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by
Reid Hoffman
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June 15 - June 23, 2020
But prioritizing speed over efficiency—even in the face of uncertainty—is especially important when your business model depends on having lots of members and getting feedback from them. If you get in early and start getting that feedback and your competitors don’t, then you’re on the path to success. In any business where scale really matters, getting in early and doing it fast can make the difference.
Blitzscaling drives “lightning” growth by prioritizing speed over efficiency, even in an environment of uncertainty.
When a start-up matures to the point where it has a killer product, a clear and sizable market, and a robust distribution channel, it has the opportunity to become a “scale-up,” which is a world-changing company that touches millions or even billions of lives. Often, the fastest and most direct path from start-up to scale-up is the hypergrowth produced by blitzscaling.
Network effects generate a positive feedback loop that can allow the first product or service that taps into those effects to build an unassailable competitive advantage.
Blitzscaling is a strategy and set of techniques for driving and managing extremely rapid growth that prioritize speed over efficiency in an environment of uncertainty. Put another way, it’s an accelerant that allows your company to grow at a furious pace that knocks the competition out of the water.
Yes, disruption produces losers as well as winners, but, as a whole, it is a vital source of growth and opportunity that you can’t afford to ignore.
People should be part of building the future rather than feeling like the future is being forced upon them.
Start-ups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.
“It’s like harpooning a whale. The good news is, you’ve harpooned a whale. And the bad news is, you’ve harpooned a whale!”
When a market is up for grabs, the risk isn’t inefficiency—the risk is playing it too safe. If you win, efficiency isn’t that important; if you lose, efficiency is completely irrelevant.
When you blitzscale, you deliberately make decisions and commit to them even though your confidence level is substantially lower than 100 percent. You accept the risk of making the wrong decision and willingly pay the cost of significant operating inefficiencies in exchange for the ability to move faster. These risks and costs are acceptable because the risk and cost of being too slow is even greater.
To mitigate the downside of the risks you take, you should try to focus them—line them up with a small number of hypotheses about how your business will develop so that you can more easily understand and monitor what drives your success or failure. You also have to be prepared to execute with more than 100 percent effort to compensate for the bets that don’t go your way.
blitzscaling is prioritizing speed over efficiency in the face of uncertainty.
Just when you’ve finished blitzscaling one business line, you need to blitzscale the next to maintain your company’s upward trajectory. And as blitzscaling continues to spread, established companies with mature business lines should consider turning to intrapreneurs to blitzscale new business units.
1. BLITZSCALING IS BOTH AN OFFENSIVE STRATEGY AND A DEFENSIVE STRATEGY.
2. BLITZSCALING THRIVES ON POSITIVE FEEDBACK LOOPS, IN THAT THE COMPANY THAT GROWS TO SCALE FIRST REAPS SIGNIFICANT COMPETITIVE ADVANTAGES.
Once a scale-up occupies the high ground in its ecosystem, the networks around it recognize its leadership, and both talent and capital flood in.
3. DESPITE ITS INCREDIBLE ADVANTAGES AND POTENTIAL PAYOFFS, BLITZSCALING ALSO COMES WITH MASSIVE RISKS.
THE FIVE STAGES OF BLITZSCALING Stage 1 (Family) 1–9 employees Stage 2 (Tribe) 10s of employees Stage 3 (Village) 100s of employees Stage 4 (City) 1000s of employees Stage 5 (Nation) 10000s of employees
When a business can grow users, customers, and revenues faster than the number of employees without collapsing under the weight of its own growth, the business can achieve greater profitability and keep growing without being as tightly constrained by the need for financial or human capital. In contrast, when the number of employees grows faster than users, customers, and revenues, it’s a major red flag that could indicate issues with the fundamental business model.
TECHNIQUE #1: BUSINESS MODEL INNOVATION
The first technique of blitzscaling is to design an innovative business model that can truly grow.
A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business.
while figuring out the right combinations of services to bring together into a breakthrough product has become a major differentiator.
Business model innovation is how start-ups are able to outcompete established competitors who typically hold a host of advantages over any upstarts.
“If your playbook is the same as your competitor’s, you are in trouble, because chances are they are just going to run your playbook with a lot more resources!”
Technology innovation is a key factor in retaining the gains produced by business model innovation. After all, if one technology innovation can create a new market, another technology innovation can render it obsolete, seemingly overnight.
The key is to combine new technologies with effective distribution to potential customers, a scalable and high-margin revenue model, and an approach that allows you to serve those customers given your probable resource constraints.
TECHNIQUE #2: STRATEGY INNOVATION
To achieve your goals, you have to know what you plan to do and, just as important, what you plan not to do. Also, growth doesn’t create value in and of itself; for that, it has to be paired with a working business model.
The answer is that blitzscaling businesses tend to play in winner-take-most or winner-take-all markets. The greater risk for a successful, growing business is to move too slowly and allow its competitors to win market leadership and first-scaler advantage.
TECHNIQUE #3: MANAGEMENT INNOVATION
What I mean is that no matter how brilliant your business model and growth strategy, you won’t be able to build a real-world (i.e., non-theoretical) blockbuster company without a lot of practice. But that problem is magnified when you’re trying to blitzscale.
You can’t transplant a heart from one species into another and expect it to thrive.
In contrast, and much to their misfortune, start-ups that relied purely on technology innovation without any real business model innovation largely went bust.
The real value creation comes when innovative technology enables innovative products and services with innovative business models.
a company’s business model describes how it generates financial returns by producing, selling, and supporting its products.
GROWTH FACTOR #1: MARKET SIZE
The most basic growth factor to consider for your business model is market size.
A big market has both a large number of potential customers and a variety of efficient channels for reaching those customers.
Ideally, the market itself is also growing quickly, which can make a smaller market attractive and a large market irresistible.
When evaluating market size, it’s also critical to try to account for how lower costs and product improvements can expand markets by appealing to new customers, in addition to seizing market share from existing players.
“Sizing the market for a disruptor based on an incumbent’s market is like sizing a car industry off how many horses there were in 1910.”
The other factor that can lead to underestimating a market is neglecting to account for expanding into additional markets.
but the cold and unromantic fact is that a good product with great distribution will almost always beat a great product with poor distribution.
You have to be good at building a product, then you have to be just as good at getting users, then you have to be just as good at building a business model. If you’re missing any of the links in the chain, the whole chain is broken.
Despite these dangers, leveraging existing networks can be a critical part of a business model, especially if these networks can provide a “booster rocket” that is later supplemented with virality or network effects.
“Viral” distribution occurs when the users of a product bring more users, and those users bring additional users, and so on, much like an infectious virus spreads from host to host. Virality can either be organic—occurring during the course of normal usage of the product—or incentivized by some kind of reward.
If your distribution strategy focuses on virality, you also have to focus on retention. Bringing new users in through the front door doesn’t help you grow if they immediately turn around and leave.
Virality almost always requires a product that is either free or freemium (i.e., free up to a certain point, after which the user has to pay to upgrade—Dropbox, for example, offers 2 GB of free storage). We can’t recall a single instance of a company that grew to a massive scale by leveraging the virality of a paid product.
