Herbalife, Valeant…Shopify?

 

This is Kickstart—the daily morning management briefing on innovation, leadership, technology and the economy from the editors of Canadian BusinessSign up to get it directly to your inbox each weekday at 6 AM Eastern.


Good morning! Here’s what’s on our radar at the moment:

Herbalife, Valeant…Shopify?

Citron Research strikes again: the firm founded by combative U.S. short seller Andrew Left lashed out at Canada’s e-commerce darling Shopify yesterday, driving down its share price by more than 10% in one day. Citron, Kickstart readers will remember, is the firm that waged a long battle against Herbalife (which it called a “ponzi scheme”) and made a fortune betting against Valeant Pharmaceuticals, of whose management and accounting practices it was an early (and very loud) critic. So when Andrew Left calls Shopify a “get-rich-quick” scheme, people do listen—although they appear to be doing so a little skeptically in this case. Left argues that Shopify is driving growth by recruiting new clients through aggressive marketing techniques, and most of those new shopkeepers are not actually going to succeed, which he says implies an inevitable collapse. It’s an awfully pessimistic view that raises some genuine questions about Shopify’s business—but it also doesn’t have the feel of the the slam-dunk that Citron’s Valeant case did. One thing is certain, however: Andrew Left has a flair for the dramatic and pursues his quarry doggedly and at length. Stay tuned.

A spokeswoman for Shopify declined to comment on the report. Citron’s allegations raise a key question: how sustainable is the rapid revenue growth that has propelled Shopify into one of the most highly valued software companies in North America? The company has always celebrated the fact that most of its users aren’t established businesses, but instead regular people inspired to start selling online by how easy it is to set up a Shopify store. […] “We’re not changing physics here, some small businesses simply don’t work,” Finkelstein said. “But the ones that do succeed will stay with us for a very long time.”

Previously: Why the world needs short sellers

Link: Bloomberg


How to instil a culture of change

Facebook Vice President of Product Fidji Simo has overseen a period of explosive growth at the social networking company, and one of her biggest successes was the high-speed rollout of Facebook Live—the company’s live video-streaming platform. Facebook saw a huge opportunity in allowing anyone to broadcast live video from wherever they were—and once it decided to prioritize the feature, it was all in. In the space of one week, Simo increased the number of engineers working on Live from 10 to 100. Telling 90 high-demand employees to drop everything is a tall order but, as she explains, it’s doable if you’ve laid the groundwork such that people expect change to be part of their job:

“The only way to have this type of flexibility is to build a culture that makes change totally expected and acceptable — that’s what will make these instances less painful,” says Simo. “You create this culture by putting people in charge of a problem, not a product; reinforcing again and again that you’re all working in a market where assumptions change and that’s okay; releasing products early to get initial feedback and adjusting accordingly. If you do all that, you create an organization that can absorb change — and that’s vital.”

Link: First Round Review


Google’s hardware is nowheresville

Google yesterday unveiled a fleet of new and updated hardware products: a phone, a laptop, two tabletop voice-activated assistants/speakers, a pair of wireless earbuds, a tiny camera that takes pictures autonomously, and a VR headset (that’s really just a pricey way to strap your phone to your face). Taken altogether, it’s kind of a kooky lineup, although with some nifty features. The earbuds, for instance, will perform real-time translation between 40 different languages. But the phone, the Pixel 2, was the star of the show. It needs to be:  Google’s last stab at a flagship phone, the first Pixel, peaked at 0.7% market share in the U.S. Perhaps the charitable case is that there’s…plenty of room to grow?

What’s less clear is whether Google has any significant changes in store to how the Pixel is marketed and sold. Because while its first version was critically acclaimed for both its hardware and software, it has not made much of a dent in the U.S. smartphone market after launching last October. An average 0.7 percent of U.S. smartphone subscribers used the Pixel in the three month period ending in August, according to data from measurement company comScore. For context: Apple’s iPhone is used by 45.5 percent of subscribers, and Samsung phones — the dominant company using Google Android to power its devices — represents 29.5 percent of U.S. subscriber share. More broadly, 53 percent of U.S. smartphone subscribers use Android phones.

Link: Recode


WATCH: Inside the Lego vault

Danish toymaker Lego recently opened a new amusement park/museum/archive in Billund, Denmark, called Lego House, which pays homage to the iconic plastic brick in both function and form: the entire structure uses the same proportions as the toy version, making it appear to be something you could really snap together. In this short video, renowned architect Bjarke Ingels, whose firm designed the facility, gives a tour of the house and explains the design philosophies and techniques that made it possible. For true brick-heads, the real attraction is “The Vault,” an underground trove where Lego reputedly keeps first editions of every building set it’s ever issued. And yes, that includes a Lego set of the Lego House itself.

Link: YouTube


Earnings reports today

Canadian publicly traded companies of note scheduled to report quarterly earnings today:

Aritzia (ATZ), The Intertain Group (ITX), Khan Resources (KRI), Richelieu Hardware (RCH), Theratechnologies (TH), Trilogy Metals (TMQ)


Thanks for reading! Have a truly excellent day.

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