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Blitzscaling by Reid Hoffman and Chris Yeh.
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In markets where Internet technology is a dominant factor, there are powerful winner-take-all dynamics. The first company to achieve a critical mass can dominate its industry for a long time.

The enabler is the Internet - specifically, its power of zero-marginal-cost distribution. The ability to reach millions (or billions) of users and service their needs automatically, at nearly no marginal cost, creates situations where a powerful company becomes ever more powerful through positive feedback loops, like network effects and virality.

Traditional business strategy involves gathering information and making decisions with a certain degree of confidence. Take calculated risks that you can measure and afford. Prioritize correctness and efficiency over speed.

But in certain markets today, this is too slow. The risk isn’t inefficiency or wasting money - the risk is playing it too safe. If you win, efficiency isn’t important; if you lose, efficiency is irrelevant. As in Glengarry Glen Ross, “second prize is steak knives. Third prize is you’re fired.”

Blitzscaling drives fast growth by prioritizing speed over efficiency, even in an environment of uncertainty. When you blitzscale, you make decisions before knowing exactly how things will play out. You accept the risk of making mistakes and operating inefficiently, in exchange for moving faster.

Business Models that Scale

There isn’t a universal business model that works for every company, but most great business models overlap with these four growth factors.

1. Market Size

A big market has a large number of potential customers and efficient channels for reaching those customers. Ideally, the market is also growing quickly, meaning markets that seem small initially can grow to become massive.

2. Distribution

Many startups focus on product but overlook the importance of distribution. Roughly speaking, there are two general categories: existing networks (paid advertising and SEO) and word-of-mouth/virality.

3. High Gross Margins

Software companies have high fixed costs and low marginal costs, often above 60%. In contrast, “old economy” businesses like restaurants have low gross margins.

For a fixed amount of revenue, higher margins create more funds for companies to reinvest in R&D and growth to ward off competitors.

4. Network Effects

Network effects apply when a user using the product makes the product more valuable for other users. This is also called “demand-side economies of scale” by economists. Services that benefit from network effects include social networks, two-sided marketplaces, and technology platforms.

When Do You Start to Blitzscale?

The only time it makes sense to blitzscale is when speed into the market is the critical strategy to achieve massive outcomes.

You should not blitzscale if you’re not at product/market fit, your business model doesn’t work, or if the market conditions aren’t right. If taking on cost, risk, and speed don’t actually confer an advantage, it’s better to follow traditional business rules and wait for the time that blitzscaling becomes appropriate.

Blitzscaling also makes sense in a few other specific conditions:

  • Big new opportunity
    • Market size and gross margins create enormous potential value, and there isn’t a dominant market leader.
    • Often, this is when a technological innovation upends existing markets, creating large opportunities that incumbents are not well-suited to capture.
  • First-scaler advantage
    • These opportunities often involve positive feedback loops. The mechanisms that confer first-scaler advantage include network effects, returns to data, economies of scale.
    • Blitzscaling often doesn’t work if another company has first-scaler advantage.
  • Competition
    • Can somebody else realize this opportunity earlier than me? If yes, moving faster reduces risk of competition.
    • Startups who act quickly can evade incumbents who aren’t focusing on the space.

When Should You Stop Blitzscaling?

Blitzscaling are like fighter jet afterburners - you don’t switch them on and never turn them off. Blitzscaling is used for a specific purpose for a limited time, after which you turn to fastscaling or another type of company growth.

You stop blitzscaling when your business it outgrowing your current strategy. Warning signs of when this is:

  • Declining rate of growth (relative to market and competition)
  • Worsening unit economics
  • Decreasing per-employee productivity
  • Increasing management overhead

Managing Teams through Blitzscaling

As the company grows from a handful of people to 10s, then 100s, then 1000s of people, drastic changes in management need to happen. Here are a few critical ones:

Generalists to Specialists

At each stage of a company, different types of people are required to provide what the organization needs at that time. An analogy to the military: “the marines take the beach, the army takes the country, and the police govern the country.”

In the beginning up until 100 people, you should tend to hire generalists. They adapt quickly to the rapidly changing needs of the business in its volatile early days.

At Village stage (100s of people), specialists are critical to scale. They perform functions better than generalists can, and you need them sooner than generalists can learn the job. Thus specialists may need to be hired from outside the org.

Managers to Executives

The types of senior team members you need to hire will change.

