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Clash of management styles could be to blame for Shopify CTO’s departure, tech analyst says

January 27, 2023

RMW Commerce Consulting’s Rick Watson told Techopia he thinks Shopify CEO Tobi Lütke might be growing impatient at e-commerce giant’s pace of product development.

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Shopify chief technology officer Allan Leinwand is departing the company in the next few weeks, the latest in a string of recent changes in the e-commerce giant’s senior management ranks. In a statement from Leinwand provided Friday by the Ottawa-based firm, he says he is leaving Shopify for an unspecified “personal reason.” Leinwand, once a senior vice-president of engineering at Slack, spent 18 months at Shopify, taking over from Jean-Michel Lemieux, who left in 2021. “Shopify has grown tremendously during my time here, and I’m deeply excited about what the future holds for the organization,” Leinwand said. “I’ll be working with the team over the next few weeks to ensure a smooth transition. I’m a proud shareholder and I’ll be cheering on from the sidelines.” Shopify president Harley Finkelstein said in a statement that CEO and co-founder Tobi Lütke will now oversee research and development. As chief technology officer, Leinwand played a key role in bringing new products to market. But one prominent tech analyst said Friday he thinks Lütke might be growing impatient at the pace of product development. “They’ve publicly made statements that innovation for their products is not proceeding as quickly as it should be,” Rick Watson, CEO and founder of New York-based RMW Commerce Consulting, said. “My suspicion is that the instincts of Allan and the instincts of Tobi as a founder were not always in alignment. It’s a young company culture, and a C-level role usually means you have a great deal of autonomy as to how you run things from a department point of view. For a company with a founder who’s an engineer, I just don’t think that’s the case. Unless Allan were a very passive person, this was never going to last forever. ” Shopify’s new chief operating officer and vice-president of product Kaz Nejatian, who assumed those roles last September, has become the company’s main spokesperson for new products. Watson said he’s not surprised Lütke has taken over the R&D reins, adding he doesn’t expect Shopify to replace Leinwand any time soon. “The reality is, Tobi is the owner of both product and technology no matter who is in the role,” he said. Watson said he doesn’t expect the latest C-suite shakeup to have much impact on Shopify’s stock price or bottom line. “People aren’t going to buy or sell Shopify based on the CTO leaving – if the stock price is going up and the company is becoming more profitable,” he explained. “But if both of those things are not true, then it starts to create a narrative. The thing that investors are always going to look to first is performance, period.” Lütke previously stepped in to take over chief product officer Craig Miller’s responsibilities, when Miller left in 2020. At the time, Lütke said there were no plans to replace Miller. Leinwand’s departure comes after the company parted ways with several key staff, including Lemieux, Miller, chief financial officer Amy Shapero, chief operating officer Toby Shannan and chief talent officer Brittany Forsyth, during the pandemic. Shopify has now retooled virtually its entire senior management team as it attempts to navigate sea changes in the e-commerce landscape and evolve its product and customer base. While the company’s revenues and share price soared earlier in the pandemic amid an explosion in online shopping, Shopify has fallen back to Earth over the past year as COVID-related lockdowns were lifted and consumers flocked back to brick-and-mortar stores. Last summer, the company laid off 10 per cent or roughly 1,000 of its workers and admitted it misjudged the growth of e-commerce. At its zenith in 2021, Shopify was Canada’s most valuable publicly traded company. But since November of that year, its stock price has plummeted nearly 70 per cent. The company recently introduced a number of measures aimed at wringing more efficiencies out of its workforce, including cutting most employee meetings. Last week, Shopify announced it was raising prices for three of its service plans after they had remained “largely unchanged” for 12 years. The software juggernaut is also taking steps to broaden its client base and attract enterprise-level customers that are more likely to provide stable long-term cash flow. The company recently forged an alliance with professional services giant Ernst and Young, and late last year it launched a new product stack called Commerce Components that gives merchants “a la carte” access to features such as its checkout system and application interfaces with no rate limits, rather than requiring customers to pay for a whole platform. Shopify, which keeps its books in U.S. dollars, is coming off a disappointing third quarter in which it reported a net loss of $158.4 million or 12 cents per diluted share, compared with a net profit of nearly $1.15 billion or 90 cents per diluted share the previous year. The company is slated to report its results for the fourth quarter ended Dec. 31 after markets close on Feb. 15. Despite the industry-wide headwinds facing the tech sector, Watson said the Ottawa firm is still “better-positioned than most everyone else in the economy” to weather the storm. “They’re still taking share from the broader market,” he said. “In general, even if e-commerce isn’t a rocket ship like it was two years ago, e-commerce is still growing and Shopify benefits from that. I expect growth (in the fourth quarter) will be slightly stronger than maybe the doomsayers have (predicted).” – With files from the Canadian Press