The Canada Principle

Once upon a time when Netflix were still renting out DVDs, two founders Mark Randolph and Reed Hastings was considering expanding their service to Canada. They reasoned that this English-speaking close neighbour, with good infrastructure would be an easy 10% extra revenue (Canada is roughly 10% the size of the US).

The more they looked into it though, the more complicated it turned out to be. They would have to support a new currency, conform to Canadas tax laws, and part their content of it needed to be in French to conform to Canadian law! Needless to say, this easy 10% suddenly looked very complicated and the two founders decided to drop the idea of expanding to Canada and keep focusing on their core market instead.

I tell this story every so often, but most people get it wrong the first time they hear it. They think it’s about geographical expansion, but that’s just an example.

What the Canada Principle is really about is focus!

Let’s look at a different example. During my time as CTO at Baby Journey, an app for pregnancy women and parents of children up to two years, a constant topic in management meetings was how we could grow the business. An obvious next step, that we also saw some competitors take, was to extend our services with a new app specifically for young parents. Maybe we could do stroller meetups or play date matching. Or a community!

Should be simple, right? We already have the users during the full length of the pregnancy, so there is already trust. It’s just a a matter of moving the user to the next app and the next phase of the baby journey, right?

Not quite.

While it seemed like a good idea at the start, there wasn't a lot of overlap between that opportunity and what we were doing at the time. The more we looked into it, the more obvious it became that we would have to split our focus not only in tech but in marketing and sales too.

Expanding into parenting services would have essentially required building a whole new app, either by halting development of our main product or by hiring an entirely new team. Either options seemed a bit too costly. This realisation led helped make up our minds: instead of broadening our scope, we chose to deepen it.

Instead of expanding to a new audience, we doubled down on our core offering. This reinstated focus abled us to innovate within our existing market. We added competitions where our users could win great prizes from our partners, created hundreds of new pieces of content, polished the experience to keep our 4,8 rating and eventually gamified the whole experience to reach even higher retention.

The results speak for themselves. Baby Journey is now the largest pregnancy app in Sweden. And the success did not come from creating a new app, but from refining our offering and keeping the whole business streamlined. Ironically, this streamlining also made it easier for Baby Journey to expand to Norway.

Now, I’m not saying that this decision was the sole reason for Baby Journey’s success. It came from constantly challenging, re-evaluating, and re-affirming our strategy. We many more opportunities, such as acquiring other apps and build a paid community. But each time, after careful consideration, we said no to the shiny new opportunity and came back to our core focus.

As a final note, I think it’s important to add that The Canada Principle doesn’t mean that a company should never expand or diversify. Netflix has definitely expanded to Canada at this point. But the timing needs to be right. And whatever opportunity you have before you needs to be aligned with your current focus. If it isn’t just say no.

I could talk about this principle at length, diving into more examples and exploring its nuances across different industries and scenarios, and also how you know when it is time to build your second product. But this newsletter was supposed to be short (shorter than my blog posts, at least) so I'll end it with a question for you to ponder:

When looking at all the opportunities you have before you right now, which one is most aligned with your core offering and which one is your Canada?