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by
Reid Hoffman
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May 7 - June 15, 2019
Reed Hastings, the cofounder and CEO of Netflix. When he started Netflix, his long-term vision was to provide television on demand, delivered via the Internet. But back in 1997, the technology simply wasn’t ready for his vision—remember,
Hastings has said that he got the idea from a computer science class in which one of the assignments was to calculate the bandwidth of a station wagon full of backup tapes driving across the country!
“When we first started raising money in 1997, we thought we’d be mostly streaming in 5 years,” Hastings told us when he visited our Blitzscaling class at Stanford. “In 2002, we had no streaming. So we thought that by 2007, it would be half our business. In 2007, we were still nowhere. So we made the same prediction. And this time we were wrong the other way—by 2012, streaming was 60% of our business.” It may have taken longer than Hastings expected, but Moore’s Law eventually came through for him.
Apple II was a desktop computer with a bulky cathode-ray tube monitor, and the iPhone 5S was a portable supercomputer that people carried in their pockets.
Whenever I interview someone for a job, I like to ask this question: “What important truth do very few people agree with you on?”
Brilliant thinking is rare, but courage is in even shorter supply than genius.
Being contrarian doesn’t mean that dumb people disagree with you; it means that smart people disagree with you!
by definition, business model innovation involves trying something that is new, and thus unproven!
Brad Stone summarized this approach in his book on Amazon, The Everything Store: Lower prices led to more customer visits. More customers increased the volume of sales and attracted more commission-paying third-party sellers to the site. That allowed Amazon to get more out of fixed costs like the fulfillment centers and the servers needed to run the website. This greater efficiency then enabled it to lower prices further. Feed any part of this flywheel, they reasoned, and it should accelerate the loop.
The only time that it makes sense to blitzscale is when (whether for offensive or defensive reasons) you have determined that speed into the market is the critical strategy to achieve massive outcomes.
Why was YouTube at the right time? Networks were finally big enough to stream video. Cell phone cameras allowed everyone to record videos. And the investment environment allowed a very capital-intensive bet.
the most common driver of blitzscaling is the threat of competition. Even without competition, you would still want to achieve first-scaler advantage and climb the learning curve,
Ask yourself, “Can somebody else realize this opportunity before me?” If the answer is yes, moving faster probably reduces the risk of competition more than it raises the risk of failure.
Yahoo! cofounder Jerry Yang told us in an interview for Reid’s Masters of Scale podcast, “All bold strategies have a risk. If you don’t see it, you’re flying risk-blind.”
Blitzscaling is like the afterburners on a fighter jet that allow you to fly at double or triple normal speed but consume fuel at a shockingly high rate. You don’t just switch on the afterburners and never turn them off.
Blitzscaling can actually be dangerous when you reach the limits of your market. If you run out of market headroom, all that speed and momentum will come to a crashing halt as you slam into your market’s ceiling.
Scale is critical to e-commerce and cloud computing; scale is antithetical to world-class fine dining.
Throughout its history, Amazon has been more aggressive than its competitors, and that aggressiveness has paid huge dividends. Of course, it helps that Jeff Bezos and his team are world-class at executing against this strategy.
Stage 1 (Family): The Founder Personally Pulls the Levers of Hypergrowth
Stage 2 (Tribe): The Founder Manages the People Who Are Pulling the Levers
Stage 3 (Village): The Founder Designs an Organization That Pulls the Levers
Stage 5 (Nation): The Founder Figures Out How to Pull the Organization Back from Blitzscaling and Start Blitzscaling New Product Lines and Business Units
One metaphor I use to explain this shift is to take yet another analogy from military history: the marines take the beach, the army takes the country, and the police govern the country.
one of the main benefits of bringing on specialists is that it allows you to redeploy capable generalists to attack your most pressing challenges.
While hiring specialists is an incredibly powerful tool to help you scale, it is dangerous to do so prematurely. Specialists are just that—specialized.
Think of generalists as the “stem cells” of your organization. Your body has a small number of stem cells that have the capability to morph into various other types of cells as needed. In a large organization, you may need a small number of people who can perform various functions as needed, whether exploring new products and technologies or tackling issues that lack a well-defined solution.
Managers are frontline leaders who worry about day-to-day tactics: they create, implement, and execute detailed plans that allow the organization to either do new things or do existing things more efficiently.
