Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies

by Reid Hoffman

Brian also knew that if Wimdu was able to capture and dominate the European market, Airbnb might not survive. “If you’re a travel site and you don’t cover Europe, you’re dead,”

“Supergrowers”—companies whose growth was greater than 60 percent when they reached $100 million in revenues—were eight times more likely to reach $1 billion in revenues than those growing less than 20 percent.

As Mark Zuckerberg told me in an interview for my Masters of Scale podcast, “We got to a point where it was taking us more time to go back and fix the bugs and issues that we’re creating than the speed that we were gaining by going faster.”

There is a scientific term for out-of-control growth in the human body: “cancer.”

The fact that the phases don’t always move in lockstep is a feature of blitzscaling, not a bug. As we’ll discuss, operational scalability is one of the primary growth limiters that scale-ups need to address. 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.

Netscape engineers invented JavaScript, SSL,

Microsoft preinstalled its Internet Explorer on all new Windows computers, then gave away its Web server software, Internet Information Server (IIS), which effectively destroyed Netscape’s business model.

Harvard Business School professor and author Clay Christensen believes that you need to focus on the concept of the “job-to-be-done”; that is, when a customer buys a product, she is “hiring” it to do a particular job.

Dropbox in your e-mail. Go from here to sharing a file with this e-mail address.” Zero of the five people we tested succeeded. Zero of the five even came close. This was just stunning. We’re like, “Oh my God, this is the worst product ever created.” So we made a list of like eighty things in this Excel spreadsheet, then just sanded down all these rough edges in the experience, and watched our activation rate climb.

Would you ever choose Burger King over McDonald’s because Whoppers are lower margin than Big Macs? Typically, you focus solely on the cost to you, and the perceived benefits of the purchase. This means that it’s not necessarily any easier to sell a low-margin product than a high-margin product.

So we switched PayPal from “always free” to “ACH always free” and started charging fees to accept credit card payments. Fortunately, we already had a loyal following, and our customers accepted the change.

Predictably Irrational, describing an experiment in which he offered research subjects the choice of a Lindt chocolate truffle for 15 cents or a Hershey’s Kiss for a mere penny. Nearly three-fourths of the subjects chose the premium truffle rather than the humble Kiss. But when Ariely changed the pricing so that the truffle cost 14 cents and the Kiss was free—the same price differential—more than two-thirds of the subjects chose the inferior (but free) Kisses.

Due to the cost and overhead of the extensive field operations required to support on-premise software, traditional enterprise software licenses had to be in the six- or seven-figure range simply to make the model work. This meant that software vendors focused on the needs of only the largest customers.

To go from “yet another search engine” to “the last search engine” (as my old friend Peter Thiel put it in his 2014 Stanford lecture “Competition Is for Losers”), Google had to leverage a series of existing networks and partners. For example, Google’s bold deal to power AOL’s search results helped the company grow its search business by orders of magnitude. Later, other distribution bets like the Firefox partnership, the acquisition of Android, and the creation of the Chrome browser all paid off and helped maintain Google’s distribution dominance.

Many people forget how Facebook struggled with the transition from desktop to mobile. Facebook’s initial mobile product provided a slow, suboptimal experience, and adoption of that product was accordingly slow. Fortunately for Facebook, Mark Zuckerberg saw that the market was going mobile and put a moratorium on new feature development in order to focus the entire team on building a new, far superior mobile product.

First, they hired people from their personal networks, with an emphasis on “branded” talent. For example, if an employee had a friend, and that friend worked for the management consulting firm Bain & Company, that friend got hired because ClassPass could assume that the person was smart and would get along with people. Second, some of the time saved by not interviewing for skills allowed the team to interview for alignment with the company’s mission.

If the company doesn’t realize the root cause, the most common (and unhelpful) response is to call for changing the CEO or the executive team—the VP of sales is particularly vulnerable because he or she often takes the blame for the slowdown—or both. How many times does replacing the CEO actually reignite massive growth? The only good example we can think of is what Steve Jobs did at Apple. So if you have a Steve Jobs waiting in the wings, go ahead and switch CEOs. Otherwise, it probably won’t help.