Managers manage contributors and execute detailed day-to-day plans. Executive manage managers.

Managers can be trained from within, because individual contributors can learn how to manage from good managers. In contrast, executives are initially harder to train because managers in your organization don’t have model executives to learn from. Therefore, start by hiring executives from outside.

Founder to Leader

You need to step back from fighting fires and day-to-day decisions to the bigger picture. There are three ways to scale yourself:

  • Delegation: people do work you previously did
  • Amplification: people augment what you continue to do
  • Making yourself better

Read the full summary for the complete set of 9 management tips.

Rules of Blitzscaling

Blitzscaling also requires counterintuitive actions that contradict common business sense and will feel unnatural.

Be a “Bad” Manager

Be OK with breaking best practices of standard management. You might need to restructure the hierarchy of the company 3 times a year, churn through management teams, have unclear career progression for new hires, and retain confusing job titles. This feels like chaos to the team, but having this flexibility keeps the company nimble. You risk the organization in exchange for focusing wholly on growth.

Launch Products Before You Feel They’re Ready

Always launch before you feel the product is fully ready. Otherwise, you’ll waste time building things no one cares about.

Once you launch, listen to the data more than...

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Blitzscaling Summary Shortform Introduction

Be Aware of the Viewpoints of Venture Capitalists

Reid Hoffman spends part of his time as a venture capitalist. Much as with Peter Thiel’s Zero to One, be aware of the incentives venture capitalists have to push the “take huge risks, move fast at all costs” narrative, and how these incentives might conflict with yours as a founder:

  • VCs need outsized returns on a few companies to make up most of the returns of their entire portfolio. They’d prefer for each company to go for broke than to be conservative - for a VC, it’s ok for 9 companies to fail if 1 is a blockbuster. In contrast, you only have your one company, and another company’s success is little condolence when yours fails.
  • VCs need to deploy large amounts of capital if they raise large funds (e.g. if they raise a $1B fund, they can’t write $1MM checks). For you, raising more capital may not be worth the dilution and liquidation preferences if you can’t effectively deploy the capital.
  • VCs raise funds with a limited lifetime (usually 10 years with extensions) and need to get liquidity for their equity in your company during that time (sell stock, IPO, acquisition). They therefore want to push for fast growth and exit sooner. If you prefer a longer time horizon or want to stay private forever, your interests may conflict.

In many cases, VC performs a valuable function when the stars align. In a superb case like Facebook, everyone’s incentives were aligned - the business actually needs capital to grow in a winner-take-all market, the strategy thesis is correct, the business effectively deploys capital, and the company explodes in value.

In the most punishing case, your market doesn’t have huge returns of scale or winner-take-all dynamics, you raised too much capital to burn on strategies that don’t return, and liquidation preferences for investors sap your returns on exit. In an alternate universe, you might have built a more sustainable, meaningfully successful company and pocketed more returns.

This Book Focuses on Operations

Finally, like most startup/management advice, Blitzscaling focuses more on operational best practices, which are repeatable and teachable. It doesn’t teach as much on how to generate the core idea of the business - the best it gets is describing commonalities of previously successful strategies.

This isn’t the authors’ fault: vetting good ideas that will work is a hard problem, and even professional investors have a low batting average. Plus, many valuable ideas are contrarian and thus by definition unteachable; the more...

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Blitzscaling Summary Introduction

In markets where Internet technology is a dominant factor, there are powerful winner-take-all dynamics. The first company to achieve a critical mass can dominate its industry for a long time.

The enabler is the Internet - specifically, its power of zero-marginal-cost distribution. The ability to reach millions (or billions) of users and service their needs automatically, at nearly no marginal cost, creates situations where a powerful company becomes ever more powerful through positive feedback loops. These second-order effects include network effects and virality.

While similar positive feedback loops have led to massive organizations for millennia - see the Roman Empire, Rockefeller’s Standard Oil, and Microsoft - the Internet has dramatically shortened the feedback loop iteration time and enabled unprecedented global scale.

Thus, for companies vying for market dominance, it’s imperative to move fast and take on large risk, or forever lose the fight. Blitzscaling is a book that covers important questions:

  • Why do you need to grow fast?
  • In what...

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Blitzscaling Summary Chapter 1: What is Blitzscaling?

Traditional business strategy involves gathering information and making decisions with a certain degree of confidence. Take calculated risks that you can measure and afford. Prioritize correctness and efficiency over speed.

