The Lightning-Fast Path to Building Massively Valuable Companies
Reid Hoffman, Chris Yeh
Blitzscaling talks about the strategies that allow you to scale a business at high speed. Interestingly, the author, Reid Hofmann (the founder of LinkedIn), argues that these strategies allow you to grow even faster than startups.
To internalize this view, you must understand that Hofmann looks at these strategies in terms of four characteristics: efficiency versus speed, and uncertainty versus certainty. Traditional companies operate in efficiency with certainty: they know their business, and they develop it efficiently in order to grow. Startups operate in uncertainty, although, like traditional companies, they are always looking for efficiency. The case of bltizscaling companies is different: they work in uncertainty, just like startups, but they prioritize speed over efficiency.
This leads to a series of mistakes and inefficiencies when developing a company, but the book explains that this strategy is key in markets where the winner takes all. Under this model, as a company, you make a very counter-intuitive decision: you raise a very large amount of money and invest it with a 100% focus on scalability.
In this sense, blitzscaling drives “blitz” growth and owes its name to the German army’s infamous World War II strategy, “blitzkrieg.” Despite the darkness of that era, especially in that army, the author highlights how this strategy of attack without the possibility of return was taken up in different fields: football, aggressive marketing strategies on TV, and now in business.
The book stands out for having many specific definitions that I found interesting. Among the ones I liked the most is that it identifies the four growth factors of a business: 1) Market size: talking about billions of dollars. 2) Distribution: a distribution channel that can grow without driving up costs. 3) High gross margins: especially to re-invest and make it through challenging periods. 4) Network effects: each new customer contributes to the rest by being part of a network.
I loved “Blitzscaling” because it explicitly breaks down how the most aggressive startups scale, and allows you to analyze whether this system could work in our ventures or not.
It is especially striking how counterintuitive several of its steps and actions are when making decisions. And although it is not for all types of business, it is relevant to understand the philosophy behind this model.