Tag Archives: Startup

Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman, Chris Yeh

Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies by Reid Hoffman, Chris Yeh

Summary

  1. Blitzscaling is when you put speed over efficiency, even in the face of uncertainty. This constant and fast feedback will help you adopt, evolve, and move forward faster than your competitors. Getting this feedback early and moving quickly on it is the name of the game – especially if you are a platform and have a two sided model. Blitzscaling is a risky decision but, if your competitor has taken this path, it is less risky than doing nothing. This book will walk you through how to do it, when to do it, why to do it, and what it looks like. The cost and inefficiencies are worth it because the downside of not doing it when new technology enables is far greater – irrelevance.

Key Takeaways

  • Blitzscaling Overview
    • Blitzscaling will help you make better decisions where speed is the ultimate super power
    • Blitzscaling works as both offense and defense – you can catch people off guard and as if you don’t, you might not survive. You can leverage your initial competitive advantage into a long-term one before the market and competitors can respond. You can get easier access to capital as investors prefer to back market leaders allowing you to further your advantage of competitors. Blitzscaling allows you to set the playing field to your advantage
  1. McKinsey found the companies that had 60% growth when they reached $100 million in revenues are 8x more likely to reach $1 billion then those who are growing at 20% of the similar size. They have first scaler advantage. At this point, the ecosystem around this massive company recognize them as the market leader and shift their behavior to better suit them which leads to positive feedback loops
  2. Startups, just like certain materials and chemicals, go through phase changes. A dominant global leader is not simply a startup times of thousand it is a fundamentally different machine. Just as ice skates are useless on water, the same tactics used in the startup may be useless once you have achieved product market fit.
  3. The five phases of Blitzscaling: Family, tribe, village, city, nation
  4. The first step is creating a business model that can grow. This sounds elementary but it’s amazing how many startup founders miss this simple piece. You must have a business model that can scale or else it’ll break before you can reach dominance. Business model innovation is more important than most people think as technology today is not the differentiator it used to be. Most great startups are like Tesla which combine existing technologies in a unique and special way rather than like Space-X where they had to invent their own technologies 
  5. Blitzscaling is a strategic innovation and hurls much common wisdom out the window. Founders should only blitzscale when they determine that the most important factor in their company’s survival is speed into the market. It is a big bet but can pay off handsomely.
  6. The revenue model don’t have to be perfect when you do it. Your only goal is scale into a market that is winner take all or winner take most. However, not every company should blitzscale if product-market fit isn’t there or if the business model isn’t there
  7. You should blitzscale when there’s a big new opportunity, when the size of the market and gross margins overlap to create potential huge value. You should also blitzscale when there is no dominant market leader or oligopoly that controls the market 
  8. Another way to think about blitzscaling is by climbing learning curves faster than others
  9. Blitzscaling is not meant to go on forever. You should stop when growth slows, when average revenue per employee slows, when gross margins begin to climb, and other similar leading indicator show that your growth is slowing. You should also slow when you are reaching the upper bounds of a market
  10. In blitzscaling mode, raise more cash (much more cash) than you think you’ll need. Typically you should try to raise enough money for 18 to 24 months of survival. When trying to raise money nothing is more powerful than not needing it. Only spend money on things which are life or death if not solved
  11. As startups blitzscale, they have to balance responsibility with their power
  12. Try to partner with currently blitzscaling companies or companies which have blitzscaled in the past
  13. Managing Growth
    1. The role and skills needed by the CEO and top management are different for every level and size of the startup. It is never static and is always changing
    2. Business model growth factors
      1. Market size – paying customers, great distribution, fixed and expanding margins
      2. Distribution – leveraging existing networks, virality
      3. High gross margins – more revenues lead to more cash on hand which can be put to use, more attractive to investors
      4. Network effects – direct, indirect, two sided, local, compatibility and standards
    3. There are two growth limiters: product market fit and operational scalability
    4. 8 key transitions 
      1. From small teams to large teams. This can be a tough psychological change for founders and early employees as it is now impossible to be part of every decision and have clarity into every department 
      2. From generalists to specialists 
      3. From managers to executives. Executives organize and lead managers and managers execute day to day operations. Hire people who are known to at least one current team member, start them small and let them prove their value and gain other’s trust, then think about promoting them
