Why did Shopify succeed?

Introduction

Last Thursday, Shopify hosted an event at the Elgin Street location. The purpose of this post will be to collect my thoughts about this rapidly growing company. This post will be about my thoughts and it is quite a wall of text, but hopefully one that is quite insightful.  It is one of those times when once you are very engaged a topic, you simply cannot stop writing about it.

 

Although I currently do not work in the technology industry, I cannot help but feel that Canada’s prosperity depends on having a very vibrant technology sector. Having lived in Waterloo around Southern Ontario and earlier in my life in the Midwestern United States, I saw the impacts of the decline of manufacturing here in North America and the very real impact it had on living standards, wages, along with overall hope.  I fear that if technology in Canada does not succeed, it could result in major economic problems and a very real decline in living standards for Canadians. I have met in my life too many people who have been hurt by the decline in manufacturing in both the  Canadian and American manufacturing heartland to not think that any decline in technology might have a similar impact. We cannot rely solely on natural resources, as the decline in oil prices has recently demonstrated.  As Canadians, we must diversify and ideally, have a vibrant technology sector, along with a return in manufacturing. I must stress the word “we” in this context too.

 

Shopify has become one of the few Canadian success stories. To that end, I wanted to learn more about Shopify and their successes.  I attended because I feel like I am invested in Canada’s future when I do. This sounds cheesy, but I’ll explain in this post more in the “Hope and Fear” section at the bottom (which I hope you will get to).  It is always interesting to attend events like this because you always get a unique combination of people that you see.  I think that is worthy of a post in and of itself, but for now I’d like to dedicate a post to Shopify.

 

The “Shopifolk”

 

I came in with a very high level of curiosity. Companies will always want to try to present their best at these events. In that regard, you do have to keep some degree of skepticism. They are here (and to their credit, they readily admitted it), companies do indeed hold these for entirely selfish reasons. They love the attention. That can lead to interest in other ways, such as word of mouth, more people using their services, etc.

 

The other reason of course is that every company these days says to me that they are “different” in some way or another. Most do not live up to their claim. The reason why I made this post is because Shopify is one of the few organizations that I have seen that has done so.  That is very high praise coming from me, by the way. I’m not the type of person that is very easily impressed. Perhaps that may be the reason why they have achieved “different” results.

 

This was not the first time I had met Shopifolk (yes that is what they call themselves) before. There does seem to be a few interesting things:

  1. Very casual and conversationalist
  2. Many seem to be clustered around the Centretown area (and Byward Market especially, which seems to  play a very key part of their organization’s culture, at least at Head Office)
  3. They love to talk about their work
  4. Fast paced company

 

Very casual and conversationalist

I personally love this. I am not a fan of the idea of “dressing for success”. My background is accounting and it is often a conservative profession.  I have always believed that a suit and a tie or any other formal dress does not make a person magically more competent. Instead, it is a “signaling” mechanism. There is a mentality within the company of come as you are. Do not try to be something that you are not.  As I said, it is something I personally love.  You can tell that it is a very “fun loving” culture. The offices have very bright colours and are clearly designed to help inspire workers. I wonder about the similarities between Shopify and Google’s offices.  In fact, on that note, I wonder about the similarities between Google and Shopify in other ways. They are both appealing to computer engineers, both are known for their bold offices, and both are famous for their perks. They are both very famous too for being very selective in who they hire.

 

Byward Market and Centretown

The Byward market appears to have played a very central role at Shopify. This was not brought up during the event, but anecdotally, I have found that many of the Shopifolk have relocated to Centretown after working there. Likewise, Shopify has played a role in building up the area and has received considerable media attention for it. I would be very interested to learn more about this topic.

 

In the context of this post, it may also be worth exploring how communities have been able to build successful technology firms. Why Ottawa? What made Ottawa so successful in this regard? Likewise, why San Francisco in the case of Silicon Valley? I always love to ask the “why” question. For Canadians, I would argue that it would be important to have as many communities as possible that emulate whatever it was that made it possible for a start-up.

 

They love to talk about their work

You can often tell when someone says they love what they do and actually mean it.  I have been to events where the presenter’s words were seemed like they were saying something, but they did not always feel it.

