Key Takeaways and Overall Review
- Key takeaways:
- Blitzscaling is a high-risk, high reward strategy that prioritizes speed over efficiency in the face of uncertainty.
- Blizscale when (a) opportunity is large (b) you have a compelling, counterintuitive business model innovation, esp. one with a disruptive revenue model and/or viral distribution (c) there are strong unit economics at scale (d) there are positive network effects and/or lock-in (d) the threat of competition is high.
- Hire leaders who have proven experience scaling from your current stage to the next stage.
- Overall, I recommend the book. As you read it, think about how each principle applies to your market. For instance, even though the book feels very B2C tech-focused, I felt many principles apply at least somewhat to B2B.
- The Good:
- Truly felt comprehensive
- Great examples from the author’s own experience at LinkedIn as well as the experiences of others
- Well-written (logically structured; not repetitive; etc.)
- Efficient – neither over- nor under-explains
- Not self-promotional in any way
- I got the sense this was a podcast-to-book project. I’ve seen those executed very poorly and this one was done expertly.
- The Bad
- The book starts very slow. I almost gave up since I was worried I’d have to read hundreds of pages explaining positive network effects (though important, a simple and well-worn concept). However, it does pick up.
- There are almost too many lists to keep track of (which can get a bit tedious since it is a lazy way to write). I wish the authors had included a summary/appendix with a consolidated checklist.
- You are not really going to walk away with (m)any major epiphanies. Case-in-point is my rather stingy set of key takeaways above. To their credit, the authors more or less say that every successful company is its own special snowflake.
- The Good:
PART I What Is Blitzscaling?
- Blitzscaling is prioritizing speed over efficiency (even) in the face of uncertainty
- Blitzscaling is particularly important in businesses where scale really matters, esp. those with positive network effects.
- Just when you’ve finished Blitzscaling one business line, you need to Blitzscale the next to maintain your company’s upward trajectory.
- Three key techniques of Blitzscaling
- BUSINESS MODEL INNOVATION – distribution + high-margin revenue model + acceptable service
- STRATEGY INNOVATION
- MANAGEMENT INNOVATION – hiring “good enough” people + launching imperfect products + letting fires burn + ignoring angry customers.
PART II Business Model Innovation
- Start-ups that relied purely on technology innovation without any real business model innovation largely went bust.
- Great companies and great businesses often seem to be bad ideas when they first appear because business model innovations — by their very definition — can’t point to a proven business model to demonstrate why they’ll work.
- Four key business model growth factors:
- MARKET SIZE – fast growing and either already large or reasonably expected to become large
- DISTRIBUTION – via existing networks and/or virality (free or freemium)
- HIGH GROSS MARGINS – expected in the future at scale
- NETWORK EFFECTS – Of which there are 5 kinds
- Direct: Increases in usage lead to increases in value (ex: Facebook)
- Indirect: Increases in usage encourage consumption of complementary products (ex: adoption of an operating system)
- Two-sided: Increases in usage by one set of users increases the value to a different set of complementary users, and vice versa. (Example: Marketplaces such as eBay)
- Local: Increases in usage by a small subset of users increases the value for a connected user. (Example: cellular family plans)
- Compatibility and Standards: The use of one technology product encourages the use of compatible products. (Example: Microsoft Office)
- Two key business growth limiters
- LACK OF PRODUCT/MARKET FIT – though it is critical to seek a nonobvious market opportunity where you have a unique advantage or approach, and one that competing players won’t see until you’ve had a chance to build a healthy lead. Most nonobvious opportunities arise from a change in the market that the incumbents aren’t willing or able to adapt to.
- OPERATIONAL SCALABILITY – human or infrastructure
- Proven business model patterns
- BITS RATHER THAN ATOMS
- PLATFORMS
- FREE OR FREEMIUM
- MARKETPLACES
- SUBSCRIPTIONS
- DIGITAL GOODS
- FEEDS
- Underlying principles of business model
innovation
- MOORE’S LAW – The best entrepreneurs anticipate it.
- AUTOMATION
- ADAPTATION, NOT OPTIMIZATION
- THE CONTRARIAN PRINCIPLE
- LinkedIn Merlin would analyze usage patterns and tell each salesperson which companies to call, how they were already using LinkedIn, and even create a personalized sales deck for each individual prospect!
