Blitzscaling: Lessons from Week#3 and Week#4
I am taking CS183C this quarter at Stanford. This class focuses on the idea of Blitzscaling (rapid scaling once a startup finds a reasonable product-market fit). It is a sequel to CS183 taught by Peter Thiel and CS183B Sam Altman in previous years.
Prompt for this week — Write about how the principles of blitzscaling change from the Family stage to the Tribal stage. Focus on things which: a) resonated the most with you and b) surprised you. Explain how you plan to apply these principles in your own life/business.
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In the first part of this class (the “Family”), the lessons were focused on identifying undervalued market opportunities and building a product with a strong fit for this market: move fast, make quick decisions, focus on the user and ignore everything else. In this part (the “Tribe”), the focus shifts to growth: once a team identifies a unique opportunity, how to scale as rapidly and effectively as possible.
The lesson that resonated the most was the importance of timing. John Lilly and Eric Schmidt talked about this in detail — no product scales before it works. Hence, it is critical to time the scaling phase correctly. That is not to say it should work perfectly, but as Eric Schmidt put it, it is essential that it at least “barely works” — the original iPhone had no apps, Facebook did not have a newsfeed when it launched. The first versions of what became world-changing products, barely worked but they had the right combination of features to be interesting. Usually, growing without a good product-market fit just worsens the problem. Jen Pahlka eluded to this theme too, when she said the early days of Code for America felt like “You’re laying down the tracks as the train is reaching the part where the tracks are supposed to be.”
Another theme I connected with was how to do hiring correctly in this stage. When going from the “Family” to the “Tribe”, hiring speeds up and a substantial fraction of hires will be outside of the founders’ networks. In order to continue to hire the best and most committed people, it is important to set up a rigorous hiring process (what to look for in candidates and how). Eric Schmidt spoke about this at length — industry usually overvalues specific skill sets and past experience but undervalues strategic and technical flexibility. During this period of rapid growth and scaling, things change very quickly and it is crucial to have fast learners who adapt quickly. Moreover, these early hires define the culture of the company and play an important role in interviewing/referring future hires. Therefore, it is critical to ensure quality, cultural fit and commitment to the mission. The cost of a bad hire at this stage can be large.
When talking about Mozilla, John Lilly introduced the concept of “competing asymmetrically” which surprised me because I had never thought of it that way. If Netscape was to compete with Microsoft on the browser, when IE had north of 90% market share and Microsoft had 10 times as many engineers working on the problem as Netscape did, it had to do it asymmetrically. This idea was the primary motivation behind creation of Mozilla, which was formed to coordinate the development of open source version of Netscape’s browser. The story of IE and Firefox is a cautionary one for market leaders — as Andy Grove said in his book, “Only the paranoid survive”.
Perhaps the most surprising theme from this stage, something that emerged from Eric Schmidt’s interview although I don’t remember him talking about it explicitly, was that founders should continue to push the boundaries even though the consensus might be to be more cautious once the startup begins to scale. Larry Page and Sergey Brin decided Google should build Chrome even though the consensus was that they should invest in improving Firefox; they decided to buy and scale Android even though the consensus was this wasn’t a good idea. It is okay to be overly optimistic or naive or politically incorrect — relaxing these non-essential constraints can be the most effective way to unlock innovation. This lesson is as important to a startup as it is to our lives.
