In this episode of The Knowledge Project Podcast, Tobi Lütke, the co-founder and CEO of Shopify, shares his insights on entrepreneurship, innovation, and the importance of maintaining a clear strategy in a rapidly changing business environment.
He discusses how Shopify navigated the challenges of the COVID-19 pandemic, the differences between founder-led and non-founder-led companies, and the importance of creating a safe environment for risk-taking and innovation.
Risk-Taking and Innovation
Risk-taking is crucial for innovation.
Doing the same thing as everyone else doesn’t add value.
Companies should create an environment where employees feel safe to take risks and fail, as this can lead to innovation.
I think the most important thing that people have to understand is how un-doable is a decision? If an idea is fully un-doable, I want people to almost, you know, make it as quickly as they can. – Tobi Lutke
The Power of Entrepreneurship
Entrepreneurship has the power to solve problems and create value.
Shopify’s mission is to make entrepreneurship simpler and more accessible, particularly in the digital realm.
This mission is driven by a belief in the transformative power of entrepreneurship.
The Challenge of Preventing Reversion to the Mean
Preventing a company from reverting to the ‘middle of the bell curve’ in terms of industry competency is a challenge.
Everything a company does should be aimed at beating this reversion to the mean.
This requires a clear strategy and a commitment to continually reassessing and adapting to the current circumstances.
The most important thing is to keep the most important thing the most important thing. In our case, it’s to make a product that’s really appreciated by entrepreneurs and can deal with not just the current but also the next problem sets. – Tobi Lütke, CEO of Shopify
Maintaining Focus Amidst Volatility
During times of volatility, such as the COVID-19 pandemic, it’s crucial to maintain focus on the most important aspects of the business.
For Shopify, this meant continuing to create a product that entrepreneurs appreciate and can use to solve their current and future problems.
The Importance of a Clear Strategy
Having a clear strategy and a guiding principle is essential for navigating challenges.
For Shopify, the guiding principle is the belief that entrepreneurship should be simpler and that their software should make entrepreneurship easier, particularly in the digital realm.
The Role of Subtraction in Growth
While it’s easier to add things, removing things can often be more beneficial.
Saying yes to one thing means saying no to everything else that could have been done during that time.
As a result, the set of things that can be done becomes smaller, while the set of things that need to be maintained grows larger.
The best possible roadmap is to have a very clear view of what matters to your merchant, have a super strong model of your own capabilities, and then rerun the function of deciding what is the very best thing you can work on every moment. – Tobi Lütke, CEO of Shopify
The Role of Founders and CEOs
There are significant differences between founders and CEOs. Founders are driven by a vision and a passion for their idea, while CEOs need to manage and lead a company effectively.
This requires a different set of skills, including the ability to make tough decisions, manage people, and navigate complex business environments.
The Importance of Fighting Bureaucracy
Bureaucracy and process are terms exclusive to things that do not work.
If people talk about an area having a lot of bureaucracy, it’s usually an area that could be streamlined enormously with some first principle thinking.
The Evolution of Shopify
As Shopify has grown, the role of its CEO, Tobi Lütke, has evolved.
He has had to adapt and develop new skills to manage the company effectively.
This evolution is a testament to the dynamic nature of leadership in a rapidly growing company.
The Future of Shopify
Despite the challenges posed by the COVID-19 pandemic, Lütke remains optimistic about the future of Shopify.
He believes that the company’s clear strategy and commitment to innovation will enable it to continue to thrive in the digital realm.
Adapting to Changing Circumstances
Being adaptable and responsive to changing circumstances is crucial.
Traditional concepts like roadmaps and plans can be overrated.
Instead, it’s more effective to have a clear understanding of what matters to your customers and a strong model of your own capabilities.
This allows you to continually reassess what the best thing to work on is, given the current circumstances.