But in certain markets today, this is too slow . The risk isn’t inefficiency or wasting money - the risk is playing it too safe. If you win, efficiency isn’t important; if you lose, efficiency is irrelevant. As in Glengarry Glen Ross, “second prize is steak knives. Third prize is you’re fired.”

Blitzscaling drives fast growth by prioritizing speed over efficiency , even in an environment of uncertainty. When you blitzscale, you make decisions before knowing exactly how things will play out. You accept the risk of making mistakes and operating inefficiently, in exchange for moving faster.

  • The term “blitzscaling” was inspired from the WWII German military technique “blitzkrieg.” In contrast to traditional military strategies of moving at a slow pace to secure supply lines and retreat, blitzkrieg pushed speed and surprise at the risk of running out of provisions.
  • Blitzscaling goes beyond the simplistic “get big fast” because it purposefully applies effort to hypotheses about how the business will develop.

How does blitzscaling compare to other forms of growth? Consider this table:

Efficiency Speed
Uncertainty Classic start-up growth Blitzscaling
Certainty Classic scale-up growth Fastscaling

In typical chronological order for a company/product:

  • Start-ups prioritize efficiency in uncertainty. Resource efficiency lets you learn more about your business before you run out of money. This establishes the beach head.
  • Blitzscaling sacrifices efficiency for speed, without waiting for certainty on whether the sacrifice will pay off. This tries to achieve critical mass or market dominance.
  • Fastscaling sacrifices efficiency for speed in times of certainty. This is used to gain market share or achieve revenue milestones, using proven strategies. The business is in a dominant position and maturing.
  • Scale-up growth grows efficiently in certainty. This is classic corporate management, using ROI and DCF analysis to maximize returns in an established, stable market. The business is an established industry leader.

When do you blitzscale? When you have a killer product, a clear and sizable market, and a robust distribution channel.

A company may be made up of multiple products at different stages of the S-curve life cycle. And different companies in the same industry may be in different stages of the life cycle. For instance, Tencent had messaging app QQ in maturity in 2010 while WeChat was in start-up/blitzscaling mode.

Basics of Blitzscaling

Blitzscaling is both offensive and defensive.

  • Offensively, it takes the market by surprise. It builds competitive advantages before other players can respond. It opens up access to capital, since investors prefer market leaders.
  • Defensively, it sets a pace that keeps competitors gasping to keep up. They try to mimic your moves but have little time to develop differentiated strategies themselves.

Blitzscaling thrives on positive feedback loops . The company that grows to scale first reaps significant competitive advantages in:

  • Labor: employees want to work for the market leader for excitement and money.
  • VCs prefer to invest in leaders, and the cash influx further cements the leader’s position.
  • Customers: Powered by network effects, buyers get more value as the company grows faster.

Blitzscaling comes with massive risks.

  • Blitzscaling can proceed so rapidly that the company unravels. The company needs to reinvent its leadership style and strategy at every new phase of scale.
  • Blitzscaling is like “harpooning a whale. The good news is you’ve harpooned a whale. The bad news is you’ve harpooned a whale!”

3 Key Techniques of Blitzscaling

The book will cover three aspects of blitzscaling critical to making it work and avoid merely burning a large pile of money:

  1. Business model innovation: how the company makes money
    • It’s not just about technology. If it were, federal research labs would produce billion dollar companies on a regular basis.
    • Technology can develop new ways of earning money.
  2. Strategy innovation: find novel ways to grow
    • Combine new technology with effective distribution, a scalable and high-margin revenue model, and a financing strategy.
  3. Management innovation: scaling the organization

Anecdotes of Blitzscaling

In 2011 Airbnb faced pressure from the German Samwer brothers, who raised $90MM to take on Airbnb in Europe (when Airbnb had just raised $7MM). The Samwers...

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Blitzscaling Summary Chapter 2: Business Models that Scale

Business models are how the company makes money by serving its customers. This chapter discusses aspects of successful business models in general, and business models that are especially suited to blitzscaling.

Four Growth Factors

There isn’t a universal business model that works for every company, but most great business models overlap with these four growth factors.

1. Market Size

A big market has a large number of potential customers and efficient channels for reaching those customers. Ideally, the market is also growing quickly, meaning markets that seem small initially can grow to become massive.