PayPal (then known as Confinity) in December 1998, Confinity was intended to be a mobile phone encryption company using Max’s highly efficient encryption technology. From there, the company pivoted first to mobile phone cash (pivot #1) and then to PalmPilot payments via infrared beaming (pivot #2). Unfortunately, the network of PalmPilot users who wanted to beam money to each other simply wasn’t that robust, so we pivoted again and added e-mail payments (pivot #3). By the end of the year, we saw an emerging market in settling eBay transactions and pivoted our product development efforts to serve that market (pivot #4).

Be clear that employees will get opportunities to grow and advance their careers, but this doesn’t necessarily mean that if they’re running engineering now, they’ll be VP of engineering when the company has ten thousand employees and is planning its IPO. Focus on responsibility instead of the specific title. An employee who runs the engineering “department” at the Family stage might consider it a demotion to be one of several directors of engineering at the City or Nation stage, but you can point out that at the Family stage she was managing a team of three engineers and now she oversees a team of one hundred. Encourage employees to focus less on their job titles and more on how each tour of duty’s activities and experiences prepare them for greater responsibilities in the future.

Bring the new executive in at a lower level initially and let the executive prove himself or herself. John gave himself the title “Director of Business Development and Operations” and only took on bigger titles after he had demonstrated his ability and value to existing teams. He employed the same technique when he hired Schrep, bringing him in as “Director of Engineering.” Once Schrep had a chance to prove himself, John noted, “It became pretty clear to everyone pretty quickly that Schrep was incredibly confident, and improved everything he touched.” This visible success made promoting him to VP of engineering both obvious and uncontroversial.

As the company grows, you have to shift from informal, in-person, individual conversations to formal, electronic, “push” broadcasting and online “pull” resources. You also have to shift from sharing all information by default to deciding on what is secret and what is shareable. If you don’t manage to develop an effective internal communications strategy, your organization will become disjointed and start to fall apart.

course, at the Village stage, the company likely exceeds Dunbar’s number (the number of individuals with whom any one person can maintain stable relationships), and

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.

Regular e-mails to all employees are a common best practice. Blitzscaling masters Patrick Collison and YouTube’s Shishir Mehrotra also employed this technique to manage their rapidly growing organizations. “I was a big believer in writing a weekly email,” Shishir told our Blitzscaling class at Stanford. “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.”

Most companies, even in the highly competitive world of the consumer Internet, still think it’s sufficient to conduct a lot of A/B tests and iterate accordingly. This is an effective tactic but poor strategy, since local optimizations do not necessarily lead to a globally optimal result. A dedicated growth team can look at the big picture and see how product and marketing decisions interact to produce (or not produce) the desired results.

Jonathan Rosenberg of Google has told the story of how blindly managing to the numbers led Excite@Home astray. Excite@Home measured the click-throughs on every element of its home page. If an element didn’t look like it would hit its click-through target, Excite@Home would make the element more visually prominent. In other words, in attempting to hit its numbers, the home page team was emphasizing the least compelling elements and de-emphasizing the most compelling ones!

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 whom it’s just the next rung on the ladder. As a founder, you’re just so much more committed, and your team is so much more committed.

Companies like Google grant a great deal of freedom to individual units, and, as a result, the different products and services do not fit together seamlessly. Many of Google’s services are strong enough to succeed on their own, but this means that they are succeeding in spite of, rather than because of, multithreading.

One thing that can keep these employees motivated is making the various threads discrete projects—the equivalent of “apps” running on the main thread’s “platform.” This makes it easy to answer the question “Why shouldn’t I just start my own company?” by pointing out the benefits of building on the platform.

Warren Buffett at Berkshire Hathaway? The difference is that Berkshire Hathaway’s companies are separate, noncompetitive, cash-generating businesses that have a history of independent operations and complete management teams. In contrast, when a blitzscaling company starts setting up multiple threads, they are still attached, might be competitive, are likely consuming the same pool of cash, and have no history of independent operations.

There are only three ways to scale yourself: delegation, amplification, and just plain making yourself better.