By contrast, the role of the executive is to lead managers. For the most part, executives don’t manage individual contributors. Instead, they focus on vision and strategy.
Running a hundred-person department at a hundred-year-old company that grows at 5 percent a year does practically nothing to prepare you for running a hundred-person department at a company that is tripling in size every year!
One of the major advantages that companies in Silicon Valley enjoy is generations of rapidly scaling companies that have produced a rich supply of executives with blitzscaling experience.
Hire someone who is already a known quantity to at least one member of the team.
Bring the new executive in at a lower level initially and let the executive prove himself or herself.
Once the executive has earned the team’s trust and credibility, consider promoting him or her. Another executive that John hired, Dan Portillo, was brought in to run recruiting but proved so valuable that he was promoted to VP of people and asked to run HR as well. Today, Dan serves in a similar role at Greylock.
The organization’s collective learning rate—especially within its leadership team—determines its ability to anticipate future trends, while the strength of its internal structure—especially in terms of its frontline teams—determines its ability to act quickly on those key insights and seize the competitive advantage.
As a leader, you should seek out opinions from across the organization on important issues, but you can’t abdicate your responsibility and rely only on group consensus to make tough decisions.
at the asset management company BlackRock, certain meetings are held by teleconference, even for the subset of employees who could gather in a single conference room so that all employees are on an equal footing.
The big change is the need for formal, explicit, broadcast communication. It feels unnatural, especially for me for some reason. Part of the way to rationalize it is to realize that a start-up is not a natural environment. The optimal things to do don’t always feel natural. The social groups you belong to don’t typically grow 100 percent per year. The new people weren’t there for all the tortured discussions of the past. That can be good, but they also don’t have the context, so it is a delicate balancing act.
Brian Chesky addresses this need at Airbnb by sending a long e-mail to every employee each Sunday night. Chesky’s e-mail isn’t simply a recitation of key performance indicators, which could be just as easily accessed on a dashboard somewhere; rather, Chesky shares his thinking on a topic he considers important to the company.
“Leaders [who] write things down tend to deal with [fewer] communications issues. You have to clarify your thought processes in a completely different way. If you just have a meeting and say, ‘Okay, so we’ve all decided,’ then people play telephone.”
Jeff Bezos of Amazon discussed how he makes data a critical part of his management process. “If this is a decision based on opinions, then my opinion wins,” said Jeff. “However, data beats opinion. So bring data.”
Data is the lifeblood of decision making for any company, but it is particularly fundamental if it informs the design of your product, or if acquisition marketing is your key distribution strategy.
strongly believe that as a whole company, you can’t get behind more than three to five metrics.
Sometimes even a single metric can tell you a lot. At YouTube, Shishir Mehrotra decided that their single clarifying metric would be watch time. “Our goal was to get to one billion hours per day of watch time,” he said.
Mariam Naficy of Minted told me, “The key is to create consistent questions from the beginning and to not change them over time, because that’s the only way to compare metrics over time. We’ve been using Net Promoter Score [a customer-loyalty metric that measures how likely customers would be to recommend a product or service to others] from the beginning.”
Mark Pincus invested heavily in his BI team at Zynga, which allowed the company to track every click in their games rather than rely on Google Analytics like most of his competitors.
According to Greylock’s Josh Elman, “The best growth teams identify the core insights that get users from ‘curious’ to ‘activated habitual’ users and build every feature and program in the product—including the nonsoftware features that are a part of the whole product—to get users through this hurdle faster.”
We don’t know of a single start-up that succeeded without starting out as single-threaded. That focus is the key to beating larger competitors in the early stages of a company’s existence.
For years, Drew Houston of Dropbox was told that Google would kill his company because of its secretive “Project Platypus” (which eventually launched as Google Drive). Houston found these proclamations more annoying than frightening, because he knew the power of singular focus.
For a company like Google that’s doing a hundred different things, there’s a very long breadline to get the next good engineer. And if you’re project #35, which is about where Google Drive was on their list, it’s going to take a long time before that team gets fed with any amazing people. When you consider the eleven players you put on the field versus your counterpart at a big company, you can actually have a massive talent advantage. Not because Google doesn’t have great engineers; they probably have better engineers than you. But the leader of the project is a midlevel product manager for
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Joseph Ansanelli, the cofounder and CEO of the customer service software start-up Gladly, tells entrepreneurs, “Don’t try a second channel until you have your main flywheel working. Most successful companies dominate one channel.”