Sometimes the market size for an innovative company is underestimated, because the potential to grow the market and the potential for the company to expand are underestimated. Therefore, don’t fix your sense of market size to the size of the incumbent - this can drastically underestimate how large the market can grow.

  • Analogy: Don’t size the car industry off of how many horses there were in 1910.
  • Some analysts once found Uber’s valuation ridiculous since it represented a sizable percentage of the global taxi market. It turns out Uber’s superior customer experience grew the market beyond what taxis did, and ridesharing eventually eclipsed all of taxis.
  • Airbnb grew to carry more rooms than the entire hotel industry.
  • Amazon grew far beyond its early beachhead in books, which now accounts for less than 7% of company sales.

2. Distribution

Many startups focus on product but overlook the importance of distribution. Roughly speaking, there are two general categories: existing networks and word-of-mouth.

Existing Networks

  • Traditional web models include paid acquisition and SEO.
  • Companies also get exposure from existing platforms like Facebook, app stores.
  • Scrappy startups can find ways to co-opt existing networks.
    • PayPal made it easy for eBay sellers to add a “Pay with PayPal” button to listings
    • Airbnb sent requests to Craigslist posters to replicate their listings on Airbnb.

Word of Mouth/Virality

  • A virality strategy requires good retention, to better increase the number of referrals made.
  • Virality usually requires a free or freemium product. The authors can’t recall a company with a paid product that grew to massive scale using virality.
  • Examples
    • Linkedin built address book scrapers to invite contacts; added public profiles which users started integrating in their email signatures.
    • For each referral, PayPal paid the referrer $10 and the new user $10. People obviously like free money.
    • Dropbox gave perks (extra storage) for inviting friends.

3. High Gross Margins

Gross margins = Revenue - cost of goods sold. This is a good measure of long-term unit economics.

Software companies have high fixed costs and low marginal costs, often above 60%. In contrast, “old economy” businesses like restaurants have low gross margins. (Shortform note: part of the reason is that the low upfront costs of “old economy” businesses like restaurants lower the barrier to entry, thus driving down prices. Further, “old economy” businesses often exist in the physical world rather than virtually, thus costing more to operate.)

High gross margins give big strategic benefits:

  • For a fixed amount of revenue, higher margins create more funds for companies to reinvest in R&D and growth to ward off competitors.
  • Operations scale with revenue or sales volume, moreso than with earnings. In other words, fixing profit, a company can have lower operational complexity with higher gross margins. It’s easier to service customers who generate $15MM in sales and $10MM in margins, than to service customers who generate $100MM sales with the same $10MM in margins.

4. Network Effects

Network effects apply when a user using the product makes the product more valuable for other users. This is also called “demand-side economies of scale” by economists.

The major types of network effects are:

  • Direct: Usage directly increases value
    • Messaging apps like WeChat, social networks like Facebook
  • Indirect: Usage encourages consumption of complementary goods, which increases the value of the original product
    • Tech platforms invite developers to build applications on the platform
      • Operating systems like Windows, iOS, Android
      • Gaming consoles like Playstation
  • Two-Sided Network Effects: Usage by one set of users increases value to a different set of users
    • Marketplaces like eBay, Uber, Airbnb, Steam, Adwords
  • Local Network Effects: Usage by a small subset of users increases the value for a connected user
    • Cell phone companies used to offer unlimited cell phone calls to “favorites”
  • Compatibility and Standards: Use of one technology encourages use of compatible products
    • More people using the MS Word .doc made rivals like WordPerfect less useful

Network effects generate positive feedback loops: more users makes the product more valuable, which attract more users. Inversely, a network with relatively fewer users is useless relative to more popular alternatives.

The game is thus to be the first to gain a critical mass of users, thus kicking off the virtuous cycle. Companies like Uber are willing to subsidize users in the belief that they can capture more value once they become the winner in the space.

The Internet has enabled faster acceleration of network effects, because of low marginal cost of reaching more users. Building phone lines to connect people was one pace of growth; allowing a user to instantaneously invite 100 friends, who can join within minutes, is wholly another.

Avoid Two Growth Limiters

Design your high-growth company around these two obstacles.

Lack of Product/Market Fit

Product/market fit is having a product that can satisfy the market. If you don’t build...

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Blitzscaling Summary Chapter 3: Do I Blitzscale or Not?

This chapter of Blitzscaling discusses the choice of whether to blitzscale and when.