When you try to picture an abstract “head of product,” for example, you might have a hard time visualizing this faceless entity doing a better job than you are. But when you picture a particular individual (say, Joe Zadeh of Airbnb), all of a sudden your mind shifts to thinking, “Wow, just imagine how awesome it would be to have someone like this running our product team.”

For example, I was one of the first start-up leaders in Silicon Valley to borrow the “chief of staff” concept from the realm of politics and established corporations. Unlike a traditional assistant or even a technical assistant, your chief of staff should amplify your business impact: he or she should be a businessperson who can not only make certain decisions for you but also triage the important decisions that you have to make yourself. A chief of staff can also make sure that all the people who want to meet or interact with you are “briefed” in advance so that your time together can be as efficient and effective as possible.

I recommend that you read Ben’s essay on the topic, “10,000 Hours with Reid Hoffman,” which you can find on his personal website, Casnocha.com.

Since you’re going to face new challenges during every stage of blitzscaling, you have to make yourself into a learning machine. My friend Elon Musk is a great example. He dropped out of Stanford’s PhD program in applied physics because he thought he could learn more on his own! He started SpaceX and Tesla by learning literal rocket science and carmaking. So how do you accelerate your learning curve so that you can learn more faster? The key is to stand, as Isaac Newton wrote, “on the shoulders of giants.”

That’s one of the things I learned from Mark Zuckerberg and Sheryl Sandberg. Mark and Sheryl meet first thing every Monday and at the end of every Friday—no matter how busy they are or what else has come up. The Friday meeting is especially important because it gives them time to look back over the week and reflect on what they’ve learned.

Netflix CEO Reed Hastings warned our Stanford class, “[When I was running Pure Software,] I felt like investing in me was selfish. I thought, ‘I should be working.’ I was invited to join YPO [Young President’s Organization], but I thought, ‘I can’t take a day off.’ I was too busy chopping wood to sharpen the axe. I should have spent more time with other entrepreneurs. I should have done yoga or meditation. I didn’t understand that by making myself better, I was helping the company, even if I was away from work.”

A paid enterprise product needs to be even more refined, but it can still have significant flaws, because these types of products are intended for expert users who may have no choice but to use the product. A paid consumer product has the least room for error. While consumers are very tolerant of flaws in free products, they expect products they pay for to be nearly perfect and will grouse loudly about any significant flaws they find: “What am I paying for here?”

People are often quite bad at predicting how they’ll react to changes. The scientific term is the inconsistency between predicted and observed behavior. For example, when Facebook was considering adding a feature that would use facial recognition to automatically tag members’ faces in photographs, the focus group participants were very negative toward the concept, calling it “creepy” and an invasion of privacy. Yet when Facebook tested the feature, auto-tagging boosted engagement and users loved it!

The fundamental rule of customer service has long been “The customer is always right.” But for many blitzscaling companies, the key rule is “Provide whatever customer service you can as long as it doesn’t slow you down … and that may mean no service!” Many blitzscaling start-ups will offer e-mail support only, or no support at all, relying on users to find and help one another on discussion forums.

Brian Chesky of Airbnb defines culture in a simple and concise way: “a shared way of doing things.”

Drew Houston makes sure that all Dropbox employees are aware that they need to help re-create the culture. “We tell people, ‘You might have just joined last week, but sooner or later, you’ll be an old-school Dropboxer too. So remember the things you like about this place now, because it’ll be your responsibility to make sure those things stick around.’”

“You have to continue to repeat things” Brian told our class at Stanford. “Culture is about repeating, over and over again, the things that really matter for your company.”

“Ship of Theseus” paradox. The

borrow an analogy from sports, you may need to take repeated shots on goal before scoring. Established players have a much easier time financing multiple shots on goal.

A major issue faced by established players is that the incentives tend to favor cautious expansion rather than aggressive blitzscaling. Successful companies generally assume that they already have something valuable, which means risk taking tends to be penalized.

That’s not something a start-up faces—a start-up is dead by default, so there is nothing to lose.

A $10 million opportunity that a start-up might see as a life-changing bet is pocket change to a big company.

networks,