200 Powerful Reid Hoffman Quotes Startups, Scaling (2023)
1. “People change. You change. Some relationships just aren’t meant to last beyond a certain point. It’s okay to simply let those friendships fade. This is a natural evolution of some relationships. Unlike romantic relationships, with friendships there’s rarely a reason to have a full-on breakup. Even if people go in different directions and the friendship slowly peters out, trust can endure. And unlike most exes, it is possible to rekindle/reactivate friendships later on when your lives are more aligned.”
2. “A few of the managers we spoke with for this book worried that the tour of duty framework might give employees "permission" to leave. But permission is not yours to give or to withhold, and believing you have that power is simply a self-deception that leads to a dishonest relationship with your employees. Employees don't need your permission to switch companies, and if you try to assert that right, they'll simply make their move behind your back.”
3. “While blitzscaling requires risk taking, it doesn’t require unnecessary risk taking. Indeed, the higher level of risk associated with blitzscaling makes risk management even more valuable and important. As Yahoo! cofounder Jerry Yang told us in an interview for Reid’s Masters of Scale podcast, “All bold strategies have a risk. If you don’t see it, you’re flying risk-blind.”
4. “In their book Future Shock, the futurists Alvin and Heidi Toffler wrote that “change is the only constant,” and “to survive, to avert what we have termed future shock, the individual must become infinitely more adaptable and capable than ever before.” Those words were originally published in 1970. The pace of change has only accelerated since then.”
5. “Airbnb’s strategy for photographing its hosts’ rooms offers an instructive example. Early on, Airbnb’s founders discovered that one of the key factors that increased the chances of renting a room on Airbnb was the quality of the photographs of that room. It turns out that most of us aren’t professional photographers, and our poorly composed, poorly shot cell phone pictures don’t do a good job of conveying the awesomeness of our living spaces. So the founders took to the road, visiting hosts and taking photographs for them. Obviously, personally visiting every host was hardly a scalable solution, so the the task was soon outsourced to freelance photographers. As Airbnb grew, the strategy shifted from the founders managing a short list of photographers, to an employee managing a large group of photographers, to an automated system managing a global network of photographers. Founder Brian Chesky describes this strategy succinctly: “Do everything by hand until it’s too painful, then automate it.”
6. “This key transition is the shift from playing offense to playing offense and defense at the same time. More poetically, it’s the shift from being a pirate to being part of the navy. It requires an evolution in strategy as well as an evolution in company culture.”
7. “Brian Chesky sends to all Airbnb employees is a powerful one. “You have to continue to repeat things” Brian told our class at Stanford. “Culture is about repeating, over and over again, the things that really matter for your company.” Airbnb reinforces these verbal messages with visual impact as well. Brian hired an artist from Pixar to create a storyboard of the entire experience of an Airbnb guest, from start to finish, emphasizing the customer-centered design thinking that is a hallmark of its culture. Even Airbnb conference rooms tell a story; each one is a replica of a room that’s available for rent on the service. Every time Airbnb team members hold a meeting in one of those rooms, they are reminded of how guests feel when they stay there. At Amazon, Jeff Bezos famously bans PowerPoint decks and insists on written memos, which are read in silence at the beginning of each meeting. This memo policy is one of the ways that Amazon encourages a culture of truth telling. Memos have to be specific and comprehensive, and those who read the memos have to respond in kind rather than simply sit through some broad bullet points on a PowerPoint deck and nod vague agreement. Bezos believes that memos encourage smarter questions and deeper thinking. Plus, because they’re self-contained (rather than requiring a person to present a deck), they are more easily distributed and consumed by a wider population within Amazon. The late Steve Jobs used architecture as a core part of his deliberate communications strategy at Pixar. He designed Pixar headquarters so that the front doors, main stairs, main theater, and screening rooms all led to the atrium, which contained the café and mailboxes, ensuring that employees from all departments and specialties would see people from other groups on a regular basis, thus reinforcing Pixar’s collaborative, inclusive culture.”
8. “A friend is not an asset you own; it’s a shared relationship. A friend is an ally, a collaborator. Think of it like ballroom dancing. You don’t control the other person’s feet. Your task is to move in unison, perhaps gently guiding or following. There’s a deep sense of mutuality. Trying to win/acquire friends as if they were objects undermines the endeavor altogether.”
