Final Reflections on Blitzscaling

While writing this final essay for CS183C, I tried to revisit all the sessions we have had in my mind and rethink the ideas that stood out for me. One important thing to understand is that blitzscaling is not a structured process where you can follow a list of instructions step by step to scale your company. Strategies that have worked for hyper-growth companies like Linkedin, Airbnb, Google etc. might not be the one that will work for you. It’s more about developing that instinct that allows to strategically think about the problem at hand and broadly apply the principles of blitzscaling to solve it and proceed to the next organizational level.

“Every moment in business happens only once.” — Peter Thiel

Factors that trigger the decision to blitzscale

• External forces — Dynamics of the market and competition play an important role in deciding whether or not to blitzscale. It’s important to understand the nature of the game being played and whether it has ‘winner takes all’ type dynamics typically associated with network effects businesses! Is the competition gaining scale and creating a sense of urgency for you to get more market share? Does a mechanism exist that can lock-in customers/suppliers/distributors and create high switching costs for them? Market dynamics also demand some consideration. Do people in the capital markets feel comfortable with optimizing and running the company for growth? How big is the target market? Do you expect it to be fragmented? Do you really have to get to scale first in order to capture value?
• Internal preparedness — Blitzscaling can create huge organizational and cultural debt within the company. The company needs to be ready from the inside to be able to endure a fast scale-up and all of its consequences. Presence of a strong leadership team is of primal importance. There needs to be an alignment in aspirations among the employees and confidence in their core product offering that has been externally validated (mostly by users). Understanding of the key parameters of the business is also important as it will provide context on what to optimize for and what metrics to track as you grow.
• Fuel for growth — Once you have considered all external and internal influences, the next logical question to ask is; What do you need to blitzscale? How will you get it? The two most important resources you need are capital and people. Will you be able to raise a war chest on favorable terms given the current market conditions? Will you be able to hire the people you need and do it fast enough so it does not impede your progress?

I think these are the most important factors that would trigger the decision to commit to blitzscaling. Answering these questions is not going to be easy but you still have to ask them to evaluate whether you are ready to scale or not.

Techniques to blitzscale

• Find a vehicle for growth — The most basic technique to blitzscale is to find the vehicle that will allow you to achieve scale. This is basically your growth hypothesis and depends on the nature of the business you are in, and also changes with time. The questions you should ask at this point to find this vehicle are; What resource or unfair advantage can you leverage? What opportunity for arbitrage can you exploit that’s hidden from the rest of the world?
• Compete asymmetrically — John mentioned this in one of the sessions and I think it’s the most fundamental principle of blitzscaling. Lessons from the competition between Netflix and Blockbuster, Airbnb and Wimdu reinforce this idea. You need to have a very distinct understanding of the game you are playing and the reward structure as it will allow you to find things to focus on that your competition is oblivious to. Head-on competition is usually beneficial for the consumer but it’s a loss for all the companies involved specifically the scaling startup. It’s important to stop competing reactively for ex- cutting prices in response to a price cut by a competitor is usually not the best strategy, a price war ends with your profits getting competed away. You need to compete proactively being informed by your own distinctive viewpoint about the business and the market.
• Unifying vision — A clearly communicated, unifying vision brings the company together and creates alignment. It has to be articulated properly and will provide useful context to measure progress and make decisions. Successful implementation of this technique allows the same decisions to be made in the company regardless of your presence or absence. The goal is to be so clear and explicit that everyone understand what needs to be done. It also unlocks another blitzscaling weapon which is speed. Clarity of vision enables faster decision making and allows you to leverage your speed against competition.

What got you here won’t get you there!

The very essence of CS 183C is that the life of a company is comprised of distinct stages defined as OSx or Family, Village, Tribe etc. and that the things you need to focus on and worry about change as you grow. This embodies the fact that you need to constantly rediscover your business to figure out how to keep growing. The things that have worked until this point will not work in the future and so proactive thinking is a necessity. The idea of doing things that don’t scale is closely related. Most startups have to do scrappy things at the beginning and then gradually re-engineer everything to handle the scale. Eric rightly said that every problem is a new problem at a different scale.

The story of Netflix was for me the ultimate example of this concept. What started as a DVD rental by mail business evolved into the most dominant online content creation and distribution platform. This evolution is what has kept the company relevant and allowed them to survive tough competition.

Blitzscaling lesson that is least likely to work

The community driven growth approach followed by Mozilla in my opinion is the least likely to work and does not generalize well to other startups. Mozilla’s growth story is an incredible one and there are a lot of things that can be learned from it. However, leveraging resources from the community to fulfill key organizational functions is very less likely to work for a for-profit company as a growth strategy.

Conclusion

My favorite lesson from this course is understanding the importance of thinking independently from first principles in order to successfully blitzscale your company. The challenges will be different every single time and you will need to come up with new ideas to overcome them. Keeping the principles of blitzscaling in mind will provide a frame work to evaluate those ideas and solve these problems faster to achieve scale before the competition can.