It is possible to apply the blitzscaling methods to a large-scale business? Does blitzscaling only work with technology companies?
The process of blitzscaling is usually associated with startups like Airbnb and PayPal. However, the blitzscaling method can be applied almost to any industry. Additionally, a company doesn’t have to be small to blitzscale it. Blitzscaling works on large-scale businesses just as well.
Keep reading to learn how to apply blitzscaling to a large-scale business.
Can Blitzscaling Work Outside of Technology?
Normally, blitzscaling is discussed in the context of technology startups. But can blitzscaling work outside of technology? Can a large-scale business blitzscale? 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? If they have excited investors, the startup will likely have too high a valuation for you to afford.
- Avoid them. Cede control of the new market to them, and develop your own new strategy.
- IBM ceded control of computer hardware to new companies like Dell, repositioning it as a technology consultant.
- Bookstores have refashioned themselves from bestseller stockers to literary communities and eclectic collections, surviving in the age of Amazon.
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Like what you just read? Read the rest of the world's best book summary and analysis of Reid Hoffman and Chris Yeh's "Blitzscaling" at Shortform .
Here's what you'll find in our full Blitzscaling summary :
- How to build a company that grows to a large size very quickly
- Why you have to ignore efficiency and profit for speed
- How companies like Facebook, Uber, and Airbnb were able to blitzscale