Blitzscaling with Reid Hoffman & Co: Final Assignment
It has been 2.5 months of Blitzscaling (aka the process by which you scale a company really quickly, think Airbnb/Uber/Google/Youtube etc. size growth), with Reid Hoffman (CEO and Founder of LinkedIn) and Co at Stanford University. We have had 20 sessions, heard from 16 guests and have gone through four stages of Blitzscaling — Family (10,000s users), Tribe (<100,000s users), Village (<1,000,000,000s users) City (<10,000,000s users) & Nation (100,000,000 +). For our first two assignments we were asked to reflect on the principles that a) most resonated with us and b) most surprised us for each stage of blitzscaling, which I did here and here. For our final assignment we were asked to reflect on the overall process of blitzscaling with 4 questions. Here is what I had to say:
Question 1:
You built and launched a product, it’s just barely working, but people are using it. When is it that you should make the decision to go for 10,000+ users, or in Facebook/Google’s case 1,000,000,000+? Aka when is it time to blitzscale? And more specifically, what are the three most important factors that should trigger your decision to commit to blitzscaling?
1. You have 100 + people who absolutely LOVE your product.
As Paul Graham has famously advised a number of successful founders:
“It is better to have 100 people that love you than a 1000 that just sort of like you. If you have 100 people that love you they will tell 100 people, and they will tell 100 people. All you have to get is 100 people that love it.” — Paul Graham, Venture Capitalist
We heard from many start-up founders who succeeded this way — Firefox started with its small but dedicated open source community, Minted with its community of independent artists, Airbnb with its hosts in New York, LinkedIn with its recruiter buy-in, etc. When you have a group of people that love your product they will talk; they will talk about your product or service on your behalf, they might sell it to their closest circles, and sometimes if you are lucky they might even teach friends and family how to use the product, etc.
From a user perspective, I can personally attest to this theory. I was one of the early-ish adopters of Airbnb that fell hard and fast for the platform and as a result I couldn’t shut up about it. As soon as I saw what it could do for me from a supply perspective (provide me another income stream) and demand perspective (allow me to rent unique places all around the world via a few button clicks affordably) I told everyone that would listen to me about it. I even dug into the services finer details so I could provide accurate answers to follow-up questions that were coming my way as a result of advocating it. Is there insurance included? What do I need to do to sign up? How much should I charge? How much do you make? Etc. I even helped a handful of individuals set up their account and navigate the app 1-on-1 because I knew it was as a barrier for a few of my friends. Especially my older friends.
Was it for the $134/$33 referal credit? Not really. I mean that was a nice bonus — even though I now realize, after taking this class, that was a heck of a deal for Airbnb at the time when their idea was still trying to gain traction — but rather it was because I knew my friends well enough to know that some of them could also benefit from this service greatly and I just wanted to let them know it existed.
As Paul said, 100 users who love your product far exceeds having 1000 who like it. So if you have this going for you, and you are honest about it, you might want to think about taking your company to the next level. Why? Because you will have a strong community of users backing you up and it will help pave your way.
2. Your current system is starting to break and/or competition is moving in.
Scenario One: Your current system is starting to break
Your user base is starting to grow fast enough that your current operational and capital efficiency is starting to erode. According to Eric Schmidt, CEO of Google,
“At every order of magnitude you should expect the process to break and know that you will have to build it again.” — Eric Schmidt, CEO of Google
In other words, when you feel like you can no longer keep up, it might mean that you have outgrown the current stage of your business and are ready for the next one.
Individually we have all been there — the point at which our current capacities have out grown our previous capacities. But when is it time to take the plunge and commit to moving to the next stage? Too soon, and we might not be ready. Too late, and we might miss the opportunity to reach our end goal. Although there is no black and white answer there is one tell-tale sign among start-ups that you might be ready and that is that your process starts to break down. This could look like any number of things depending on your business — individuals from different cities are starting to use your product, you can no longer keep up with user emails, you don’t have enough server space, your workers are completely overworked etc. For a stronger visual depiction I like to think of this as the business growth spurt. The point in your business’s life when all the sudden its clothes don’t fit. In other words its old process (shopping for size X) is broken and no longer works for its current condition (it is now a size Y). Hence, it is time to adjust the business’s processes by increasing its size.
