This article is based on Reid Hoffman’s book ‘Blitzscaling- The Lighting Fast Path to Building Massively Valuable Companies’.
Blitzscaling is an aggressive growth strategy. It is a set of techniques that allows both startups and large corporations to build dominant, world-leading businesses really fast.
This strategy prioritizes speed over efficiency in an environment of uncertainty. In more simpler terms, it’s an ‘accelerant’ that allows your company to grow at an extreme pace by beating the competition.
Blitzscaling is different from running a business in a classical way. Classic businesses gather information for a long time and only then make decisions. Non-
Such strategy prioritizes correctness over speed. This strategy doesn’t work when new technologies enable a new market or scramble an existing one.
High risks = high rewards
When the company is growing exponentially (i.e blitzscaling), you constantly need to reinvent your product, leadership style, and the entire company. What worked in the previous stage of growth, won’t work in the next.
The chance of failing is high when blitzscaling
Very few companies can
‘Which of you in 2004 would’ve predicted that letting people see what their friends are talking about by staring at a tiny screen on a handheld computer would become the dominant form of media?’Reid Hoffman
To successfully implement futuristic ideas, the founding team needs to take high risks, but also be prepared for failure. At first, all futuristic ideas may seem as bad ideas, until proven otherwise. Taking high risks has also a downside, which should not be overlooked. Not only taking too high risks but also lack of product/market fit can lead to a failure of a business.
Hoffman elaborates on factors which can limit exponential growth, or stop the company from blitzscaling.
Number 1 growth limiter is lack of product/market fit.
If there is no product/market fit, there cannot be rapid growth. Lack of it makes growth difficult and expensive. It is frequently happening that you won’t be able to fully validate your product/market fit before fully committing to building a company. If you fail, fail fast.
Number 2 growth limiter is human limitations on operational capability.
In essence, this means that in order to blitzscale successfully, you should design a business model that requires as few human beings as possible. It is hard to scale a business which needs a person for every small task. In software companies, it is possible to achieve massive success with minimal number of employees.
One of such examples was WhatsApp. Their freemium business model (the service was free for a year and then cost $1 per year) allowed them to have very few people working in marketing, sales, and customer service.
Another approach is to hire subcontractors, like Airbnb did when they ‘hired’ freelance photographers to take pictures of listed apartments.
“Do everything by hand until it’s too painful, then automate it”Brian Chesky, the founder of Airbnb
Examples of companies blitzscaling successfully
There are several well-known companies which have achieved the scale by
In the early days, in 2011, they had a European competitor called Wimdu, which operated at the exact same area, and were basically a copycat of Airbnb. Airbnb had a chance to buy Wimdu, but they decided not to. Airbnb could have had Wimdu in exchange for a 25-percent stake in Airbnb.
Integrating Wimdu’s finance-centric and metric-driven team with Airbnb’s could have caused huge harm to Airbnb’s design-driven culture. Brian Chesky decided not to buy their competitor. Mark Zuckerberg encouraged him to fight on and said: “Don’t buy them, the best product will win!”
Later, Chesky admitted that their competitor Wimdu was a gift, as it forced Airbnb to scale faster than they ever would have.
One of the other examples Reid Hoffman brings out in his book about a company which
In 1996, Amazon had 151 employees and a revenue of $5.1 million. In only 3 years, they became a public company which hired 7600 employees and generated revenues of $1.64 billion. That’s a 50-time increase in staff, and 322 times increase in revenue in just three years.
Amazon has never had any problems with finding the product/market fit. Mostly, because it was targeting the thriving retail market. Due to this, Amazon was able to achieve hypergrowth almost immediately.
But we should not forget that Amazon has also had failures, like other leading companies today. At some point, they tried to create their own payments system and auctions, even launched their own phone (Fire Phone) but these attempts failed.
How to apply
blitzscaling to your business?
‘The only time that it makes sense to
blitzscaleis when you have determined that the speed into the market is the critical strategy to achieve massive outcomes. ‘
If you want to blitzscale your business, you need to be ready to spend capital in ways that traditional businesses would consider ‘wasteful’. This means that a financial strategy that supports aggressive blitzscaling is necessary. Uber is a good example of that.
Uber uses low fares when entering new cities, just to attract new clients. This is a costly thing to do for Uber. Once a significant client base has been created, they slowly start
Such strategy would fail, if they wouldn’t have millions in investors’ money to spend. Therefore, if you want to implement a similar strategy to growing your business exponentially, you need to have a significant amount of money raised.
“Blitzscaling requires capital – whether from investors or from cash flow – to fund relatively inefficient growth.”
Hire the right people
To blitzscale your company successfully, you need to reinvent your entire organization at different points. Or as Marshall Goldsmith put it: “What got you here won’t get you there”.
You’re constantly expanding your team, and you need to hire the right people at the right time. Not all people can function effectively at the ‘family stage’ (>10 people) of the startup. Also, not all people are able to function well in the city stage (1000+ people).
Therefore, you need to hire the right people with the right skills, depending on the current state of the company. But you should keep in mind that ‘courage is in even shorter supply than genius’.
Google’s hiring strategy shaped it’s culture. Eric Schmidt shared that:
‘We’d hire people who were special in some way. You don’t hire generic people – you hire people who have had stress and achievement.’
I couldn’t agree
Some critique about the book
There was one part of the book which really didn’t resonate with me – it’s on diversity. And I don’t mean the diversity of experiences. Hoffman makes a point that you need to hire a diverse team in order to succeed.
Yes, it is great if you have a diverse team, but there’s something more important than diversity. And it is competence. In my honest opinion, competence should always become before anything else. Hoffman doesn’t even mention the word ‘competence’ anywhere in the diversity paragraph.
“Even at the family stage, a company should be explicit about diversity, and state in writing that it strives to be inclusive in terms of gender, sexuality, religion, ancestry, and age.”
First of all, I’m not entirely sure why such statements need to be written down. Companies which operate in the private sector should hire people who they find the most competent and fit for the job. Person’s religion, sexuality, gender etc. should not matter, whatsoever.
For example, several studies have shown that in the Western world, coding and engineering are more popular among men. Therefore, as there are more men in those fields, it is only logical to assume that the amount of highly competent male engineers/programmers is also higher.
I understand my view on this is very controversial in comparison to the mainstream view, but I always speak my mind in this blog. And it’s okay if you disagree.
To hire a female developer or engineer just because of her gender (to diversify the team), is discrimination against men. To hire a male HR executive just because he’s a male is a discrimination against women. Would you rather be hired for your skills or
Therefore, I firmly believe that competence should be skill number 1 when it comes to hiring.
Would I recommend the book?
In general, yes. It wasn’t the best book I’ve ever read, but it definitely taught me a few things. When you’re trying to blitzscale your company (or have previous experience in blitzscaling companies), you’ll get a lot out of this book.
If you’re working for a company that is currently blitzscaling, you may get a lot out of this book as well. You start to understand why some decisions are made, why barely functioning products are released, or why certain people are hired.
You can purchase the book here.
Reid Hoffman also has a cool podcast called Masters of Scale, where he interviews the founders of successful startups. I recommend!
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