      4. From dialogue to broadcasting. Establishing formal and consistent communication is extremely important as you grow. Chesky sends out a weekly email on Sunday nights which highlight growth metrics but also give the team updates and clarity on how the company is doing and other important topics so that everyone continues to feel involved and informed
      5. From improvisation and inspiration to data. At the beginning you have no customers to listen to but over time you have to track team metrics and analyze the data so that you can improve and adapt. Track the number of user’s raw engagement and churn to begin with and then customize and go deeper as is necessary for your product or service. No company should have more than 3 to 5 metrics as more tends to lead to confusion. It doesn’t necessarily matter what data you collect but what data gets presented to decision-makers. 
      6. From single threading to multithreading. The author doesn’t know of one start up that didn’t start out as singularly focused. They can branch out from there but it is important to have a deep focus when you’re first getting started
      7. From pirate to navy. From continuous offense to a blend of offense and defense. You must strike a balance between the power of being small and nimble and the benefits of being large and having scale. Much like JBS Haldane stipulates, you are fundamentally different when you scale. You can’t run a city the same way you run a tribe and you can’t run a nation the same way you run a city
      8. From founder to leader. Your role as the founder will change as the company scales and grows and you must adapt to it or you won’t be serving the company as it needs you to. You have to keep your personal learning curve ahead of the businesses’ growth curve. There are three ways to scale yourself: delegation, amplification, and simply getting better.
    5. Doing things which don’t scale when you’re growing quickly. It might be best to find a hack that you’ll have to throw away later than taking your time and running an elegant piece of software
    6. Ignore your customers at least at this stage in your growth. You have to provide whatever customer service you can that doesn’t slow you down – most likely this will be no customer service. However, you cannot ignore culture a strong culture is really important and is defined by consistent values and actions across the company. The executive in charge of the functional area which drives the culture of the company tends to be the natural successor to the CEO
  14. Awesome analysis on Zara the clothing retailer who uses split scaling techniques. Although it is a retailer, they use speed to their advantage and focus less on efficiency
  15. Incumbents have some natural advantages such as scale, the power and resources to continuously innovate, longevity, and mergers and acquisitions but the disadvantages include poorly aligned incentives, managerial overhang, lack of risk appetite, public pressure since they’re publicly traded, etc.
  16. A good way to gauge risk is by thinking through the knowns and the unknowns and systemic risk and non-systemic risk. Therefore, you must act immediately if there’s some big systemic risk, do something short term to solve your problem, note the problem now so that you can solve it later and let it burn (if unknown and non-systemic)
  17. Instability and change are the new norm and the only way to thrive is to know that you have to adapt faster than the change around you.  Be an infinite learner, be a first responder who is willing and able to act, veer towards industries, people, and companies that are biased towards blitzscaling as this is where the fastest and biggest growth lies
  18. Other
    1. Real value is created when innovative technologies allow for innovative products / services, with an innovative business, model to emerge
    2. It’s important to differentiate between first mover advantage and first scaler advantage. First movers often die but successful first scalers tend to achieve a very powerful position
    3. Do everything by hand until it’s too painful. Then automate it
    4. Common patterns of dominant businesses:
      1. Bits versus atoms (software/digital rather than physical)
      2. Platforms
      3. Free or freemium
      4. Marketplaces
      5. Subscriptions
      6. Digital goods
      7. Newsfeeds which drive user engagement and retention
    5. You must focus on adaptation rather than optimization
    6. You should always have a plan a Plan B and plan Z that you can fall back on in case your first option doesn’t work out and then your option in case worst case scenarios come up
    7. In the early days prioritize hiring those who can add value immediately and not the absolute perfect candidate
    8. Tolerate bad management. At the beginning it is more important to move quickly than to have perfect organization and processes in place
    9. Launch a product that embarrasses you. You don’t want to wait so long until it’s perfect want to get out and see what the market thinks of it
    10. You have to listen to your customers. Not only what they say, but you also have to know when to ignore them – must learn to blend data/intuition
    11. You have to know which fires to fight which ones to say no to and which ones you actually have some control over. Only then can you know which problems to tackle and in which order. Distribution, product, customer service, operations are some of the most important