 

By contrast, enthusiasm is infectious. It is very difficult to fake it, at least for people who are a good judge of character.  They can easily go on enthusiastically about it and there is a passion that is lacking when the words sound forced. I have a favorable impression here that the majority of people I spoke with seemed engaged in what they did.

 

Fast paced company

This being Ottawa, a disproportionate number of the Shopifolk come from government or other large corporations, which have varying cultures. They once even set up an booth as IBM had layoffs in Ottawa. One person told me that the people who succeed there felt liberated at the fast pace, while the ones who don’t struggle to deal with the fast pace.

 

I think that it is the product of the industry. Right now the company is doubling every year. It is an immature industry still, so things happen quickly.  Eventually it will mature, but I hope that it never loses its edge.

 

 

Act on “Instinct”

Around mid-way,  Doug Teztner gave a speech about what he felt made a great fit.

 

Anyways, during the event, Doug gave 3 basic criteria for successful people:

  1. They are authentic
  2. They “give a shit” (Doug’s words not mine) :p
  3. They are people you want to be around
  4. Doug listed this one as optional, but “situational awareness”

 

They  rely very heavily on the recruiter’s “gut feeling”. They want people with these characteristics. Afterwards, we had a pretty lively conversation. I regret that we did not talk more in depth, but being who he is, I’m sure he is very much in demand.

 

I will try to describe these as best I can based on my (admittedly limited) experiences and give my thoughts.

 

Authentic

Doug notes that modern interviewing is a hair pulling exercise. There are a set of pre-scripted questions and the end result is that people will adapt by saying what they think the interviewer will want to hear. The end result is a person that is not themselves. They are what they think the interviewer wants them to be. Doug argued that the person that gets hired is not the person that is the best fit for the job or the company culture, but the one that has been able to answer the questions in a way that the interviewer thinks they wanted to hear. It goes without saying that Doug feels that is an awful way to hire. For Doug, the problem is that the ability  to answer interview questions well are not necessarily the same people that will perform the job well.

 

The other problem that Doug noted was that companies fear getting a lawsuit. The end result is a system designed to be “bulletproof” from a legal risk standpoint. Again, there is a potential trade-off here and  he feels that the problem is that when an organization prioritizes legal risk over everything else, the ability for a company to get the best fit for the job is inevitably compromised. He believed that the risks were well worth taking, all things considered, particularly given Shopify’s position (they are well funded at the moment).

 

That influenced Doug’s ideas very heavily. He believed that companies should hire based on people who were really themselves and evaluate based on that.

 

“Give a Shit”

Doug noted that only a very small percentage of people have ever really cared about their work. The overwhelming majority are not as heavily invested in their work. Earlier I noted that the Shopifolk had a tendency to talk constantly about what they did, like it was their favourite hobby or something along those lines.  They had a sense of ownership.

 

When I was studying for my accounting designation, my moderator, who is a very well regarded Management Consultant, said 2/3s of people are not engaged at work. He was actually on the radio saying this. I’d argue that the number is likely higher, perhaps in the only 10-15% “give a shit”. I think that looking back, at school, we probably all remember an assignment where we were placed in a group, and they were the only person that actually worked extremely hard on the given project. Then when the evaluations came up, everyone gave each other high marks and the group did well, but only due to the person that actually cared about their work.

 

One of the things that I love about my current position is that the people who I work with are actively engaged. It makes working with them so much better.  Off-topic, but it is something that I am very grateful for. I think that it is one of the things about the not-for-profit sector that is desirable. The people are committed towards the work they do. The combination of the not-for-profit culture and the often lower pay drives that.  It does however lead to a selection bias that leads to a more amiable workforce and one that seems more heavily invested than most companies.

 

People you want to be around

I don’t think this one needs an explanation. People that are actively engaged, and have great technical skills is good, but they need to be friendly and people that you want to work with. Otherwise, it is all for nothing.

 

My thought on this one is that we spend more time at work than anywhere else when we are awake. We spend more time than with our family and friends. Not having people who have agreeable personalities that you can work with would be a killer for any job. It would bring down the productivity of an entire team or worse. I can see why they would want to aggressively filter for that. Equally so, I will note that it is hard to filter for unpleasant individuals in a traditional interview setting.

