The "Second Act"

Fast-growing businesses often employ what we call the “Second Act” strategy – when product innovation is leveraged to expand the initial core market in an effort to acquire new customers. But what’s the right way to go about it?

The Portfolio Roadmap is the master plan for the future. In practice, it is the art of predicting what the consumer will want tomorrow and molding the organization, products, and experiences to meet those future needs. It is a strategic decision – one that may determine your company’s long-term success. Your portfolio roadmap is critical to everything that follows: Aligning teams, hiring the right people, acquiring the necessary assets, and developing the best product.

Shopify built a $100 billion+ company in a market dominated by Amazon by taking a strategic approach to their portfolio roadmap – leveraging both its narrative and architecture to de-position their biggest threat. Let’s take a look at how they did it.

STEP 1: Early on, Shopify laid the foundation for growth by delivering the best, the easiest, and the most scalable way for anyone with a product to build a beautiful online store.

STEP 2: At the time, Shopify could have positioned themselves as “providers of cloud and software solutions for businesses to launch ecommerce offerings.” Instead, they fiercely committed to making a broader, deeper impact by focusing solely on serving the needs of entrepreneurs – making it easy for them to start, run, and grow a business. CEO Tobi Lutke came out with a brilliant line that encapsulates their Market Positioning: “Amazon is trying to build an empire. Shopify is trying to arm the rebels.”

STEP 3: This customer-led focus informed the future trajectory of the enterprise, as the company boldly pivoted away from being a “software only” tool, while other similar companies remained just software tools and perished over time.

STEP 4: Shopify reframed themselves as one “platform” solution for entrepreneurs trying to build and sell their products. This clear strategic vision informed the portfolio roadmap. And over time, Shopify built out a suite of services including payments, branding, marketing, shipping, and customer engagement tools.

STEP 5: By giving entrepreneurs access to a plug-and-play marketplace (supported by third-party apps), Shopify gave its users the creative tools to differentiate themselves in the marketplace, something that Amazon wasn't built to do. So, in essence, Shopify's defendable competitive advantage became its ability to facilitate differentiation.

What we can learn from Shopify: Differentiation breakthroughs are less dependent on individual building blocks; it’s how they are combined that matters – with the customer always top-of-mind. The strategic challenge is to make choices that mutually reinforce each other to provide a multiplier effect and to demonstrate a fundamentally new and superior value.