No one understands startups and how to make them grow at lightning speed better than Reid Hoffman. The businessman was an executive at PayPal when it first started out and then went on to start LinkedIn. Hoffman has since invested in several quick-growing companies through his Greylock Partners.
Hoffman’s success has earned him the moniker “startup whisperer of Silicon Valley.” He also coined the term “blitzscaling,” a groundbreaking concept that allows entrepreneurs to quickly grow their companies and stay ahead of their rivals.
What is Blitzscaling?
A blitz is defined as a sudden attack or a concerted effort, and it’s those ideas that are behind the principle of blitzscaling. Blitzscaling is the concept of building a company quickly in order to serve a large market, usually a global one.
Hoffman describes blitzscaling as a form of high-impact entrepreneurship, the kind that generates a lot of jobs and affects other industries.
One of the best examples of blitzscaling is Amazon. In 1996, Jeff Bezos only had 151 employees and a revenue of about $5.1 million. Three years later, the company had 7,600 people and generated a profit of $1.64 billion. Despite criticisms and people advising against it, Bezos pushed for concepts like one-day deliveries and cloud storage and invested on these ideas. The company’s profits are not what stakeholders expected at times, but there’s no denying that the company has basically defined eCommerce.
How Dangerous Is Blitzscaling?
There are untold rewards in blitzscaling, but there’s also a lot of danger and challenges. To a lot of people, blitzscaling seems to be the opposite of everything that’s taught in business school. Hoffman actually likened the strategy to the blitzkrieg campaigns of World War II. Soldiers carry only what they need, they move quickly, surprise their enemies, and emerge victorious.
Similarly, startups utilizing this strategy have to move swiftly. Therefore, they take on more risks, like getting the right people for the job. The talent or skill set a company requires changes as it grows. Employers need to pick the people who are ideal for the moment, and not someone they necessarily think will be effective once things settle down.
The need for speed also means that companies have to be willing and prepared to launch a product even if it’s not perfect yet. The goal is to be the first to stake your claim and get immediate feedback that will be used to make improvements. Business would also have to neglect certain aspects of the business. Hoffman admitted that as PayPal was growing, they ignored customer complaints and just concentrated on improving their product.
Another challenge is implementation. A big company like Microsoft can easily finance its growth, but startups have to convince investors to put money on them. Unfortunately, it’s easier to sweet talk investors if they know their gamble will pay off, and that’s not something that blitzscaling can guarantee. Blitzscaling also requires more money, and the company has to place some of its capital in reserve so they can recover from the mistakes made.
Why Do Entrepreneurs Blitzscale?
As an entrepreneur, you want to corner the market. Blitzscaling is a great way for doing this. Being the first in the niche to scale means your company will have a “first-scaler advantage.” Other networks or companies would recognize you as the leader. Once you have established that, getting the talent and investors you need becomes easier.
Blitzscaling also gives entrepreneurs the element of surprise. By scaling at lightning speed, a brand can bypass exclusive niches and create breakout opportunities. Take into account Slack’s impressive growth. The company took bigger companies like Microsoft and Salesforce by surprise. It also gave Slack the chance to set the pace and force its rivals to try and catch up with it, which resulted in its competitors having less time to develop and implement a counter-attack.
The goal of blitzscaling is to hit the market as hard as you can and make enough buzz to draw the attention of talented people and interested investors. However, the strategy brings with it great risks so make sure you weigh that against what you hope to achieve.
[Featured image via Pixabay]