Scenario Two: Competition is moving in
According to Brian Chesky, after making it to a certain level of success,
“You will now have the luxury of everyone copying you and wanting to destroy you.” — Brian Chesky, CEO and Founder of Airbnb
If this happens, you might not have a choice of whether or not to blitzscale, you either do or die.
Airbnb found itself in this situation when they heard that the Samwer brothers were coming after them — a pair who are famous for imitating/cloning popular American Internet Services, launching them in Europe and then selling them back to the American company for a hefty price. To give you some prespective, in 1999 the Samwer brother’s profitably sold their eBay clone Alando.de to eBay for €35 million and in 2010 they sold their Groupon clone CityDeal to Groupon for around € 100 million. In other words, they knew what they were doing and had a record of success to back it up.
When Brian found out they were after Airbnb, he had just closed a round of funding with Reid Hoffman for $7 million. The Samwer brothers on the other hand, were backed by $90 million and were ready to launch in Europe. Brian called up Mark Zuckerberg (nbd) and asked him what he thought (they had also tried to go after Facebook). Zuckerberg said he was in trouble but that whoever had the strongest product in the end would win.
Brian had no choice but to commit to blitzscaling if his goal was to turn Airbnb into an international company. He raised an additional $100 million and with that, immediately opened up nearly a dozen international offices and hired country managers for each of them. His focus? Well, it wasn’t just expansion. Brian had to do something that gave him a competitive edge over the brothers and so he focused almost entirely on building a strong culture as well as building a great product like Zuckerberg advised— two components of the business that clones don’t do so well in.
After spending nearly two years on geographic expansion, Airbnb finally found itself in a more comfortable position. By the end of 2012, Airbnb was in 30,000 cities worldwide. It was at that point that Brian and his team decided not to purchase Wimdu (the Samwer clone). Not only did Brian no longer feel threatened by the brothers he also didn’t agree with their tactics. Airbnb 1, Samwer brothers, 0. That said, if Brian would have delayed his decision to blitzscale any longer the outcome of the situation could have played out differently.
So in summary, there are two more situations to keep your eye on when deciding whether or not its time to pull the blitzscaling trigger. 1) You have outgrown your current system and you can tell because things are starting to break. 2) You have a competitor encroaching and therefore it’s do or die.
3. You are mentally prepared for what is to come.
Blitzscaling is no easy task no is it something that should be. You are preparing to launch your company in literally thousands of cities if not countries; each of which have different rules, regulations, cultures, goals and history. You are going to be hiring 100s if not 10,000s of employees (Google has 60,000 employees) to help champion the companies mission. And you are going to be adding something that you and your team have curated to the world market and all its inhabitants. You better know for sure that you are ready to carry that weight.
According to Brian Chesky,
“Every 6 months of the journey, you will have an entirely different job. You will have to become an entriely different person because your skill sets will have to change. You will need to be adaptable. Intelligence will become the ability to achieve goals in different environments.” — Brian Chesky, CEO of Airbnb
Constantly check in with yourself and make sure that you and your team know what to expect before pulling that trigger. The idea should be shaking you so hard that you are willing go into poverty to pursue it according to the CEO of Netflix. If it is not, follow Google’s lead and hire yourself a CEO or reconsider and swap the idea of market domination for a sustainable business model. All of these options are equally impressive and admirable.
Question 2
You’ve made the decision to go for millions/billions of users. Now it is your job to set the direction and make it so your team can be as effective as possible. How do you do it? More specifically, what are three techniques you’ve learned in the class that you are most likely to use when you blitzscale?