9. “Tencent had partnered with leading mobile carriers like China Mobile to receive 40 percent of the SMS charges that QQ users racked up when they sent messages to mobile phones. A new service could hurt Tencent’s financial bottom line and at the same time risk its relationships with some of China’s most powerful companies. It was the sort of decision that publicly traded, ten-thousand-person companies typically refer to a committee for further study. But Ma wasn’t a typical corporate executive. That very night, he gave Zhang the go-ahead to pursue the idea. Zhang put together a ten-person team, including seven engineers, to build and launch the new product. In just two months, Zhang’s small team had built a mobile-first social messaging network with a clean, minimalistic design that was the polar opposite of QQ. Ma named the service Weixin, which means “micromessage” in Mandarin. Outside of China, the service became known as WeChat. What came next was staggering. Just sixteen months after Zhang’s fateful late-night message to Ma, WeChat celebrated its one hundred millionth user. Six months after that, it had grown to two hundred million users. Four months after that, it had grown to three hundred million users. Pony Ma’s late-night bet paid off handsomely. Tencent reported 2016 revenues of $ 22 billion, up 48 percent from the previous year, and up nearly 700 percent since 2010, the year before WeChat’s launch. By early 2018, Tencent reached a market capitalization of over $ 500 billion, making it one of the world’s most valuable companies, and WeChat was one of the most widely and intensively used services in the world. Fast Company called WeChat “China’s app for everything,” and the Financial Times reported that more than half of its users spend over ninety minutes a day using the app. To put WeChat in an American context, it’s as if one single service combined the functions of Facebook, WhatsApp, Facebook Messenger, Venmo, Grubhub, Amazon, Uber, Apple Pay, Gmail, and even Slack into a single megaservice. You can use WeChat to do run-of-the-mill things like texting and calling people, participating in social media, and reading articles, but you can also book a taxi, buy movie tickets, make doctors’ appointments, send money to friends, play games, pay your rent, order dinner for the night, plus so much more. All from a single app on your smartphone.”
10. “Even if the money doesn’t prove to be necessary, a major financing round can also have positive signaling effects—it helps convince the rest of the world that your company is likely to emerge as the market leader, and can discourage investors from backing additional competitors”
11. “Managing risk is a key variable, frankly, all aspects of life, business is just one of them, and one of the things that most people do in terms of managing risk, that’s actually bad thinking, is they think they can manage risk to zero. Everything has some risk to it. You know, you drive your car down the street, a drunk driver may hit you. So what you’re doing is you’re actually trying to get to an acceptable level of risk.” – Reid Hoffman
12. “In the end, Airbnb’s founders realized that they wanted to take on the Samwers—and they wanted to win. But how? The key was an aggressive, all-out program of growth that we call blitzscaling. Blitzscaling drives “lightning” growth by prioritizing speed over efficiency, even in an environment of uncertainty. It’s a set of specific strategies and tactics that allowed Airbnb to beat the Samwer brothers at their own game. Just a few months later, determined to acquire the resources needed to outscale the Samwers, Brian raised $ 112 million in additional venture capital. Airbnb then embarked on an aggressive international expansion plan, including the acquisition of Accoleo, a smaller and more affordable German Airbnb clone, that allowed Airbnb to compete directly with Wimdu in its home market. By the spring of 2012, Airbnb had opened nine international offices, setting up shop in London, Hamburg, Berlin, Paris, Milan, Barcelona, Copenhagen, Moscow, and São Paulo. Bookings had grown ten times since that previous February, and in June 2012 Airbnb announced its ten millionth booking. “The Samwers gave us a gift,” Brian admitted many years later in our Blitzscaling class. “They forced us to scale faster than we ever would have.” By choosing to grow at a breakneck pace, Airbnb had achieved a dominant position in its market.”
