As we know, the show's getting a new showrunner next year, and changes are bound to occur. After a lukewarm reaction to its first season, Smash needs to make a splash in 2013. So, if it were up to me, here is the direction I'd like to see the show take...
Season 2 would pick up two or three years after Season 1 ended. All cliffhangers and story threads from the first season are explained, of course, but we never see their immediate effect. Instead, we're re-introduced to the enitre Smash family a couple years down the line. Everything's refreshed.
After a successful out-of-town tryout in Boston, Bombshell headed straight to Broadway with Karen as its star. She becomes the new "it" girl of Broadway, gaining glorious fame and acknowledgment (perhaps even a Tony Award). With this newfound stardom, she's grown in maturity and experience. She's a Broadway pro, no more the naive girl from Iowa. But with fame, comes sacrifie. She and Dev are no longer together, since she's focused entirely on her career. (And he's moved to DC.) This has led to a quiet unhappiness and loneliness. After a year playing Marilyn, Karen moved to Hollywood to try a film career. Her arrival wasn't well received. After a couple box office duds, she's decided to come back to New York in seach of a new project...
Meanwhile, Ivy has become a star in her own right. Though not a household name like Karen, Ivy has found success off-Broadway. She stars in her own play, receiving much critical acclaim. Throughout this journey, she's found a new love interest [a brand new character and series regular], who gives her just the attention and motivation she needed to be happy and successful. She realized her ambition was getting in the way of real happiness; no starring role was going to be enough for her. Love, it seems, was the answer. She now only wishes to follow her passion for theatre in whatever form it takes. For her, it's not about being famous anymore; it's about creating something special.
Tom and Julia's Tony Award winning Bombshell is a smash on Broadway. Their careers skyrocket, and they become the most in-demand writers in the business. Their next project is eagerly awaited. Unfortunately, the pair is fresh out of ideas. When we meet them again, they're suffering from some severe writer's block. Still, their personal lives couldn't be better. Julia's family has finally recovered from the Michael Swift debacle (Michael ended up leaving the Bombshell production after Boston), and she's happy with her husband and son (who are now downgraded to recurrring characters). Tom, meanwhile, broke up with Sam when the dancer decided to try his acting career in LA. Since then, Tom has met the love of his life, a renowned Broadway producer [another new series regular].
Eileen has successfully created her own production company, partnering with Tom's new boyfriend. Together, they saw Bombshell and a few others to success on and off Broadway. They've become highly respected in the business.
Derek directed Bombshell through its first year, earning a Tony nomination. He parted ways with the production after some as-of-yet unknown drama, and has since fallen off the map. Oddly, everyone but Tom harbors bad feelings about his departure.
Ellis fell off a cliff. Or got run over by a semi. Or something. Anyway, he's not coming back.
As we begin Season 2, Tom and Julia finally strike an idea for a new musical after six solid months of writer's block. Their new show will be a different take on a famous female duo (maybe Themla & Louise, Laverne & Shirley, or the Red and White Queen from Alice in Wonderland, or Lucy and Ethel from I Love Lucy), like Wicked did with the Wicked Witch and Glinda. Of course, the first two that come to mind to star in their new show are former rivals Karen and Ivy.
After some convincing, they get Karen (who's just returned to New York and desparate for a comeback) and Ivy (who's starring in an off-Broadway play and initially uninterested in rejoining the world of musical theatre) to come in for an audition/tryout number. Karen and Ivy haven't really spoken for the past few years, and still harbor some bad feelings about their time in Bombshell together. Eileen and her new partner (Tom's boyfriend) are thrilled at the prospect of a new show, and decide to back Tom and Julia's new project. In need of a director, Tom convinces the others to find Derek and ask him to the do the show.
With Derek back as director, Karen and Ivy as the stars, Tom and Julia writing, and Eileen and her partner producing, the new musical is underway. And the journey of Season 2 begins.
This season will see Karen and Ivy trying to find friendship, Derek's path to redemption (with Tom's help), the scheming of a new producer and financial backer [the third and final new addition to the cast], exploring the dynamics of the ensemble, and all the other usual dramatics in putting together a show. There will be fresh musicals numbers for the new show, along with more covers (made unique and interesting by show's music producers) sung by a variety of the cast.
Season 2 will take everything good about Season 1 and make it better, while offering fresh storylines, characters, and music that will finally make the show a Smash.