1. Set your mission, reinforce your mission, stick to your mission
You are scaling from 1 or 2 employees to 100s if not 1000s over a quick period of time. As soon as that starts happening coordination, opposed to product development becomes your single most important challenge. Getting 1000s of people to work towards a common goal is entirely different than coordinating one or two. So how do you do it? Well, according to many, you start by setting a mission; a statement that if drafted and communicated effectively can guide what the company is going to do and how the company is going to do it.
Take Elizabeth Holmes, CEO of Theranos for instance. A company whose mission is to make preventative care a reality through accessible information.
Whether it’s looking to hire an employee, taking money from an investor or deciding what actions the company needs to pursue, it all comes back to the mission for Elizabeth.
“I knew I had to challenge state laws and advocate on a federal level because it was central to our mission. I know who to hire and who to take on as an investor based on whether or not their answers align with our mission. I know that when things get tough, the mission is one of the only things that keeps us going. And I also know that individuals work differently when they are working towards a mission.” — Elizabeth Holmes, CEO and Founder of Theranos
For Reid Hoffman, Founder of LinkedIn, his mission statement — to create economic opportunity for every professional in the world — also became a touchstone that guided almost all of its decisions when he was CEO.
“A mission is important because it becomes the touchstone which guides your decisions. It is one of the best ways to create a common language so that everyone in the organization, regardless of who is talking to who, is on the same page.” — Reid Hoffman, Former CEO and Founder of LinkedIn
When you think about the mission statement as the equivalent of being the ultimate goal of the company, it’s not surprising that so many founders and CEOs believe it should be central to everything they do.
2. Keep data at the centre of everything you do
Time and time again founders, CEOs and VCs emphasized the importance of data. And it is no coincidence. Having consistent, reliable and timely data at a company’s disposal not only gives everyone the chance to speak a common language it also maximizes the company’s ability to coordinate its resources efficiently over time.
Miriam, CEO and Cofounder of Minted, advised us to:
“Put metrics and dashboards at the centre of your management team” — Miriam Naficy, CEO and Cofounder of Minted
For Miriam this involved creating data dashboards. These data dashboards were composed not only of metrics that were suited to her business but metrics that also enabled her to compare her business’s success across others in her industry (ie. Net Promoter Score). Aka she made sure to pay special attention to what others in her industry were measuring before selecting the metrics that she would hold her company to.
In order to make sure all her employees were up-to-date on these numbers Miriam implemented a dashboard reinforcement system — a mandatory executive meeting where her staff would come together every Monday morning to collectively review the metrics in order to assess whether or not they were on track to puruse their goals.
Marissa Meyer was also meticulous about data… especially during her days at Google. Every decision, even the shade of Google’s blue, was backed by data. She told us that:
“What you lack in experience you have to make up for in data, otherwise no one is going to listen to you.” — Marissa Meyer, CEO of Yahoo
Brian Chesky, a designer by trade, also stongly advocated for strong metrics. Brain told us that originally he built his company on intuition and good design principles however, over time he quickly realized that:
“When you scale you have to learn to move from using your intuition to using data.” — Brain Chesky, CEO and Founder of Airbnb
Brian therefore eventually opted to scale data science to all sides of Airbnb. However, instead of focusing exclusively on aggregate data (i.e how many users do we have in Country X, how many bookings do we have per day, how much does the average listing go for, etc), Airbnb chose to pay special attention to collecting data that illustrated how consumers navigated through their site. That way they could use the information to guide their design and development processes as well as their growth and monetization processes. Aka killing two birds with one stone and not loosing site of the importance he put on design.
Eric Schmidt, CEO of Google, on the other hand was strict about reviewing interview scores and following up with an employees performance. And it was this data analysis that allowed Google to realize that they, as well as other companies, had a hidden bias when it came to hiring.