13. “People should be part of building the future rather than feeling like the future is being forced upon them. Blitzscaling is what separates the start-ups that get disrupted and disappear as the world changes from the ones that scale up to become market leaders and shape the future. This book was born out of a class we taught at Stanford in which we dissected the process that went into growing the world’s largest technology companies and then codified a series of tactics and choices that made it work. The result was a specific set of principles that describes how to grow multibillion-dollar companies in a handful of years. While writing this book, we talked to hundreds of entrepreneurs and CEOs, including those of the world’s most valuable companies, such as Facebook, Alphabet (Google), Netflix, Dropbox, Twitter, and Airbnb. (You can hear a number of these conversations on my podcast, Masters of Scale.) Even though the stories of their companies’ rise were very different in many ways, the one thing they all had in common was an extreme, unwieldy, risky, inefficient, do-or-die approach to growth.”
14. “In the words of leadership guru Marshall Goldsmith, “What got you here won’t get you there.” Market share and revenue growth earn headlines, but you can’t achieve customer and revenue scale without scaling up your organization, in terms of the size and scope of your staff, as well as your financial, product, and technology strategy. If the organization doesn’t grow in lockstep with its revenues and customer base, things can quickly spiral out of control. For example, during a period of blitzscaling in the late 1980s and early 1990s, Oracle Corporation focused so single-mindedly on sales growth that its organization lagged badly on both technology (where it fell behind archrival Sybase’s) and finance and nearly went bankrupt as a result. It took the turnaround efforts of Ray Lane and Jeff Henley to stave off disaster and reposition Oracle for its later success.”
15. “You don’t necessarily need to have solved your revenue model before deciding to blitzscale. In fact, a key element of blitzscaling is often the willingness of investors to fund growth before the revenue model is proven—after all, it’s pretty easy to fund growth after the revenue model is proven.”
16. “Consider the case of two very similar companies, Twitter and Tumblr. Both had brilliant, product-oriented founders in Evan “Ev” Williams and David Karp. Both were hot social media start-ups. Both grew at a remarkable rate after establishing product/ market fit. Both had a major impact on popular culture. Yet Twitter went public and achieved a market capitalization that peaked at nearly $ 37 billion, while Tumblr was acquired by Yahoo!—another start-up that used blitzscaling to become a scale-up, only to decline and fade away—for “only” $ 1 billion. Was this dumb luck on Twitter’s side? Perhaps. Luck always plays a larger role than founders, investors, and the media would like to admit. But a major difference was that Twitter could draw on numerous networks for advice and help that Tumblr could not. For example, Twitter was able to bring in Dick Costolo, a savvy executive with prior scaling experience at Google. In contrast, even though Tumblr was arguably the most prominent start-up in its New York City ecosystem, it couldn’t easily draw upon a pool of local talent who had experience dealing with rapid growth. According to Greylock’s John Lilly, for every executive role that Tumblr needed to fill, there were less than a handful of candidates in all of New York City.”
17. “The HR department is like the soldiers in the movie 300, holding the line. They have no power to say ‘yes’ but enormous power to say ‘no.’ Their job is to prevent you from moving forward. Find a way to vault past them by getting introductions to people who can say ‘yes.”
18. “Chesapeake moved faster than any other company in its industry, deploying an army of land men to aggressively lease as much land as possible, with instructions to pay whatever was necessary, without knowing whether the gas deposits would justify the price. Hiring an army of land men and paying top dollar for leases sight unseen seemed inefficient…until the wells started producing.”
19. “A company might employ different types of scaling at different points in its life cycle. The canonical sequence that companies like Google and Facebook have gone through begins with classic start-up growth while establishing product/market fit, then shifts into blitzscaling to achieve critical mass and/or market dominance ahead of the competition, then relaxes down to fastscaling as the business matures, and finally downshifts to classic scale-up growth when the company is an established industry leader. Together, this sequence of scaling generates a classic “S-curve” of growth, with slower initial growth followed by rapid acceleration, eventually easing its way into a gentle plateau.”
20. “While you don’t want to make career moves on 0 percent information, you also don’t want to wait till you have 100 percent information—or else you’ll wait forever. Jetting off to vacation in Hawaii with no set itinerary introduces many uncertainties about what will transpire, but it’s not particularly risky. After all, how likely are you to have a bad time in Hawaii? But the biggest and best opportunities frequently are the ones with the most question marks. Don’t let uncertainty lull you into overestimating the risk.”