When Do You Start to Blitzscale?

The only time it makes sense to blitzscale is when speed into the market is the critical strategy to achieve massive outcomes.

You should not blitzscale if you’re not at product/market fit, your business model doesn’t work, or if the market conditions aren’t right. If taking on cost, risk, and speed don’t actually confer an advantage, it’s better to follow traditional business rules and wait for the time that blitzscaling becomes appropriate.

Blitzscaling also makes sense in a few other specific conditions:

  • Big new opportunity
    • Market size and gross margins create enormous potential value, and there isn’t a dominant market leader.
    • Often, this is when a technological innovation upends existing markets, creating large opportunities that incumbents are not well-suited to capture.
  • First-scaler advantage
    • These opportunities often involve positive feedback loops. The mechanisms that confer first-scaler advantage include network effects, returns to data, economies of scale.
    • Blitzscaling often doesn’t work if another company has first-scaler advantage.
      • Amazon and Yahoo! attacked eBay with their own auction marketplaces, but they failed due to eBay’s strong network effects.
      • Amazon and Microsoft attacked Google’s search engine, but they failed due to Google’s strong advantage in aggregated data and user experience.
    • Don’t confuse first to market or first to significance with first to scale. You could be the inventor of a product, but a rival can take the reins and scale to make you insignificant.
  • Competition
    • Can somebody else realize this opportunity earlier than me? If yes, moving faster reduces risk of competition.
    • Note that your competitor might not be in the same country as you. Geographic boundaries have dissolved - your competition can now be global.
    • Startups who act quickly can evade incumbents who aren’t focusing on the space.

When Should You Stop Blitzscaling?

Blitzscaling are like fighter jet afterburners - you don’t switch them on and never turn them off. Blitzscaling is used for a specific purpose for a limited time, after which you turn to fastscaling or another type of company growth.

You stop blitzscaling when your business it outgrowing your current strategy. Warning signs of when this is:

  • Declining rate of growth (relative to market and competition)
  • Worsening unit economics
  • Decreasing per-employee productivity
  • Increasing management overhead

All of these tend to signal that you’ve reached the ceiling of the market. When you’re moving fast, it’s easy to overshoot, as Groupon did when its daily deals model suffered, and as Twitter did when it overstaffed.

Do I Have to Blitzscale?

No. The French Laundry is still a single restaurant. If it’s antithetical to your mission, or you don’t want to deal with the headaches of a larger size, you don’t need to blitzscale. If you own the company, it’s up to you to do what you want with it.

Your industry may not have a winner-take-all dynamic. This can be true if the industry is very fragmented, has low margins, or little economy of scale. In this case, there is no purpose to blitzscaling, since there are fewer advantages to getting big.

Likewise, your business model may not be permissive of massive scale.

How Blitzscaling Works

Blitzscaling is not a strict sequence of steps:

  1. Do things that don’t scale.
  2. Achieve scale.
  3. Stop doing things that don’t scale, and do things that scale.

Rather, blitzscaling is iterative. It requires finding new things that don’t scale while you capture the value of existing things. The sequence of steps looks more like:

  1. Do things that don’t scale.
  2. Reach the next stage of...

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Blitzscaling Summary Chapter 4: How to Manage Teams Through Blitzscaling

(Shortform note: this is the longest chapter of Blitzscaling, possibly because creating successful business models is the least predictable and formulaic part, while management and operations is relatively predictable.)

The company progresses through five orders of magnitude:

  1. Family: 1-9 employees
  2. Tribe: 10s of employees
  3. Village: 100s of employees
  4. City: 1000s of employees
  5. Nations: 10000s of employees

The management approach must change with each of these stages. What used to work at one stage will cause chaos in a bigger stage.

The founder also has to evolve through each stage of the company.

  1. Family (1-9): Founder personally pulls levers of hypergrowth
  2. Tribe (10s): Founder manages people pulling the levers
  3. Village (100s): Founder designs an organization that pulls the levers
  4. City (1000s): Founder makes high-level decisions about goals and strategies
  5. Nations (10000s): Founder figures out how to start blitzscaling new business units

Nine Key Transitions

A company that is growing rapidly needs to transition its approach along 9 different dimensions.

Transition 1: Small Teams to Large Teams

Naturally, as your company grows, the size of the team grows. With larger teams, it becomes harder to communicate, make decisions, and align everyone on the same mission.