- Google uses a bottom-up innovation and a high tolerance for failure. Apple takes a top-down approach that puts more wood behind fewer arrows. One philosophy isn’t necessarily better than the other; the important thing is simply to find that product/market fit quickly, before your competition does.
PART III Strategy Innovation
- You don’t necessarily need to have solved your revenue model before deciding to Blitzscale
- Factors that tell you it may be the right time
to Blitzscale
- A BIG NEW OPPORTUNITY
- FIRST-SCALER ADVANTAGE – esp. based on network effects or customer lock-in
- LEARNING CURVE – complex problems with steep learning curves create barriers to entry (ex: self-driving cars)
- THREAT OF COMPETITION
- Leading indicators that can act as an early-warning
sign that you’ve outgrown your strategy:
- Declining rate of growth (relative to the market and competition)
- Worsening unit economics
- Decreasing per-employee productivity
- Increasing management overhead
- BLITZSCALING IS ITERATIVE Successful Blitzscaling
is an exercise in serial problem solving.
- Step 1: Do things that don’t scale.
- Step 2: Reach the next stage of Blitzscaling.
- Step 3: Figure out how to do one set of things that scale, while somehow also finding a way to do a completely different set of things that don’t scale.
- Step 4: Reach the next stage of Blitzscaling.
- Step 5: Repeat over and over until you reach complete market dominance.
- 5 Stages of Scale
- Family: The Founder Personally Pulls the Levers of Hypergrowth
- Tribe: The Founder Manages the People Who Are Pulling the Levers
- Village: The Founder Designs an Organization That Pulls the Levers
- City: The Founder Makes High-Level Decisions About Goals and Strategies
- Nation: The Founder Figures Out How to Pull the Organization Back from Blitzscaling and Start Blitzscaling New Product Lines and Business Units
PART IV Management Innovation
- One of the key features that sets global giants apart from those companies that flame out or implode before they can reach market dominance is an ability to evolve and optimize their management practices at each stage of growth.
- EIGHT KEY TRANSITIONS
- SMALL TEAMS TO LARGE TEAMS
- GENERALISTS TO SPECIALISTS
- Not every generalist can or even wants to become a specialist)
- The Village stage is where it becomes prudent to hire specialists, as both executives and key contributors.
- CONTRIBUTORS TO MANAGERS TO EXECUTIVES
- Managers are frontline leaders who worry about day-to-day tactics:
- The role of the executive is to lead managers and to focus on vision and strategy. Execs are responsible for the “fighting spirit” and serve as role models who help people persist through inevitable adversity.
- The ideal, of course, is to hire an executive with past experience at a Blitzscaling start-up that has already dealt with the challenges your company currently faces.
- 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
- DIALOGUE TO BROADCASTING
- Brian Chesky addresses this need at Airbnb by sending a long email to every employee each Sunday night.
- INSPIRATION TO DATA
- Picking a single clarifying metric is very hard, but it clarifies decision-making and what constitutes success.”
- The key stats will evolve as your company grows
- Almost all quality Village-size businesses will use a dashboard to assess the daily health of their companies.
- Data-driven design is great at optimizing products with incremental changes, but it could steer you to the top of a local hill rather than the highest peak. Genius-driven design may be the only way to build a revolutionary product, but it usually needs to be supplemented with data-driven refinement.
- SINGLE FOCUS TO MULTITHREADING
- We don’t know of a single start-up that succeeded without starting out as single-threaded.
- “Deciding what not to do is as important as deciding what to do.”
- It’s generally better to have your ten best people working on a single important project rather than splitting them to attack two different opportunities.
- Poorly designed incentives can make it nearly impossible to shut down a thread, even if its performance is poor, since its leadership might fight tooth and nail to stay open.
- Each product leader was the owner of a primary thread, but was also partially accountable and compensated for his or her work in supporting a fellow product leader as a secondary thread.
- PIRATE TO NAVY
- In the Nation phase, acquisitions typically become important, if not essential, to defensive strategy. At this phase, you should try to make your opponents defend every bit of their territories, because, if you succeed, they will be stretched too thin to ward off the attacks you actually consider important.