21. “A business without loyalty is a business without long-term thinking. A business without long-term thinking is a business that’s unable to invest in the future. And a business that isn’t investing in tomorrow’s opportunities and technologies—well, that’s a company already in the process of dying.”
22. “Start-ups are a wonderful thing, but they cannot by themselves increase tech employment. Equally important is what comes after that mythical moment of creation in the garage, as technology goes from prototype to mass production. This is the phase where companies scale up. They work out design details, figure out how to make things affordably, build factories, and hire people by the thousands. Scaling is hard work but necessary to make innovation matter.”
23. “Nor can companies afford to ignore technology innovation after they successfully blitzscale their way to City or Nation stage. Each and every one of the technology companies worth over $100 billion has used technology leadership to reinforce its competitive advantages.”
24. “Most of the time, change in the world overtakes you,” Reed says. When a Hollywood executive once asked him during an on-stage interview whether he makes five-year strategic plans or three-year strategic plans, Reed said he does neither: three years is an eternity in Silicon Valley, and they can’t plan that far in advance.”
25. “How did Facebook successfully overcome the growth limiter of operational scalability? On the technology side, one of the philosophies that helped Facebook become successful was its famous motto “Move fast and break things.” This emphasis on speed, which came directly from Mark Zuckerberg, allowed Facebook to achieve rapid product development and continuous product improvement. Even today, every new software engineer who joins Facebook is asked to make a revision to the Facebook codebase (potentially affecting millions or even billions of users) on his or her first day of work. However, as Facebook’s user base and engineering team grew to a massive size, Mark had to change the philosophy to “Move fast and break things with stable infrastructure.”
26. “operational scalability is one of the primary growth limiters that scale-ups need to address. When a business can grow users, customers, and revenues faster than the number of employees without collapsing under the weight of its own growth, the business can achieve greater profitability and keep growing without being as tightly constrained by the need for financial or human capital.”
27. “Bring the new executive in at a lower level initially and let the executive prove himself or herself. John gave himself the title “Director of Business Development and Operations” and only took on bigger titles after he had demonstrated his ability and value to existing teams. He employed the same technique when he hired Schrep, bringing him in as “Director of Engineering”
28. “Blitzscaling is a strategy and set of techniques for driving and managing extremely rapid growth that prioritize 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.”
29. “At the end of 1996, the five most valuable companies in the world were General Electric, Royal Dutch Shell, the Coca-Cola Company, NTT (Nippon Telegraph and Telephone), and ExxonMobil—traditional industrial and consumer companies that relied on massive economies of scale and decades of branding to drive their value. Just twenty-one years later, in the fourth quarter of 2017, the list looked very different: Apple, Google, Microsoft, Amazon, and Facebook. That’s a remarkable shift. Indeed, while Apple and Microsoft were already prominent companies at the end of 1996, Amazon was still a privately held start-up, Larry Page and Sergey Brin were still a pair of graduate students at Stanford who were two years away from founding Google, and Mark Zuckerberg was still looking forward to his bar mitzvah. So what happened? The Networked Age happened, that’s what. Technology now connects all of us in ways that were unthinkable to our ancestors. Over two billion people now carry smartphones (many of them made by Apple, or using Google’s Android operating system) that keep them constantly connected to the global network of everything. At any time, those people can find almost any information in the world (Google), buy almost any product in the world (Amazon/ Alibaba), or communicate with almost any other human in the world (Facebook/ WhatsApp/ Instagram/ WeChat). In this highly connected world, more companies than ever are able to tap into network effects to generate outsize growth and profits.”
30. “A business without loyalty is a business without long-term thinking. A business without long-term thinking is a business that’s unable to invest in the future. And a business that isn’t investing in tomorrow’s opportunities and technologies—well, that’s a company already in the process of dying.”
31. “New hires are an opportunity to refine your culture and add to its capabilities. They should be compatible with your current culture but also bring elements that help change it for the better. The art is in finding transplants that the organization’s existing “immune system” doesn’t reject.”