“We found that there was an inverse correlation between how we rated female candidates and their performance. So we changed our entire hiring process to correct the unconscious biases that were affecting our hiring.” — Former CEO of Google, Eric Schmidt
All these stories go to show that data can be customized to any situation and if done correctly can be an incredible tool that can be used not only to guide and prioritize a company’s decisions but in Google’s case can also be used to improve current processes.
There are just two things to keep in mind if and when it is time to develop your company’s data strategy according to Miriam and Sam:
“The key is to create consistent questions from the beginning and not to change them; that is the only way you can compare metrics over time.” — Mariam Naficy, CEO and Founder of Minted
“The company will build what the CEO measures”- Sam Altman, President of Y Combinator
3. What ever you do, don’t fuck up the culture
Culture. It was one of the first questions Marissa Meyer asked about after she took her new role as CEO at Yahoo. It is something that Peter Theil, the author of Zero to One and an active voice in Silicon Valley, has warned many entrepreneurs not to ‘fuck up’. And it’s something that needs to be led and enforced by the CEO and/or Founder to be taken up by the team effectively.
So what is it? According to the founders/CEOs who seem to take it really seriously:
“Culture is the repetition of things that matter” — Brian Chesky, CEO and Cofounder of Airbnb
“The people you hire make your culture.” — Eric Schmidt, Former CEO of Google
“Culture is very much the DNA of a company” — Marissa Meyer, CEO of Yahoo
“Weak cultures are diffuse; people act differently, and don’t understand each other.” — Reed Hastings, CEO of Netflix
“Even if you took away all of a company’s logos and all of a company’s info, you would still know where you are if you had a strong culture.” — Brett Taylor, CTO of Facebook
Okay, so what does implementing a strong culture look like. Well, for Airbnb — a company that is on a mission to create a strong culture — it involves the following.
1. Remodelling and renovating Airbnb’s corporate headquarters so that every room/boardroom/common room is modelled after an Airbnb Listing.“People need to be in the mindset of your product when they are building it. They need to be immersed.” — Brian Chesky, CEO and Cofounder of Airbnb
2. Building in two interview processes. In addition to the technical interview, every candidate must also go through a culture interview where they are tested on 6 core values. As an example, one of these values is “be a host” aka being passionate about hospitality and helping people.“We can test for culture through questions and looking into people’s background.” — Brian Chesky, CEO and Cofounder of Airbnb
3. Building a core values council. At Airbnb twelve employees who were seen as experts in the culture and values department were asked to form a core values council. “At Airbnb you can book office hours with these people and get help when it comes to making sure what you are working on aligns with the company’s culture.” — Brian Chesky, CEO and Cofounder of Airbnb
4. Building in cultural repetition. Brian writes a company wide email every Sunday night; it isn’t a tactical email but something more thought provoking.“I also made it so that whenever any employee signs into the building with their key card, the first message they see as they walk through those doors on their way to work is “champion the mission.” — Brian Chesky, CEO and Cofounder of Airbnb
So in conclusion, whether you are setting/reinforcing/sticking to a mission statement, keeping data at the centre of everything you do, or making sure that whatever you do you don’t fuck up the culture, you are essentially setting the direction of your company and make it so your team can be as effective as possible.
Question 3:
You can’t just hold on to your product and do what any smart person would do, there is an art in how you build these companies. Which stories, either from the class or from elsewhere, most struck you as example of the blitzscaling principle of “what got you here won’t get you there”?
Story 1: “The product is important, but not important enough.” — John Lilly, Former CEO of Mozilla
In 2002, Firefox had a product that its competitors did not; an open source web browser that had built-in ad blocking software and tabbed browsing. According to Jon this was a big deal because in 2002 you couldn’t open up a browser without being attacked by hundreds of pop up ads and you couldn’t open multiple tabs at once. Unsuprisingly, customers loved it. However, as the title suggests having this product wasn’t enough. If they wanted to become competitive globally, they were going to need to shift their focus and re-prioritize.
