Let’s Talk About Blitzscaling

For those out you out there that know me, you’ll be well aware that I’m an avid reader. Over the holiday break, one of the books I was re-reading is ‘Blitzscaling’ by Reid Hoffman, co-founder of Linkedin and author Chris Yeh. It’s a great book that I highly recommend checking out, and with a foreword from none other than Bill Gates, you know it’s a reliable source of information in the context of business scaling. The thesis of Blitzscaling is to put forward a model of growth that prioritses growth over anything else, and while it might not necessarily be a one-size-fits-all solution that’s applicable to your organisation, it’s definitely worth a read to see different ways in which you could scale your operations.

In an article published on Strategy + Business the authors note that “blitzscaling is what we call both the general framework and the specific techniques that allow companies to achieve massive scale at incredible speed. If you’re growing at a rate that is so much faster than your competitors that it makes you feel uncomfortable, then hold on tight, you might be blitzscaling.” The authors point to the stratospheric rise of Amazon globally as a cut-and-dry example of Blitzscaling in action, stating that “Amazon’s incredible growth in the late 1990s (and up through today) is a prime example of blitzscaling. In 1996, a pre-IPO Amazon Books had 151 employees and generated revenues of USD $5.1 million. By 1999, the now-public Amazon had grown to 7,600 and generated revenues of $1.64 billion. That’s a 50-fold rise in staff and 322-fold rise in revenue in just three years. In 2017, Amazon had 541,900 employees and was forecast to generate revenues of $177 billion (up from $136 billion in 2016)”.

One of Dropbox’s co-founders, Drew Houston described the feeling of rapid growth like “harpooning a whale,” which can feel like a blessing and a burden. “The good news is, you’ve harpooned a whale,” he said, “and the bad news is, you’ve harpooned a whale.”

With blitzscaling, an organisation makes less-pointed decisions than with the traditional, safe business model and accept the potential of risks like making the wrong decision and willingly paying the cost for operating inefficiencies. The tradeoff for this, the authors argue, is the speed in which your organisation can pivot and capitalise on opporunities early-on, or even before they fully present themselves, which consequently puts your organisation in a perfect position. “These risks are acceptable because the risk and cost of being too slow is even greater,” they say. “But blitzscaling is more than just plunging ahead blindly in an effort to ‘get big fast’ to win the market. To mitigate the downside of the risks you take, you should try to focus them - line them up with a small number of hypotheses about how your business will develop so that you can more easily understand and monitor what drives your success or failure.”

“If you’re growing at a rate that is so much faster than your competitors that it makes you feel uncomfortable, then hold on tight, you might be blitzscaling.”

This is no doubt an intimidating concept to implement in your organisation, especially considering just how prudent and conservative you need to be with an organisation’s finite resources. The authors acknowledge this, stating that “it’s just about as counterintuitive as it comes. The classic approach to business strategy involves gathering information and making decisions when you can be reasonably confident of the results. Take risks, conventional wisdom says, but take calculated ones that you can both measure and afford. Implicitly, this technique prioritizes correctness and efficiency over speed.”

“When a market is up for grabs, the risk isn’t inefficiency - the risk is playing too safe.”

While conventional wisdom and the usual business plan can prove worthwhile for a number of organisations, the idea behind the thesis of blitzscaling is that new practices enabled by advancements in technologies can disrupt an existing market, and even create a brand-new market that you’re not a part of. “Efficiency and certainty, while innately appealing, and very important in the context of a stable, established market, offer little guidance to the disruptors, inventors and innovators of the world. When a market is up for grabs, the risk isn’t inefficiency - the risk is playing too safe. If you win, efficiency isn’t that important; if you lose, efficiency is completely irrelevant. Over the years, many have criticized Amazon for its risky strategy of consuming capital without delivering consistent profits, but Amazon is probably glad that its ‘inefficiency’ helped it win several key markets- online retail, ebooks and cloud computing, to name a few.”

One of the downsides to this approach is that decisions are often made with a lack of certainty, and this element of risk-taking behavior can be detrimental at times. In a piece coming later this week, we’re going to dive into the three key techniques to initiating and perpetuating blitzscaling in your organisation, as well as some more examples and explanations of organisations leveraging - and some that failed to leverage - the concept in their operations.

For now, thanks for reading, and I’ll see you in the next post.

Kobi Simmat.

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