32. “Another, less obvious benefit to this model is that once a subscription business achieves scale, the predictability of its revenue streams allows it to be more aggressive with long-term investments, since it isn’t obliged to maintain large cash balances to weather short-term variations in the business.”
33. “Technology innovation is a key factor in retaining the gains produced by business model innovation. After all, if one technology innovation can create a new market, another technology innovation can render it obsolete, seemingly overnight. While Uber has achieved massive scale, the greatest threat to its future doesn’t come in the form of direct competitors like Didi Chuxing, though these are formidable threats. The greatest threat to Uber’s business is the technology innovation of autonomous vehicles, which could make obsolete one of Uber’s biggest competitive advantages—its carefully cultivated network of drivers—essentially overnight.”
34. “the role of the executive is to lead managers. For the most part, executives don’t manage individual contributors. Instead, they focus on vision and strategy. Yet they are still connected to the frontline employees because they are also responsible for the “fighting spirit” of their organizations; they need to be role models who help people persist through inevitable adversity.”
35. “Fortunately, Google found product/ market fit by refining Overture’s advertising auction model. Google’s AdWords product was so much better at monetizing search through its self-service, relevance-driven, auction system that by the time those competitors managed to play catch-up, Google had amassed the financial resources that allowed it to invest whatever was necessary to maintain product superiority. Google doesn’t always get product/ market fit right (and if it had run out of money before hitting upon AdWords, the search business might have died before ever achieving that fit). This is a reflection of its very intentional product management philosophy, which relies on bottom-up innovation and a high tolerance for failure. When it works, as in Gmail, which was a bottom-up project launched by Paul Buchheit, it can produce killer products. But when it fails, it results in killed products, as demonstrated by projects like Buzz, Wave, and Glass. To overcome this risk of failure, Google relies on both its financial strength (which comes from its high gross margins, among other things) and a willingness to decisively cut its losses. For example, when Google bought YouTube (which had clearly achieved product/ market fit), it was willing to abandon its own Google Video service, even though it had invested heavily in that product. Other massively successful companies take a very different approach. In contrast to Google, where new ideas can come from anywhere in the company and there are always many parallel projects going on at the same time, Apple takes a top-down approach that puts more wood behind fewer arrows. Apple keeps its product lines small and tends to work on a single major product at a time. One philosophy isn’t necessarily better than the other; the important thing is simply to find that product/ market fit quickly, before your competition does.”
36. “Free” has an incredible power that no other pricing does. The Duke behavioral economist Dan Ariely wrote about the power of free in his excellent book Predictably Irrational, describing an experiment in which he offered research subjects the choice of a Lindt chocolate truffle for 15 cents or a Hershey’s Kiss for a mere penny. Nearly three-fourths of the subjects chose the premium truffle rather than the humble Kiss. But when Ariely changed the pricing so that the truffle cost 14 cents and the Kiss was free—the same price differential—more than two-thirds of the subjects chose the inferior (but free) Kisses. The incredible power of free makes it a valuable tool for distribution and virality. It also plays an important role in jump-starting network effects by helping a product achieve the critical mass of users that is required for those effects to kick in. At LinkedIn, we knew that our basic accounts had to be free if we wanted to get to the million users we theorized represented critical mass. Sometimes you can offer a product for free and still be profitable; in the advertising-driven business model, a large enough mass of free users can be valuable even if they never pay for your service. Facebook, for example, doesn’t charge its users a dime, but it is able to generate large amounts of high-gross-margin revenue by selling targeted advertising. But sometimes a product doesn’t lend itself to the advertising model, as is the case with many services used by students and educators. Without third-party revenue, the problem with offering your product to users for free is that you can’t offset your lack of sales by “making it up in volume.”
37. “since transactions on today’s platforms are conducted through application programming interfaces (APIs) rather than person-to-person negotiations, they proceed swiftly, seamlessly, and in incredible volumes, all with barely any human intervention. If a platform achieves scale and becomes the de facto standard for its industry, the network effects of compatibility and standards (combined with the ability to rapidly iterate and optimize the platform) create a significant and lasting competitive advantage that can be nearly unassailable. This dominance lets the market leader “tax” all the participants who want to use the platform, much as levies were imposed in the bygone Republic of Venice. For example, the iTunes store takes a 30 percent share of the proceeds whenever a song, a movie, a book, or an app is sold on that platform. These platform revenues tend to have very high gross margins,”
38. “While ‘Silicon Valley’ and ‘start-ups’ are used almost synonymously these days, only a tiny fraction of the world’s start-ups actually originate in Silicon Valley, and this fraction has been getting smaller as start-up knowledge spreads around the globe. Thanks to the internet, entrepreneurs everywhere have access to the same information.”