In growing organizations, hierarchy is important so people know what the reporting structure is and have clear HR practices. Despite the recent popularity of flat organizations, the authors argue that flat cultures have a poor track record of results. People in flat hierarchies don’t know where to turn for conflict resolution, which slows down decision making.

Transition 2: Generalists to Specialists

At each stage of a company, different types of people are required to provide what the organization needs at that time. An analogy to the military: “the marines take the beach, the army takes the country, and the police govern the country.”

In the beginning up until 100 people, you should tend to hire generalists. They adapt quickly to the rapidly changing needs of the business in its volatile early days.

At Village stage (100s of people), specialists are critical to scale. They perform functions better than generalists can, and you need them sooner than generalists can learn the job. Thus specialists may need to be hired from outside the org.

This can cause resentment from people who have stayed from the beginning, if they expected to be promoted to lead the specialized team. To counter this, set expectations clear from the beginning - just because they’re running engineering now doesn’t guarantee they’ll be VP of engineering at 1000 employees.

Use the “tours of duty” model partly to help explain why they won’t be promoted. The idea is that when someone joins a company, they commit to a stint of 2-3 years. At that point, they've advanced their careers and can now do great things elsewhere, without expectation from either side that they should stay.

Hiring generalists is still important at all stages of a company’s growth. These are the undifferentiated stem cells of your organization, better equipped to handle the riskier and undefined problems than specialists are.

Transition 3: Managers to Executives

The types of senior team members you need to hire will change.

Managers manage contributors and execute detailed day-to-day plans. Executive manage managers.

Managers can be trained from within, because individual contributors can learn how to manage from good managers. In contrast, executives are initially harder to train because managers in your organization don’t have model executives to learn from.

Therefore, hire executives from outside, preferably executives who’ve been in similar stage companies before and dealt with similar issues as you’re facing now. Then, as you have a successful executive model for managers in your company to learn from, promote from within.

To decrease your team’s resentment for outside hires, 1) hire someone who’s known to a member of the team so they can vouch for the person, 2) bring an executive in at a lower level than where you ultimately plan she’ll end up, and let her prove herself to the team before promotion.

The exception to hiring from outside is if you have company-specific “secret sauce” responsibilities. These may need to be grown from the inside, if few outside executives have the specialty.

Transition 4: Dialogue to Broadcasting

At some point you can no longer have 1-on-1s with everyone, or even fit everyone into the same room. But you need to continue getting input from smart people, making everyone feel heard, and conveying key messages to people you don’t work with directly.

Have weekly all-hands, transitioning to monthly/quarterly as you get into village (100s of people) stage. A good all-hands meeting is organized, with an agenda provided in advance so a productive discussion can happen. Good meetings also help people get to know each other.

Communicate at scale. Write thoughtful weekly emails about challenges you’re facing. Record videos. Meet weekly with your company’s new hires.

For remote team members, consider 24/7 videoconferencing so people can feel connected to each other’s offices. Use asynchronous communication tools like Slack.

Transition 5: Inspiration to Data

New businesses often need to start with inspiration when building their product. They don’t analytics tools to tell them no one’s using their product, nor do analytics tools tell them what to build. At this stage, the team needs to rely on intuition to build.

But as the company matures, they need plans and goals as guidance. Improvisation becomes less helpful.

Tips:

  • Focus on 3-5 metrics that form the core of your business.
  • Make the metrics easy to access and provide clear context. A commonly accessible dashboard helps.
  • Avoid vanity metrics that are always up and to the right (views, installs). Use...

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Blitzscaling Summary Chapter 4-2: Nine Counterintuitive Rules of Blitzscaling

Blitzscaling also requires counterintuitive actions that contradict common business sense and will feel unnatural.

Rule 1: Embrace Chaos

This is a mindset thing. Get comfortable taking action in uncertainty. You’ll rarely have as much information as you want, and you need to make decisions before you get to that point. Believe that things will get figured out as you take action.

Once you know chaos will happen, be prepared for a variety of outcomes. Have a Plan A, Plan B, and Plan Z (fallback for worst-case scenario).

Rule 2: Hire People You Need Now, Not Later

It’s tempting to keep waiting to hire someone who will be great at a later stage in the company. Then when you reach that stage, that person will be around.

But you don’t need that person now. That’s premature optimization. You need the right person for your current situation. Without the right people here, you might never make it to the later stage.

