Blitzscaling: Lightning Fast Path To Building Massively Valuable Companies
Author: Chris Yeh, Reid Hoffman
High Level Summary: First of all this book comes from an author (Reid Hoffman) who has been there and done that. He has bundled deep thought in the space of getting to the finish line faster in this book.
Who is this book for: Anyone wanting to understand how to help a company grow in terms of scaling lightning fast. Although this book is targeted for new companies that are growing it also provides valuable information for individual leaders in small and large companies who are dealing with growth and the challenges that come with growth.
I would also say that this book offers great insights that will pertain to Life Sciences companies but the examples that are given are service and technology examples that will have to be translated with the idea that regulatory and first adopter environments are often different/slower in Heatlhcare.
What is Blitzscaling? The term Blitzscaling was developed by the authors by combining the word blitz (lightning fast) and scaling (growth).
“Blitzscaling is what we call both the general framework and the specific techniques that allow companies to achieve massive scale at incredible speed.” Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 23). Crown. Kindle Edition.
Competition, Beatem, or Buyem
After moving to San Francisco in October 2007, roommates and former schoolmates Brian Chesky and Joe Gebbia came up with the idea of putting an air mattress in their living room and turning it into a bed and breakfast. The site Airbedandbreakfast.com officially launched on August 11, 2008.
The founders had their first customers in town in the summer of 2008, during the Industrial Design Conference held by Industrial Designers Society of America, where travelers had a hard time finding lodging in the city.
A German competitor Wimdu copied their business model and provided a significant challenge for AirBnB growth in the European market.
“Integrating Wimdu’s finance-centric and metric-driven team could harm Airbnb’s design-driven culture. He was also reluctant to reward what he saw as a legal extortion racket rather than a sincere attempt to create value in the market.” Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 4). Crown. Kindle Edition.
At one point, AirBnB thought about buying Wimdu but due to having good advisors and a solid plan they stuck to their methods and eventually beat Wimdu out of the space.
Scaling versus Efficiency
In looking at examples like Uber and Facebook the authors rightfully explain that expansion has to come before efficiency. As your organization gains scale it is easier to find areas of inefficiency and further develop or eliminate them. When competition is fierce and Blitzscaling is needed the leaders/founders should prioritize growth over efficiency.
“Blitzscaling is a strategy and set of techniques for driving and managing extremely rapid growth that prioritize speed over efficiency in an environment of uncertainty. Put another way, it’s an accelerant that allows your company to grow at a furious pace that knocks the competition out of the water.” Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 12). Crown. Kindle Edition.
The good news is that you harpooned a whale and the bad news is that you harpooned a whale!
As organizations grow and first revenue growth happens it is where you start to gain traction. When the flywheel begins turning and you start to land customer after customer questions start to come from founders and leaders:
Are all of these customers the right customers?
Will we have more staff?
When will we get time to do all of the things that we were planning on doing?
There is a method to the madness.
Company size matters. Companies that are small often have chemistry around execution. As companies grow, focus needs to be applied to scalability. The way the Blitzscaling defines this is the following:
THE FIVE STAGES OF BLITZSCALING
Stage 1 (Family) 1–9 employees
Stage 2 (Tribe) 10s of employees
Stage 3 (Village) 100s of employees
Stage 4 (City) 1,000s of employees
Stage 5 (Nation) 10,000s of employees
Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 38). Crown. Kindle Edition.
As you grow through the 5 stages there are three techniques that help companies along the way.
Technique #1: Business Model Innovation – Developing a business model that will grow with you.
Technique #2: Strategy Innovation – Planning what you will do and even more importantly what you will not do.
Technique #3: Management Innovation – Having the right people/resources that will allow you to Bitzscale.
Blitzscaling Growth Factors
To be able to use these techniques you will need a business model that maximizes around the four Blitzscaling growth factors.
Growth Factor #1: Market Size – Although this is a basic concept you need to have an addressable market in both potential customers and efficient channels that will allow you to Blitzscale.
Growth Factor #2: Distribution – Having the ability to meet demand in manufacturing and distribution will be critical as the company grows.
“You have to be good at building a product, then you have to be just as good at getting users, then you have to be just as good at building a business model.” Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 57). Crown. Kindle Edition.
Growth Factor #3: High Gross Margins – High gross margin businesses often receive investment and attention from the market. You may have a product that is not a high growth margin business and it just might not fit the tools applied by the authors for Blitzscaling.
Growth Factor #4: Network Effects – “A product or service is subject to positive network effects when increased usage by any user increases the value of the product or service for other users.” Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 66). Crown. Kindle Edition.
In the book the authors also offer deeper case studies of LinkedIn, Google, Amazon and Facebook. In each of the examples, they lay out the factors related to the Techniques and Growth Factors for each company.
When Should You Start Blitzscalaing?
Getting started early is important for companies and Blitzscaling can be done at the early stages of a company.
When Should You Stop Blitzscaling?
According to the authors there are early warning signs that you have outgrown your strategy.
Declining rate of growth (relative to the market and competition)
Worsening unit economics
Decreasing per-employee productivity
Increasing management overhead
Hoffman, Reid; Yeh, Chris. Blitzscaling (p. 132). Crown. Kindle Edition.
In reading the book, I do not fully align with the list above, but as a business leader you will be able to tell when you have outgrown the approach to your strategy. Blitzscaling is a great way to accelerate a company into a market but there will come a time when things need to change. When that happens, there are other approaches and strategies that can be applied.
If you are struggling with applying any of these tools or if you are still trying to sort out your strategic approach 5280 Life Sciences Consulting can help. Give us a call.