39. “try to establish a standard. One of the classic Silicon Valley plays is to move from an app to a platform so that you can attract people to build on and to your platform (thereby leveraging the network effect of compatibility). Salesforce.com’s Force.com ecosystem is a great example of this. By offering the ability to build third-party applications on top of the Salesforce platform, Salesforce benefits from a “force multiplier.”
40. “On defense, blitzscaling lets you set a pace that keeps your competitors gasping simply to keep up, affording them little time and space to counterattack. Because they’re focused on responding to your moves, which can often take them by surprise and force them to play catch-up, they don’t have as much time available to develop and execute differentiated strategies that might threaten your position. Blitzscaling helps you determine the playing field to your great advantage.”
41. “When a start-up matures to the point where it has a killer product, a clear and sizable market, and a robust distribution channel, it has the opportunity to become a “scale-up,” which is a world-changing company that touches millions or even billions of lives. Often, the fastest and most direct path from start-up to scale-up is the hypergrowth produced by blitzscaling.”
42. “Another hint was that he hadn’t yet played the lead role on a major network drama. It would be a high-visibility challenge. Some people might have felt overwhelmed by this kind of an opportunity, or maybe even a bit like an impostor. But sometimes that feeling means that there’s significant upside in the opportunity. A career move that makes you feel like you’re in over your head stretches you in new dimensions.”
43. “When we first started raising money in 1997, we thought we’d be mostly streaming in 5 years,” Hastings told us when he visited our Blitzscaling class at Stanford. “In 2002, we had no streaming. So we thought that by 2007, it would be half our business. In 2007, we were still nowhere. So we made the same prediction. And this time we were wrong the other way—by 2012, streaming was 60% of our business.” It may have taken longer than Hastings expected, but Moore’s Law eventually came through for him.”
44. “The best entrepreneurs don’t just follow Moore’s Law; they anticipate it. Consider Reed Hastings, the cofounder and CEO of Netflix. When he started Netflix, his long-term vision was to provide television on demand, delivered via the Internet. But back in 1997, the technology simply wasn’t ready for his vision—remember, this was during the era of dial-up Internet access. One hour of high-definition video requires transmitting 40 GB of compressed data (over 400 GB without compression). A standard 28.8K modem from that era would have taken over four months to transmit a single episode of Stranger Things. However, there was a technological innovation that would allow Netflix to get partway to Hastings’s ultimate vision—the DVD. Hastings realized that movie DVDs, then selling for around $ 20, were both compact and durable. This made them perfect for running a movie-rental-by-mail business. Hastings has said that he got the idea from a computer science class in which one of the assignments was to calculate the bandwidth of a station wagon full of backup tapes driving across the country! This was truly a case of technological innovation enabling business model innovation. Blockbuster Video had built a successful business around buying VHS tapes for around $ 100 and renting them out from physical stores, but the bulky, expensive, fragile tapes would never have supported a rental-by-mail business.”
45. “Your competitive advantage is formed by the interplay of three different, ever-changing forces: your assets, your aspirations/values, and the market realities, i.e., the supply and demand for what you offer the marketplace relative to the competition. The”
46. “First, the Internet has driven the cost of discovery for products and services lower than ever. Unlike in the past, when companies needed to offer goods in retail stores or broadcast advertising in order to be visible to customers, today buyers can find whatever they’re looking for on Amazon or other online marketplaces like Alibaba, in app stores, or, when all else fails, by Googling. Because products and services that are already popular will almost always come up first in search results, companies with a competitive advantage can quickly grow to the point where the increasing returns of network effects produce a winner-take-most or winner-take-all market.”
