Shopify COO Harley Finkelstein on the Future of Digital Retail
Harley Finkelstein started from the ground up. To put himself through law school, he sold t-shirts using Shopify—an e-commerce platform that was relatively unknown at the time. That decision in 2005 ultimately led him to become Shopify’s Chief Operating Officer, where he helped transform the company into a global industry leader. Dubbed “Newsmaker of the Year” in 2013 for his success as an entrepreneur, and named in 2015 as a new “Dragon” for CBC’s Next Gen Den, Finkelstein lives by his personal entrepreneurial philosophy of “the hustle”: go hard, go fast, build the best, and execute. In this interview with Canadian Business, Harley talks about how to scale startup culture and his “weird, dirty secret” for managing better:
Shopify has been around since 2004 but only went public in May of 2015. The IPO raised $131 million— which was more than expected. What did you learn from the experience?
We always put pressure on ourselves as a company, so it’s not really a change to have pressure from public investors. But what we learned is there’s a big difference between going public and being a trusted public company. We’ve really spent the past eight or nine months trying to become a company that’s trustworthy. We always want to make sure our earnings reflect what we said we were going to do.
In terms of building trust with investors, I can’t imagine that’s a problem when you saw 93% revenue growth in the third quarter of 2015. That performance must be worth something.
You know, numbers like that are really good, but building trust is even more important. The Street’s still trying to figure us out. There aren’t many companies from little Ottawa, Canada, on the New York Stock Exchange. So we need to explain to the market why we’re a company that could be around for the next 100 years—why we’re a company that’s making commerce better.
What practical steps have you taken to build that trust?
We make sure investors get a chance to come visit us in Ottawa. Getting people to visit Ottawa in December is obviously challenging, but it ensures transparency. In the past couple of months, we’ve struck partnerships with Facebook, Pinterest, Twitter and Amazon, and we were very forthcoming about those deals. We explained to the industry, our merchants and the general public why those partnerships will help us improve commerce.
Shopify has always put a heavy emphasis on its corporate culture. When you’re hiring during this time of massive growth, how do you ensure people will be a good fit?
Most people assume a great culture is having a cool office or really great perks—and we have those things. But what really defines whether somebody is a fit for your company is how they act when nobody’s watching. What do they do when they are left to their own devices? It’s not about how they act when they know the right answer. It’s about how they act when they don’t know the answer.
That’s a really tough goal. How do you determine someone’s true character through a standard job interview?
You can tease things out. When I’m hiring, I don’t want the guy who played on the tennis team; I want the guy who created the tennis team. I don’t want the guy who participated in some charity; I want someone who created a brand new charity. I look for people who are self-starters—people who have a bit of a founder mentality.
It sounds like you want to hire entrepreneurs.
We try to find the best and brightest. Then we try to remove all the roadblocks and red tape in their way. Most companies of our size have a lot of bottlenecks. This is a company with a startup culture. That means people can run very, very fast. “People can get shit done” is one of our core values. That somehow made it into our filings with the SEC, which is pretty neat.
How does the company change as it gets bigger?
I can’t sit around one table with the entire team and have pizza and talk about the future of the company. That has become more difficult. But we now have four offices. It would be a mistake to impose our Ottawa culture on Montreal or Toronto. That also wouldn’t scale well. So we don’t have one office culture—we’re multicultural. But most things have scaled. Things like town halls actually get richer with the more people you add.
You started with e-commerce, and then dropped the “e” and have started offering a platform that supports traditional retail as well. What’s the relationship between online retail and bricks-and-mortar retail these days?
Most people assume the future of retail is one or the other: It’s online or it’s offline. You have big retailers like Macy’s or Best Buy talking about how online retail is hurting the offline business. Our view is thatit’s all digital retail. In the future, consumers will dictate to the retailer how they want to purchase. That’s why our partnerships with platforms like Pinterest and Facebook are so important. We need to empower our merchants to sell on those social networks. But that only serves one customer demographic. In other cases, people still walk into a store, so we have our point-of-sale system. Or they’re buying something at a farmers market, so we need to be able to accept mobile payments.
It’s pretty well-documented that Canadian companies haven’t embraced e-commerce like those in the United States. Why is that?
For a long time, Canadians were buying from American stores where duty and shipping was fairly expensive. That turned off some people. And once consumers weren’t interested, retailers had no reason to be aggressive. But honestly, in the past two years, I think all that has changed. There are some incredible online businesses that started online that are just dominating here in Canada, and we power most of them.
Tobias Lütke, your CEO, did an interview in which he described Shopify as a utility. If the company does its job, nobody will notice it’s even there. But as the company grows, does it need to develop more awareness of its brand?
Shopify is a brand to merchants—it’s not a brand to consumers. We’re quite happy to be behind the scenes, which is different from other e-commerce companies. Companies like Etsy effectively rent customers to merchants. Customers go to etsy.com; they aren’t going to a particular vendor’s store. I think our model’s much better. We actually want the merchants to control the businesses themselves.
If I was doing one of these interviews at any other company, I’d be speaking with the CEO. But you’ve become the public face of the company. How did the executive team decide how to divide responsibilities?
We want to create a management team in which people can do the best work. Tobi’s one of the most brilliant product minds in the entire world. I know what he’s great at; he knows what I’m great at. We’ve just decided to focus on those areas of strengths. A lot of companies get that wrong. They focus on mitigating the weaknesses of their leaders instead of amplifying their strengths.
You recently became chief operating officer at Shopify after serving as chief platform officer. Why the change?
We don’t let the title define the role; we let the role define the title. My job at Shopify hasn’t been to oversee sales or another specific area—it’s been to add as much value as I can. And as my role has expanded, I think the CPO title became confusing. We also want the public to know I’m freeing up Tobi to focus on product and technology.
You have an executive coach. How does that help?
Until recently, it was a weird, dirty secret that some of the best leaders in the world have coaches. So I’ve become very vocal about it, because I think it’s important. Coaching at Shopify actually started with Cody Fauser, our CTO. He was a phenomenal engineer and software creator, but it didn’t come naturally for him to manage a team. So he hired a coach for himself. Once we saw the benefit for Cody, the entire executive team started seeing coaches. We now have full-time coaches on our staff and anybody who manages people can see one. Many companies take people who are great as individual employees and promote them to become managers. But just because he or she is a great engineer doesn’t mean he or she will be a great manager. Management is not instinctive.
So how does a coach help with that? Many people assume a coach is just a personal cheerleader.
Not at all. It’s a place you can go that is very safe and you can talk about things that are working—or not. Or you can use it as a sounding board. Our coaches are all experienced people. Mine was at IBM for many years, so he can say, “Look, I was in a similar situation, and here’s the way I worked it out.” I find that’s really valuable.
James Cowan/Canadian Business/March, 2016