- First, try to establish a standard. One of the classic Silicon Valley plays is to move from an app to a platform. Second, offer a more complete solution, and try to outflank the competition.
- I like to generate fresh, innovative ways to play defense by asking my team, “If we were trying to compete with ourselves, what we would do? What if we were a start-up? Google? Facebook? Microsoft?”
- SCALING YOURSELF: FOUNDER TO LEADER
- Universal skills
- ability to take bold risks in pursuit of a vision that isn’t self-evident to others
- 3 ways to scale yourself:
- Delegation
- Amplification – The goal here isn’t to free you up from your work so that you can do other things; it’s to make the things you do much more impactful. A Chief of Staff who makes certain decisions, triages which problems get attention, and briefs others is especially valuable for this.
- Making yourself better – Make yourself into a learning machine with the goal of keeping your personal learning curve ahead of the company’s growth curve. This means talking with other smart people, often, so that you can learn from their successes and failures. It’s important to leave yourself time and space for reflection and feedback.
- Universal skills
- Being the first scaler helps you acquire customers, lock in investors, and attract the best talent.
- A strong executive team meets on a regular basis and focuses on the most important initiatives and issues, including active planning for the future.
- Any given management structure is likely to be temporary. You can’t run a Village the same way you run a Tribe, and you can’t run a City the same way you run a Village. But without structure, you won’t make it to the next stage of growth.
- NINE COUNTERINTUITIVE RULES OF BLITZSCALING
- EMBRACE CHAOS – Entrepreneurs should always have a Plan A, a Plan B, and a Plan Z.
- HIRE MS. RIGHT NOW, NOT MS. RIGHT
- You need managers and executives who are “just right” for the current phase of growth;
- When you’re trying to sell your product for the first time, you need aggressive, adaptable salespeople who aren’t big on following rules.
- TOLERATE “BAD” MANAGEMENT
- LAUNCH A PRODUCT THAT EMBARRASSES YOU
- If you need to choose between getting to market quickly with an imperfect product or getting to market slowly with a “perfect” product, choose the imperfect product nearly every time.
- If you trigger lawsuits or burn through your money without learning, it means you did launch too soon.
- Entrepreneurs have to walk a fine line between fixable and fatal flaws!
- LET FIRES BURN
- Prioritize based on urgency, efficacy, & dependency
- Maslovian hierarchy of fires: #1 Distribution; #2 Product Revenue model; #3 Operations; #4 Competition; #5 What’s next?
- DO THINGS THAT DON’T SCALE (THROWAWAY WORK)
- IGNORE YOUR CUSTOMERS = 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.
- RAISE TOO MUCH MONEY
- If the unit economics are positive in the long run, and capital is available at low cost, then it makes sense to take in investment capital to fuel rapid growth.
- The classic rule of thumb in Silicon Valley is to raise enough cash for eighteen to twenty-four months of operations.
- EVOLVE YOUR CULTURE
- Ignoring your culture is not an option.
- An organization’s culture emerges over time based on the actions of many people, not just the founders.
- The two key levers of deliberate cultural transmission are communications and people management.
- Culture is heavily determined by who you hire, promote, and fire.
- The best entrepreneurs and companies use successful Blitzscaling in one market to jump into another.
PART V The Broader Landscape of Blitzscaling
- 4 advantages of established companies who want
to Blitzscale
- SCALE
- ITERATION
- LONGEVITY
- MERGERS & ACQUISITIONS (M & A)
- 3 disadvantages of established companies who
want to Blitzscale
- INCENTIVES – Incentives tend to favor cautious expansion rather than aggressive Blitzscaling.
- UNSTAGED COMMITMENT- unwillingness to stage their investments.
- PUBLIC MARKET PRESSURE
- BLITZSCALING HACKS for established companies
- Find ways to leverage people and businesses with prior Blitzscaling experience.
- Leverage the knowledge of venture capitalists.
- Treat the new initiative as a company within a company.
- 3 options to defend against Blitzscaling
- BEAT THEM
- JOIN THEM
- AVOID THEM – Since Blitzscaling is high risk, you can wait until the Blitzscaler collapses.
PART VI Responsible Blitzscaling
- The responsibilities of a Blitzscaler go beyond simply maximizing shareholder value while obeying the law; you are also responsible for how the actions of your business impact the larger society