an audio system installed in Audi’s latest mid-size electric SUV. Why did you diversify into cars and what other areas might you expand into next?

Cars will become more entertainment hubs as they tend to be more autonomous. Audi is our toe in the water, but cars hold a lot of hope for the future. We want to be anywhere people experience sound. There are a lot of areas that we are not playing in today. Cafes and offices offer plenty of opportunities.

You’ve fulfilled your commitment to launch at least two products per year, a record that Sonos had not consistently achieved prior to becoming a CEO. What steps did you take to speed up the launch of a new product?

When we didn’t have that goal, it took three years to ship our last product. We invested in two other teams to pursue prototypes and other ideas. As a complete company, we were also organized around these two moments. The effect function helped us get to the point where we say, “This is a great thing we can build and not get caught up in being perfect, the enemy of the great.” If you go for perfection, you’ll never charge for anything. It was a huge cultural breakthrough. To make a change in the culture, I took one of our first employees who was leading our software team. I made him a product manager to lead the whole initiative and get the product team to work that way. His positioning in this position has been a key factor in getting us on the path to introducing at least two new products each year.

As powerful and larger competitors devise new methods to undermine Sonos, iterative innovation may become more difficult. What must Sonos do differently to continue to deliver at least two great items each year?

We invest more in research and development to ensure we are pushing the envelope towards new concepts, ideas and partnerships. My first job would probably be to try and get people comfortable with the fact that things are changing. I’m working to make sure we adapt. The main job of any leader is to get colleagues out of their comfort zone to get to the next big innovation. Satisfaction is a killer for many companies.

What about flexibility? Why is it critical to successful business leaders?

We face challenges every day that we cannot anticipate. For example, we’ll weather whatever macroeconomic headwinds are over the coming months. You have to understand those challenges and recover and stay consistent by using your energy to become resilient.

You do beach workout at 5:30 a.m. six times a week. How do you help you recover from the inevitable work crises?

My exercises are almost meditative. This really prepares me for whatever is thrown at me later that day. Incorporating this mental aspect is perhaps the most important part of starting my day well.

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