 

Other Thoughts

One other thing that I found very admirable about the hiring was that they did not over-emphasize on experience. “They already did it, why would they want to do it again?” were Doug’s words to me. I think that is a very important consideration. Too many employers I feel today insist on work experience because they do not want to invest in training their employees to reach their peak potential. The other, as Doug noted, was that employers do not want to take risks, the believe that they have seen a person do it before, so they can do it again. The question though, as Doug notes is, do they “want” to do it again?

 

Shopify is not for everyone of course. Here is a great example of a person that found the opportunity to learn more about Shopify, and came to the conclusion that the eCommerce industry was not for them. I think that it is important because no matter how outstanding any organization is, there will be people who are themselves outstanding but are simply not a good fit. It is best to learn this early on rather than finding this one out the hard way and having to look for a new job a few months later.  Kudos to Nicole Belanger, the writer in the linked article, for coming to that conclusion early on. Equally important, their process was able to encourage a degree of “self-selection” for those it was not a good fit for.

 

I do not want to idealize Shopify, as I’m sure there are employees who have bad experiences (just like everywhere else), but I think that one reason why it is growing is because the good outweighs the bad and well, they have been able to hire, then retain great people.  Judging by Shopify’s success, they have done a solid job.

 

In-Depth Thoughts

I am going to be giving some more in depth thoughts now. In my spare time, I have been doing a lot of research about this topic in considerable detail.

 

Hack Days

This was only briefly alluded to, but Shopify has these. They are days when employees work on a project that is not the same as their ordinary jobs.

 

The concept is best known at Google for the “20% time”, although in practice it often became the “120% time”. Google seems to have phased out their 20% time in 2013, although they still try to keep the innovative spirit alive. Shopify has a similar practice known as “Hack Days”. Anyways, they take time off every 3 months to work on a project that is different from their regular routine jobs. They have a blog post about it here.

 

The practice originally came from 3M in the immediate aftermath of WW2. Anyways, here is a summary. This led to a number of innovations, most famously the Post It note. It was a radical idea at the time and it led to a number of different innovative products. Their competitors never really were able to, for the most part, match 3M, because they were unwilling to follow up on their innovations.

 

HP used to be very innovative as well in that regard, before its transformation into a low margin computer company and IT services provider.  There is a great article about how HP transformed from a respected instrument maker into what it is today.

 

For Shopify, I guess the question is, can they keep their innovative spirit as they continue to grow? What about as the industry matures?  3M and HP seem to represent two diverging paths as to how companies can end up. Google although it did phase out the formal 20% has to its credit continued to invest heavily in research and there are those who argue that the 20% time Is not quite dead.

 

The challenge will be to manage the growth in such a way that a good corporate culture is kept, and one that tolerates risk. Not all Hack Day projects will pan out. This is especially problematic as publicly traded companies are under pressure from investors for short term profits, even often at the expense of greater long-term profits.  In the short term, they are going to seem like money losers. In the long run though, a few will be revolutionary.

 

Instinct vs Talent

One of the things I am most interested in seeing is how successful this “hire on instinct” is. The instincts are going to be the bottleneck and if the instinct of whoever makes the decision is bad, then there is the risk of a bad hire, which can have monumental consequences. We humans are very loss averse and in the context of a company hiring, it is important to remember that it is not just the person, but the entire team that gets affected if there is a bad hire.

 

Let me give yet another comparison of Shopify and Google. Google found out that it was actually very awful at hiring. Google has since made some substantial changes. You can find out more on the web (or keep reading my blog as I do plan to make a future post on this at some point).

 

I think that in a few years, I would like to see Shopify do a very similar study. It would be interesting to see how well the “instincts” of their Talent Acquisition Team were. Let me put it this way, much like Google, as much as they are idealized in the media, I would not be surprised if that study resulted in some major changes.  That being said, they urgently need to do this study at some point – their survival may depend on it.

 

There is no perfect place

That brings me to one other thought. There is no perfect place.