47. “The best entrepreneurs don’t just follow Moore’s Law; they anticipate it. Consider Reed Hastings, the cofounder and CEO of Netflix. When he started Netflix, his long-term vision was to provide television on demand, delivered via the Internet. But back in 1997, the technology simply wasn’t ready for his vision”
48. “Unfortunately, for far too many, focused learning ends at college graduation. They read about stocks and bonds instead of reading books that improve their mind. They compare their cash salary to their peers' instead of comparing lessons learned. They invest in the stock market and neglect investing in themselves. They focus, in short, on hard assets instead of soft assets. This is a mistake.”
49. “Facebook excelled at distribution. As noted earlier, Facebook’s early focus on college students, which caused some to dismiss it as a niche product, was actually part of an extremely successful distribution strategy. To achieve incredible virality, Facebook would deliberately delay launching at a college campus until over 50 percent of the students had requested it so that local critical mass was reached almost immediately. Facebook further benefited from leveraging existing friend networks to expand outward from its original college user base. As users experienced the benefits of staying connected via Facebook, they naturally wanted to add their off-line friends to the network.”
50. “Assuming that you make the decision to multithread your organization, the optimal management approach is to think of each thread as a different company. For each thread, you’ll need to identify a leadership team (“cofounders”) and create an incentive structure that allows it to operate with a great deal of independence and reap the benefits of success, without making your current managers so envious that it tears the organization apart. This is always challenging!”
51. “Your teams need the ability—and the manpower—to relentlessly pursue a specific objective; asking a team to split its time between two different business lines is likely to result in the failure of both. This is especially true when the main thread is a business line that has matured. In their Harvard Business Review article “The Ambidextrous Organization,” Charles A. O’Reilly III and Michael L. Tushman draw the distinction between “exploiting” and “exploring.” Mature business lines focus on incremental innovations that help them exploit a well-known market, whereas new threads focus on more radical innovations and exploring a new market opportunity. They examined thirty-five attempts to spin up new threads, across nine different industries. What they found was that these efforts were most likely to be successful in “ambidextrous” organizations, where the new threads were organized as structurally independent units but integrated into the existing management structure. In other words, the leaders of the new threads not only have the freedom to innovate but also the ability to coordinate with senior leadership to leverage existing resources and expertise from more mature threads.”
52. “As we’ve discussed, key growth factors like distribution and network effects tend to provide disproportionate rewards to a company that is the first in its space to achieve critical scale. Being contrarian and right gives you a huge advantage because you get a head start on achieving scale.”
53. “Your competitive advantage is formed by the interplay of three different, ever-changing forces: your assets, your aspirations/values, and the market realities, i.e., the supply and demand for what you offer the marketplace relative to the competition.”
54. “For successful blitzscaling, the competitive advantage comes from the growth factors built into the business model, such as network effects, whereby the first company to achieve critical scale triggers a feedback loop that allows it to dominate a winner-take-all or winner-take-most market and achieve a lasting first-scaler advantage”
55. “while early employees often fear that deliberate cultural development will bring bureaucracy, as Reed argues, culture is actually a substitute for bureaucracy and rules. The stronger you make your culture, the less you’ll have to bind people’s behavior with rigid directives.”
56. “it’s important to leave yourself time and space for reflection and feedback. It’s easy to get caught up in an endless to-do list and to lose sight of what is important. That’s one of the things I learned from Mark Zuckerberg and Sheryl Sandberg. Mark and Sheryl meet first thing every Monday and at the end of every Friday—no matter how busy they are or what else has come up. The Friday meeting is especially important because it gives them time to look back over the week and reflect on what they’ve learned.”
57. “As you think about which industries to work in, which skills to obtain, and which books to read, study the types of tech startups that were recently funded by venture capitalists at the Series A and Series B stages because these tend to be on the cutting edge of emerging trends.”