People tend to have a preferred stage of company they like working in. Few people can excel across the board at being an individual contributor, a manager, and an executive. See if the hire is self-aware of this.

Rule 3: Be a “Bad” Manager

Be OK with breaking best practices of standard management. You might need to restructure the hierarchy of the company 3 times a year, churn through management teams, have unclear career progression for new hires, and retain confusing job titles. This feels like chaos to the team, but having this flexibility keeps the company nimble. You risk the organization in exchange for focusing wholly on growth.

Rule 4: Launch Products Before You Feel They’re Ready

Always launch before you feel the product is fully ready. Otherwise, you’ll waste time building things no one cares about.

Don’t cross the line so far into having fatal flaws that endanger your customers or reputation. Hoffman says paid consumer products have the least room for error, since they’ll expect products to be nearly perfect and will complain publicly about flaws.

Once you launch, listen to the data more than anecdotal user feedback. People are bad at articulating what they want. Look at how they’re using your product to know what they really feel.

Rule 5: Leave Small Problems Unsolved

You’ll have a host of problems to solve. You need to triage them.

  • Deal with urgent systemic risks.
    • When an Airbnb host went public about how her house was trashed by guests, it risked triggering systemic pullbacks by other hosts. The company quickly instituted an insurance policy to reassure hosts.
  • For important but not critical problems, put in a hack fix, and commit to solving it later.
  • Punt all other issues.

If someone wheels into the ER with a gunshot wound, you don’t cut out a suspicious cancer you find along the way.

Hoffman considers issues in this order of descending importance: Distribution > Product > Revenue model > Operations > Competition > What’s next?

  • In general, each top one solves all the other bottom problems. Being able to acquire users gives you data to improve your product, which drives revenue, which gives funds for operations, and so forth.
  • Inversely, if your distribution/marketing is threatened, then your entire business is threatened, and you need to fix this as a top priority.

Another question to help find issues worth fixing: “which issues will be impossible to fix later?” Choose literally impossible things, not just very difficult things.

Rule 6: Do Things that Don’t Scale

Paul Graham’s original essay by this name argues that the founders need to put in a lot of elbow grease to recruit users, hire, run operations, and understand what makes a delightful customer experience. (An example is Airbnb founders taking photos of rooms themselves so they could quickly find out what worked before making it a scalable operation).

Hoffman extends this concept to mean do things that temporarily fix the issue that might have to be fixed later, in the case of a success. Write throwaway code. Don’t build QA tools. Don’t prepare your technology to scale to a million users, when you barely have 10.

Rule 7: Ignore Customer Complaints

Customer complaints may be one of those fires you let burn so it doesn’t slow you down.

Offer light support to customers, or possibly self-service support only.

(Shortform note: this advice can contradict other startup advice to keep your customers as happy as they can, since your early customers might make a huge difference in long-term reputation and virality.)

Rule 8: Raise Too Much Money

You’ll underestimate the number of difficulties you’ll run into. When you raise money, you’ll tend to raise for a best case scenario. Then when you run into difficulties, not having enough money might kill your company.

Hoffman advises to raise like you’ve got only half the amount you currently have in the bank.

At the same time, spend money judiciously, only to fix things on the critical path to reach the next phase of scale.

(Shortform note: again, be aware of the incentives of a VC telling you to take more of their money.)

Rule 9: Evolve Your Culture

Culture is a shared way of doing things. It helps people make the right decisions autonomously. Unclear, hazy cultures get in the way of implementing strategy.

The company is like a Ship of Theseus, the paradox that describes a wooden ship that has all its planks replaced over time - when no original plank returns, is it still the same ship? Likewise, all the people in your company may change, but the company should stay the same culturally. Employees should be aware they have responsibility for re-creating the culture as it grows.

Every employee should have answers to these...

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Blitzscaling Summary Chapter 5: Blitzscaling Outside of Startups

We’ve talked up to this point about blitzscaling in the context of technology startups. But can blitzscaling work outside of technology? Can it work in companies that aren’t startups? And if you’re not a blitzscaler, how do you deal with a competitor who is?

Blitzscaling Outside Technology

The concept of blitzscaling generally means preferring speed and responsiveness over efficiency. This can happen in a variety of industries.