 

There is a thread on Quora about Google – “What is the worst part about working at Google?”:

https://www.quora.com/What-is-the-worst-part-about-working-at-Google?share=1

 

You’ll need to login to Quora to read this, but the Business Insider has a summary.  On that note, I think that someone should ask that same question on Quora: “What is the worst part about working at Shopify?” Maybe that “someone” should be themselves a Shopify employee interested.  On that note, I strongly encourage you to read the Quora answers (hey if you have read this far into my thread, you clearly have the attention span to do so!). The reason why is because I bet if you were to ask, there would likely be similarities between the two.  You could also use Glassdoor, (account needed for past the first few reviews) and in particular, focus on the negative reviews.

 

The point I’m trying to make is that it isn’t all what the media makes it out to be. To an extent, I am guilty of that too. So far, I have portrayed it as “ideal”. There are going to be up and downs, like in any organization. There is a mentality and a portrayal in the media that such companies must be perfect and that is not always true. I don’t work at Shopify and I only have outsider information, but I’m sure if I were to show this to a senior Shopify employee, they would say the same – nobody or no organization is perfect. If they do not, then I have deeply, deeply misjudged Shopify.

 

Stay humble

The one review on Quora that makes me the most concerned was this one: https://www.quora.com/What-is-the-worst-part-about-working-at-Google/answer/Jesse-Radin

Jesse Radin, stats nerd

As someone who has worked for a temp job working for Google, the worst part is the smug attitude of those who work for the REAL Google. They seem to think that anyone who isn’t working for the actual Google like they are is somehow mentally and morally inferior.

And I know that’s not the case.

 

No matter how successful one becomes, I urge you to stay humble. It is something that I emphasize very strongly.

 

In the context of hiring, humility is a very important trait, and I would say, something that is ranked alongside technical expertise.

 

 

So Why Did Shopify Succeed?

 

We cannot build a perfect system or a perfect company. Go onto Glassdoor and you will see negative reviews of every company, even the most highly recommended ones.

 

Overall, it is a combination of both good fortune, and skill of the people who are working their. Note that I say people. Too often we seem to as a society attribute success to one person. Steve Jobs of Apple is perhaps the most well known example and there has been an cult of personality built around him. In reality, it is the combined work of many people that enables an organization to succeed or fail.

 

Although like all organizations, they are imperfect, they have been successful so far  because they have managed to develop a culture that enables success.

 

My Hope and Fear

 

Since moving to Canada in 1998 and becoming a citizen here, I have felt a level of investment in this nation that I have not felt elsewhere.

 

When I first started my studies in 2008 at the University of Waterloo, Research in Motion (now known as Blackberry) was amongst the dominant players in the mobile smartphone place. Every week I would walk on their campus. At one point, I passed daily when I lived off of campus. The founders were dismissive of the iPhone and the company was never truly able to effectively respond to the threat that it displayed. By the time I graduated, RIM had lost leadership. It was shocking really. The causes of RIM’s fall from grace are worthy of a post, but the gist of it was that they were out-competed by more adaptive companies. Here is an interesting article about the subject.  The other often overlooked area is that they lost the mid-ranged high volume market too.

 

It will be interesting in the coming years to follow Shopify to see how it ends up. Will it end up being the epicenter of turning Ottawa into a major technology hub? I say that with considerable caution. I am cautiously optimistic. Earlier in this article, I called Shopify a  “success”. Perhaps that may be a bit premature.

 

Perhaps it is because I am a Canadian and I do feel a considerable level of investment in the success of Canadian companies. (Yes, I do “give a shit” when it comes to this matter), I’ve wondered a great deal about the future of this company. We’ve seen many Canadian technology companies struggle. RIM/Blackberry is an example of a company that is in decline. The high profile bankruptcy of Nortel is another. ATI Technologies, a company that makes computer graphics cards, was purchased by the American semiconductor company, AMD, which is now in considerable financial difficulty, struggling to compete with both Intel (primarily in the CPU market) and Nvidia (in the GPU market). Whether it can turnaround with its future products (namely the Zen CPU and their next generation of GPUs) is uncertain.

