November 7, 2024 • 1hr 17min
Breaking the rules of growth: Why Shopify bans KPIs, optimizes for churn, prioritizes intuition, and builds toward a 100-year vision | Archie Abrams (VP Product, Head of Growth at Shopify)
Lenny's Podcast: Product | Growth | Career
Key Takeaways
- Unique Approach to Churn: Unlike most companies that optimize for retention, Shopify optimizes for making it easy for people to try entrepreneurship, accepting that many will churn but the successful ones make up for it through their payment revenue model
- Long-Term Experimentation: Shopify maintains long-term experiment holdouts and reviews impact after 1-3 years, finding that 30-40% of experiments showing initial positive results have no long-term impact
- Metrics Philosophy: Core product teams don't use metrics/KPIs, instead relying on taste and intuition guided by a 100-year vision from CEO Toby Lütke
- Growth Team Structure: 600-person growth organization split between Growth R&D (product, engineering, data) and Growth Marketing (acquisition channels), with unique inclusion of customer support
- Sales Integration: Successfully integrated sales motion into product-led growth by creating hybrid journeys and rebuilding attribution/LTV models
Introduction
Archie Abrams is VP of Product and Head of Growth at Shopify, where he leads a 600+ person growth organization. Shopify powers over 10% of e-commerce in the United States, with $235 billion in GMV in 2023 (roughly the size of Finland's economy). The conversation explores Shopify's unique approaches to growth, product development, and organizational structure.
Topics Discussed
Shopify's Scale and Business Model (02:30)
Shopify has grown to become approximately 10% of U.S. e-commerce, excluding Amazon and Walmart. The platform processed about $235 billion in GMV (Gross Merchandise Value) in 2023, comparable to Finland's economy.
- Revenue Model: Combination of subscription fees and payment processing fees
- Scale: Powers majority of non-Amazon/Walmart e-commerce in the U.S.
Unique Approach to Churn (06:17)
Unlike most SaaS companies that focus on reducing churn, Shopify takes a different approach.
"We want to lower the barriers to getting started and help folks grow, and those winners make the whole thing work."- Philosophy: Make it easy for people to try entrepreneurship
- Acceptance: Many businesses will fail, but successful ones generate enough revenue through payments to make the model work
- Parallel to Angel Investing: Most investments won't succeed, but winners make the portfolio successful
Long-Term Experimentation and Metrics (11:08)
Shopify maintains long-term holdouts for experiments and reviews impact over extended periods.
- Holdout Structure:
- 5% holdout across all changes in a quarter
- 50/50 splits for new merchant changes
- Key Finding: 30-40% of experiments showing initial positive results show no long-term impact
- Example: Payment failure notification experiments showed short-term improvements but no long-term GMV impact
Growth Team Structure (29:47)
The 600-person growth organization is divided into two main groups:
- Growth R&D:
- Growth Products: Landing pages, sign-up, onboarding, monetization
- Enable: Internal tooling and platforms
- Customer Support: Tools and experiences
- Growth Marketing:
- Paid acquisition
- Media buying
- Affiliate marketing
- Email and SEO
Goal Setting and Forecasting (33:03)
Shopify focuses on cohort value over traditional metrics.
- Primary Metric: Total GMV generated by merchant cohorts over 3-4 years
- Secondary Considerations: Payback periods and efficiency metrics
- Channel-Specific: Each channel operates with LTVCAC guardrails
Core Product Development Philosophy (42:05)
Shopify's approach to product development is heavily influenced by CEO Toby Lütke's 100-year vision.
- Technical Focus: Heavy emphasis on technical architecture and implementation
- Review Process: Six-week review cycles with detailed technical discussions
- Project Management: Uses internal "GSD" (Get S**t Done) system for project tracking
Metrics vs. Taste-Based Decision Making (48:04)
Core product teams don't use traditional KPIs or OKRs.
- Decision Criteria: Based on taste, intuition, and technical foundation
- Quality Control: Central review by small group of leaders
- Trade-offs: More subjective decisions but enables longer-term thinking
Cross-Team Collaboration (54:30)
Growth and core product teams maintain a productive tension.
- Trust Building: Focus on maintaining quality while moving quickly
- Conflict Resolution: Regular communication and mutual respect
- Example: No-wizard principle leading to creative solutions for onboarding
Sales Integration (1:01:12)
Successfully integrated sales motion into product-led growth model.
- Key Learnings:
- Different scale requires more qualitative insights
- Need for hybrid customer journeys
- Attribution and LTV models needed rebuilding
Marketing Structure (1:06:42)
Shopify operates without a CMO, instead embedding marketing throughout the organization.
- Benefits: Closer alignment with primary goals
- Challenge: Potential coordination issues
- Success Factor: Strong brand vision from leadership
Insights on Discounting (1:08:49)
Lessons learned from Udemy experience about the power of discounting.
- Value Signaling: High list prices signal quality
- Emotional Impact: Purchases satisfy aspirational needs
- Strategy: Combine high perceived value with affordable actual prices
Conclusion
Shopify's unique approach to growth and product development, guided by a 100-year vision and willingness to optimize for long-term success over short-term metrics, has enabled it to become a dominant force in e-commerce. Key to their success is the balance between growth-focused teams driving measurable results and core product teams building for the long-term future, all while maintaining high standards for quality and merchant success.