So in 2002, Firefox dialled down its focus on product development and dialled up its focus on growth and engagement. How? They decided to run a fundraising campaign. In it they asked everyone in their community to send them $10. In exchange for the $10, Firefox would list the community members’ names in a New York Times Firefox ad.
The ad was a big success. Firefox not only ended up doubling the money they put up for the ad, but the campaign went viral and Firefox was downloaded more than 10 million times in the first month. Although it took a complete re-prioritization, Firefox quickly became a major player in the web browsing space.
Could it have reached this scale without completely re-adjsuting its priorities? Likely not. What got them to the product phase, wasn’t necessarily going to get them to the scale phase.
Story 2: “A single unifying metric can be an incredibly powerful driver” — Shishir Mehrotra, Product head of YouTube
In 2011–2012 from an outsiders perspective, YouTube seemed to be doing great — it had successfully dodged a major bullet in terms of almost failing in 2008, it had hit a number of its internal targets and had become for the first time sustainable, revenue wise. However, from an insider perspective YouTube’s profits started to slow down and many individuals started to speculate that the business had run its course as an engine of high growth.
Shishir, the product head of YouTube at the time, did not believe that this was the case. His justification? YouTube had only claimed 1.8% of the market space in comparison to T.V. Surely YouTube had the potential to go after some of T.V’s market share? Shishir thought so and so he tried to motivate his team towards that line of thinking. Unfortunately, Shishir found it to be incredibly difficult given his team had no encroaching competitors and that YouTube was already classified, in the eyes of the public, as a clear winner in the video streaming space. This was a precarious position to be in according to Shishir.
“Without having someone to chase or a sense of urgency to survive, it is extremely difficult to adjust the pace of your team.” — Shishir Mehrotra, Product Head of YouTube
Shishir realized if he wanted different results he was going to have to do things differently and so he decided to completely realign the entire company and focus on a single unifying metric — watch-time. Shishir also decided to attach a goal that according to his lead data-scientist was completley out of reach — 1 billion hours of watch time a day.
It worked. According to Shishir it clarified decision making, it changed the momentum of the team and people started suggesting bolder initiatives. The team reached their target within a few years time which ultimately amounted to a 1000% increase. “It was a simple question that went to the heart of the matter and it allowed us to re-focus on what we were really going for.” — Shishir Mehrotra, Product Head of YouTube
Could Shishir and his team have reached this scale without completely re-adjusting its focus? Once again, likely not. What got them to 100 million hours of watch time, wasn’t necessarily going to get them to a billion.
Question 4:
You have heard from 16 guests who have personally experienced what it is like to blitzscale. What blitzscaling lesson that you learned in this class do you think is least likely to work and why?
Start-ups are as much an art as they are a science. To me this means that the possible combinations for success are endless and there is no “one-size fits all” mentality. In other words, I’m not sure if there is a single lesson that I could pick out that I believe would have a low chance of working. It seems every decision a start-up makes should be made in light of the current context, timing, situation, trends, needs of our citizens/world etc. That said, there were certainly some strong and unifying themes that were continuously repeated by the 16 guests who spoke to us — many of which I have referred to in this paper. If I had to pick a lesson that raised a bit of concern for me it would be this one:
“Growth will solve all of your problems” — Sam Altman, President of Y Combinator
It’s not that I disagree with Sam. He’s simply suggesting startups must do everything in their power to make sure they survive when the odds are stacked heavily against them— however, I have seen this concept pursued in other industries — namely energy — and it seems to always have negative ramifications. To me this statement devalues other metrics of success and focuses solely on marketshare domination. I much prefer this mentality:
Never loose momentum.
If anyone is interested in any of the blitzscaling lectures, Reid and the Crew made sure they were free and available for anyone. They can be accessed here: https://www.youtube.com/user/greylockpartners/videos