 

If they succeed (and I hope they do), then perhaps Doug will be proven right and that it will be able to spawn an ecosystem around Shopify, kind of like how Google has around the San Francisco Bay area. I just hope that there is more public policy towards orientation of the future. Perhaps we will see more  start-ups like Shopify or perhaps a large crown corporation (or major expansions of existing ones).  In fact, I would argue underinvestment in research, infrastructure, and basic science is one of the biggest flaws of Canada today.  Perhaps we will see a fundamental change in culture someday.  That is a lot of “perhaps”.  I would be very interested to hear from other start-up entrepreneurs on what they think Canada should do and perhaps Shopify employees as well. I just hope that it can adapt to the changing circumstances, outwit its competitors, keep an outstanding corporate culture, learn from the mistakes of others, and if it ever becomes the dominant player of eCommerce, never uses its position in a way that exploits its monopoly.

 

Whatever else, I expect that for the foreseeable future, I will be following Shopify with great interest. The question is, can Shopify make it? The best possible outcome is a trajectory like Google. The worst I suppose would be a fizzle from a promising company, like RIM.  I will say it again: I am cautiously optimistic. Tobias Lütke, their founder seems well aware of other “fizzles” like Groupon. He will not make those mistakes at his firm.

 

I just hope that more Canadians, as Doug would put it, “give a shit” as much as I do and see the long-term impacts of having a robust technology industry.  Accordingly, we must as a society demand that from our societies leaders, vote for the politicians that invest in the future, and collectively, “give a shit” more than we currently do.  Our living standards depend on it.

4 Comments

  1. Benjamin David Steele

    Not being a Canadian, I can’t speak of giving a shit about Canada’s technology industry. I generally would like to see Canada do better in many ways, if only so that could get on more equal footing with the US. I don’t see any reason that Canada couldn’t have a technology industry as good or better than that of the US.

    BTW I’m not sure I’ve ever mentioned to you my other Canadian friend. I’ve known her much longer than I’ve known you. We’ve been talking since before I started my WordPress blog. She is definitely someone who gives a shit, although I couldn’t tell you her opinion about the technology industry. You’d probably find her an interesting person.

    link to facebook.com

    Reply
    1. Chris Liu (Post author)

      Due to its relative size and geography, Canada is heavily influenced by the US, both the good and the bad. When the US does well, in general, the Canadian economy also does well.

      The decline in American manufacturing, for example, has heavily led to the decline of manufacturing in Canada too. I view this as a great tragedy. It isn’t a coincidence that manufacturing’s decline correlated with the decline in the fortunes of the middle classes of both nations. It isn’t low wages necessarily. Japan, Germany, South Korea, the Nordic nations, and Switzerland are examples of nations that have held onto a decent manufacturing base.

      One trend that I think is quite unfortunate though is the over-dependency on natural resources. Although Canadians (and particularly Albertans) don’t like it pointed out, Canada does have a case of Dutch Disease, with oil having a disproportionate effect on the economy. The decline in oil prices has led to an economic decline in the West, and a serious decline in the Canadian dollar. To me, it’s a waste to have just a natural resources sector. Why not have a good manufacturing sector? The nations that do well in this regard support their manufacturing sectors and view them as important for national security.

      Technology should be no different. Certainly, Canada does have a decent university base, a start-up culture, and a few other things in its favor. However, there are also substantial barriers to building a viable “Silicon Valley of the North” (as the Ottawa and Kitchener Waterloo regions have sometimes been called). Nonetheless, I think it is an important goal, for prosperity, and increasingly economic security.

      Reply
      1. Benjamin David Steele

        I’m sure there is much resistance to making the Canadian economy more independent of the US economy. At present, the two countries are tied together quite closely. But I think all countries in the world would be wise to seek greater independence. I doubt globalization as we know it will be the future.

        Reply
        1. Chris Liu (Post author)

          I think that it is always risky to have a nation’s economy dependent on one other nation. The US being 10x the population and right next door makes that even more difficult. It’s diversification though that is needed.

          The reason why I am very critical of the kind of economy that people like Stephen Harper (our former Prime Minister) advocated for, an “energy superpower”, is because it leaves the Canadian economy very vulnerable. The fall in oil prices and commodities has not been kind to nations like Canada or Australia. A diversified economy, consisting of technology, but also of many different industries in manufacturing would help mitigate any declines from any single industry or area.

          Similarly, being overdependent on the US I think is not wise either. It has been said before that “when the US sneezes, Canada catches a cold”. While not always true, it does illustrate how vulnerable Canada can be to a recession in the US.

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