  • Zara takes this into fashion, hiring an excess of designers, manufacturing clothes in Europe, and shipping fully racked clothes - all normally cost-inefficient moves, but worthwhile for the speed advantage. (Shortform note: though this doesn’t describe blitzscaling necessarily if Zara isn’t opening new stories at rapid pace - just a model around having fast operations.)
  • When fracking was invented, Chesapeake Energy moved faster than rivals to secure land rights. The company borrowed money to lease land at higher prices, until the 2008 recession killed it.

Blitzscaling can also be applied to nonprofits, who can borrow concepts from business like market/impact size, distribution, gross margin, and product/market fit (especially concerning the match between what donors want and what the organization offers).

  • Barack Obama’s election campaigns are a good example of a nonprofit blitzscale.

Finally, Hoffman opines on how companies have blitzscaled across the US, in Europe, India, and of course China. He argues that Silicon Valley still has an edge over all these places for its institutional knowledge, more open collaboration, and intermixing of ideas.

Blitzscaling within a Larger Organization

Can larger organizations blitzscale? Surely. Google pushed Android to 80% of worldwide phones; Amazon’s sales continues to grow exponentially, especially through acquisitions of large retailers like Whole Foods; Facebook acquired Instagram and WhatsApp.

Large orgs have the following advantages over startups:

  • Scale - they can use existing distribution channels and customer relationships to introduce new products.
  • Iteration - large companies have enough capital to shake off failed attempts. Startups often can only make a few big bets before they run out of money.
  • Longevity - large companies have longer time horizons than startups, which need to show short-term results to keep raising money.
  • M&A - large companies have the funds to acquire other companies.

Large orgs also have these disadvantages over startups:

  • Bureaucracy and size generally make it move more slowly.
  • Large companies tend to ignore smaller business lines until it’s too late to compete, which is particularly dangerous for disruptive technologies that first look like toys but eventually transform the industry.
  • Companies face pressure from shareholders and press for short-term financial results, and get blamed for public launch failures.
  • Unlike founders in a startup, employees at a large company gain little upside from a new project working and aren’t as driven.
  • Irrational commitment - companies may spend too much on failed experiments, without the benefit of limitations like startups have with funding rounds.

How can large organizations blitzscale successfully?

  • Leverage people with prior experience blitzscaling a business.
    • GM invested in Lyft and acquired Cruise, when either company would have been difficult to found within GM.
  • Treat the new initiatives as a company within the company. Insulate it as a skunkworks project, so the exec can run it effectively without too many comparisons to the base business.

Defending Against Blitzscaling

If you’re an incumbent with a competitor who’s blitzscaling, what do you do against it? You have a few options:

  • Sit it out. If the growth factors and limiters of the business model don’t make sense to blitzscale, then don’t overreact. Let the startup wear itself out, then swoop in and pick up the spoils.
    • After the 1990s dotcom boom and bust, Webvan died and left its stranded customers to incumbent Safeway.
  • Blitzscale with them, or acquire them.
    • Why might you not acquire them?...

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Blitzscaling Summary Chapter 6: Responsible Blitzscaling

The final chapter of Blitzscaling is Reid Hoffman opining about the inevitability of blitzscaling and our country’s need to collaborate on it, rather than suppress it out of fear. His points:

  • Large modern companies that spark concerns of being monopolists (Google, Facebook, Amazon) are clearly improving consumer welfare. Contrast this to the more exploitative monopolies of the past that cornered markets and artificially inflated prices. If consumers dislike any single company like Google, there are plenty of alternatives to use.
  • Scale creates wealth for everyone. Look at how cheap TVs and mobile phones are today, how much more value Netflix gives relative to a cable subscription. Consumers are better off when companies scale to massive sizes.
  • Any country that restricts company growth will see its companies moving offshore to more hospitable grounds, taking jobs with it.
  • Large companies should self-regulate to avoid government intervention.
  • People have complained about changes for millennia. Socrates warned that the written word would harm memory; another argued that printing presses would cause too much...

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Table of Contents

  • 1-Page Summary
  • Shortform Introduction
  • Introduction
  • Chapter 1: What is Blitzscaling?
  • Chapter 2: Business Models that Scale
  • Chapter 3: Do I Blitzscale or Not?
  • Chapter 4: How to Manage Teams Through Blitzscaling
  • Chapter 4-2: Nine Counterintuitive Rules of Blitzscaling
  • Chapter 5: Blitzscaling Outside of Startups
  • Chapter 6: Responsible Blitzscaling