What I got out of it

  • Blitzscaling is the pursuit of growth and speed, even in the face of uncertainty. It is a big gamble but is necessary sometimes if coming to market first, fastest, and biggest gives you a shot at owning a big market. A great playbook for anybody thinking about pursuing this strategy

Behind the Cloud: The Untold Story of How Salesforce.com Went from Idea to Billion-Dollar Company-and Revolutionized an Industry by Marc Benioff



Summary

  1. Marc Benioff recalls what spurred him to build Salesforce.com and outlines 111 plays which helped him do it 

Key Takeaways

  1. Don’t keep your ideas so well guarded. Share them with friends and serendipity may just help you out 
  2. Be willing to take a risk – no hedging
  3. Always go after the Goliath or market leader. If there is none, go after the status quo 
  4. Whether you use a PR firm or not, make sure you know what your message is 
  5. Companies must embrace marketing from the beginning of their lives in order to break through the noise
  6. Brand (essentially keeping promises you make to employees and customers) is your more most important asset. Make sure everybody in the company is on the same page as to what the company does. Make everyone part of the marketing team and make the message concise and consistent. It must capture why you exist
  7. Build a trusting relationships with influential journalists. Meet with them often and give them direct contact to you.
  8. Unbiased advice from experts is the most powerful form of marketing. Word-of-mouth and references are so powerful
  9. Create your own analogies and metaphors upfront and test them out. This take some work but it’s so worth it as it helps people understand clearly, quickly, and concisely what you’re all about
  10. The event is your message. Make sure that the venue and everything else aligns with who you are – if you’re a sustainable company, have fair trade coffee, etc.
  11. Turn adoption into addiction through fast feedback loops. Keep in constant touch with your customers, track their requests, ask them what you could do better, act on it quickly, ask them how they are using your product. Rinse and repeat
  12. Make your website your best salesman by keeping it fresh and up-to-date. It is more effective than any direct marketing campaign
  13. Don’t undervalue your product at the beginning and don’t give discounts. Keep it simple with one price or a low number of prices across the board. This incentivizes the sales team to close deals immediately rather than waiting until end of quarter and offering customers discounts
  14. You can’t win an entire company at once. Start in a division, prove your value, and grow from there
  15. V2MOM – Benioff’s playbook for making decisions and tracking progress
    1. Vision
    2. Values
    3. Methods 
    4. Obstacles 
    5. Measures
  16. Hiring is one of the most important things you can do. Create a recruiting machine and always be on the lookout for top talent. Have people visit the new employee, make sure they have lunch plans, give them a crash course on product and culture 
  17. Set aggressive but attainable goals. If it’s too hard and only 10% make it, their morale is sky high but everyone else’s is low. This also helps with camaraderie and consistent morale 
  18. Hire A players, demote B players, fire C players. Hire slow and fire fast
  19. Solicit and act upon customer feedback.
  20. Strive for this checklist to be checked off for employees:
    1. I am doing the best work of my professional career
    2. I have the opportunity every day to do what I do best at work
    3. In the past six months I have talked to someone about my progress
    4. There is someone who cares about my development
    5. I have opportunities to learn and grow at work
    6. My opinions are sought after and acted upon
    7. My supervisor or someone cares about me as a person
    8. I have a support network at work
    9. My colleagues care about and do quality work
    10. I am recognized and rewarded for my contributions
  21. Eskimo proverb: “The time to fish is during the storm.” The time for real progress and differentiation is when others are retreating, not when everything is perfect.

What I got out of it

  1. Some great advice for anyone starting or leading a company. A playbook for various stages and common issues that everyone would face in this type of pursuit 



On How to Start a Startup

I spent some time carefully listening to and digesting Y-Combinator’s videos on starting a startup and have attempted to make a distilled “teacher’s reference guide” which (hopefully) offers an actionable and informative introduction to their powerful ideas for success and pitfalls to avoid.

*This is Y-Combinator’s content and not my own words. I’ve simply distilled, compiled, and added a few notes.