Ben Thompson on Shopify’s questionable self-awareness when they ventured into logistics:
Here’s the thing: logistics were and are a big challenge for merchants. It is a problem that needs to be solved. In this case, however, Shopify was too laser-focused on merchants; logistics was a situation where they needed to not just understand the problems being faced by their merchants, but also understand themselves and what problems they were actually capable of solving.
Specifically, Shopify is a software company, and that puts one hard constraint on your business: you need to go horizontal, not vertical. Software requires huge amounts of R&D but it also scales infinitely; software businesses profit by maximizing leverage on their investments, which means serving more customers with the same capabilities. Logistics, though, means the physical world, which means variable costs and a limited addressable market; this limits the leverage you get from software, without decreasing the need for R&D.
Self-awareness of one’s core strengths is as crucial as customer focus, and Shopify’s failure to stay within the bounds of what it could effectively manage as a software company resulted in significant setbacks.