Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies
"In the journey of entrepreneurship, tenacity of purpose is supreme."
In October of 2018, I had the good fortune to attend a talk delivered by Dominic Johnson Founding Partner & CEO of Somerset Capital Management in Central London. This was without a doubt one of my favourite talks ever. Dominic didn't beat around the bush, he din't sugar coat his words and his words were straight to the point and resonated with me. You can read more about it on here.
One of the many things that Dominic talked about and which has been stuck in my mind ever since was, as an entrepreneur if in the first two years of business, when you go to bed if your stomach isn't pinched to your back then you're doing something wrong. The room instantly bursted with laughs and giggles, all of these were polite and gentlemanly ways of confessing that those words had in fact hit a nerve - a big change from the stiff upper lips displayed just moments earlier.
There's indeed many things that keep an entrepreneur or business owner up at night, among them certainly is how to build a massively valuable business and in the shortest time possible. A monumental task and this is the task that Reid Hoffman and Chris Yeh set themselves to tackle in their best selling book Blitzscaling.
Mile End, London, June of 2019
Reid respectfully starts by making a quick note on the use of the term blitzscaling which is derived from "blitzkrieg - lighting war" a strategy used extensively during World War II military campaigns of Nazi Germany. He acknowledges the negative connotations of the term blitz but he believes that it makes the term best fit for the concepts discussed in the book.
In Reid's own words: “Blitzscaling is a strategy and set of techniques for driving and managing extremely rapid growth that prioritise speed over efficiency in an environment of uncertainty. Put another way, it’s an accelerant that allows your company to grow at a furious pace that knocks the competition out of the water."
Drew Houston founder of Dropbox describes this feeling: "It's like harpooning a whale. The good news is, you've harpooned a whale. And the bad news is, you've harpooned a whale!"
Growing a startup at an incredible speed and at a massive scale without any consideration for efficiency is counter intuitive and against conventional wisdom, which promotes gathering information and making decisions based on that information, and taking calculated risks that can be both measured and afforded.
Reid succinctly reminds us what entrepreneurship is about:
"I often tell entrepreneurs that starting a company is like jumping off a cliff and assembling an airplane on the way down. The default outcome for any start-up is death, which means that you have to move quickly and decisively to avoid that default outcome at all costs."
Although growing a business with efficiency and certainty in mind is the most reasonable and logical way to build a business, this method doesn't offer freedom and plenty of room of manoeuvre to disruptors and innovators. In the wild wild west of startup land, inefficiency is a lesser evil than playing it too safe. Blink twice and you may lose your shot.
Being the first mover usually results in being the dominant player and subsequently the market leader.
With Internet and software businesses where economies of scale are key to success coming up second doesn’t offer the same benefits as being the market leader. Hence in order to achieve this leadership, scaling up as quickly as a possible without any consideration for efficiency or cost is a must – startups are often forced to grow by any means necessary not just to thrive but in order to survive.
Silicon Valley is the world capital of blitzscaling this is because blitzscaling requires more than just courage and skill from founders and CEOs, it also requires an ecosystem with the right financial and human capital.
Nevertheless cities such as London, Stockholm, Berlin, NY and Boston just to name a few, are becoming powerful tech hubs.
Kenya is pioneering mobile services like the M-Pesa mobile payment system which accounted for $28 billion in transactions in Kenya in 2015 - to put this in perspective, Kenya's GDP in the same year was $63 billion.
Blitzscaling initially may come across as being contrary to common sense however it's often the only conceivable and viable option. If a startup has both the human and capital financial, and the market is big enough for the startup to become a unicorn then it's the right route to take.
Hasta la vista!
Dauda Barry