58. “Moreover, Netflix produces exactly what it knows its customers want based on their past viewing habits, eliminating the waste of all those pilots, and only loses customers when they make a proactive decision to cancel their subscription. The more a person uses Netflix, the better Netflix gets at providing exactly what that person wants. And increasingly, what people want is the original content that is exclusive to Netflix. The legendary screenwriter William Goldman famously wrote of Hollywood, “Nobody knows anything.” To which Reed Hastings replies, “Netflix does.” And all this came about because Hastings had the insight and persistence to wait nearly a decade for Moore’s Law to turn his long-term vision from an impossible pipe dream into one of the most successful media companies in history. Moore’s Law has worked its magic many other times, enabling new technologies ranging from computer animation (Pixar) to online file storage (Dropbox) to smartphones (Apple). Each of those technologies followed the same path from pipe dream to world-conquering reality, all driven by Gordon Moore’s 1965 insight.”
59. “Harvard Business School professor and author Clay Christensen believes that you need to focus on the concept of the “job-to-be-done”; that is, when a customer buys a product, she is “hiring” it to do a particular job. Then there’s Brian Chesky of Airbnb, who said simply, “Build a product people love. Hire amazing people. What else is there to do? Everything else is fake work.” As Andrea Ovans aptly put it in her January 2015 Harvard Business Review article, “What Is a Business Model?”, it’s enough to make your head swim! For the purposes of this book, we’ll focus on the basic definition: a company’s business model describes how it generates financial returns by producing, selling, and supporting its products. What sets companies like Amazon, Google, and Facebook apart, even from other successful high-tech companies, is that they have consistently been able to design and execute business models with characteristics that allow them to quickly achieve massive scale and sustainable competitive advantage. Of course, there isn’t a single perfect business model that works for every company, and trying to find one is a waste of time. But most great business models have certain characteristics in common. If you want to find your best business model, you should try to design one that maximizes four key growth factors and minimizes two key growth limiters.”
60. “Nokia is a great example of the cost of caution. In 2007, Nokia was the world’s largest and most successful maker of mobile phones, with a market capitalization of just under $ 99 billion. Then Apple and Samsung came blazing into the market. In 2013, Nokia sold its money-losing handset operations to Microsoft for $ 7 billion, and in 2016 Microsoft sold its feature phone assets and the Nokia handset brand to Foxconn and HMD for just $ 350 million. That’s a drop in value for Nokia’s mobile phone business from somewhere in the neighborhood of $ 99 billion to $ 350 million in less than a decade—a decline of over 99 percent. At the time, Nokia’s decisions may have seemed to make sense. Nokia actually continued growing even after the launch of the iPhone and Google’s Android operating system. Nokia hit its peak in terms of unit volume when it shipped 104 million phones in 2010. But Nokia’s sales declined after that, and were surpassed by Android in 2011 and iPhone in 2012. By the time Nokia’s management realized the existential threat facing them, it was too late; even the desperation play of aligning themselves with Microsoft as its exclusive Windows Phone partner couldn’t reverse the decline.”
61. “Learn and go as quickly as you can. Even if not every single release is perfect, I think you’re going to end up doing better over a year or two than you would be if you just waited a year to get feedback on all of your ideas. That focus on learning quickly is the focus of the company.”
62. “Blitzscaling requires you to move at a pace that is almost certainly uncomfortable for your team. You will definitely make many mistakes as you navigate an environment full of uncertainty; the art lies in developing the skill to learn quickly from those mistakes and return to a relentlessly rapid advance.”
63. “PROVEN PATTERN #1: BITS RATHER THAN ATOMS Google and Facebook are largely software businesses that focus on electronic bits rather than material atoms. Bits-based businesses have a much easier time serving a global market, which in turn makes it easier to achieve a large market size. Bits are also far easier to move around than atoms, so bits-based businesses can more easily tap into distribution techniques like virality, and their ability to be highly networked provides more opportunities to leverage network effects. Bits-based businesses tend to be high-gross-margin businesses because they have fewer variable costs. Bits also make it easier to design around growth limiters. You can iterate more quickly on software products (many Internet companies release new software daily) than on physical products, making it faster and cheaper to achieve product/market fit. And”
64. “Psychologist Arthur Aron of SUNY Stony Brook discovered that asking participants in an experiment to share their deepest feelings and beliefs for a single hour could generate the same sense of trust and intimacy that typically takes weeks, months, or years to form.”
65. “As you think about which industries to work in, which skills to obtain, and which books to read, study the types of tech startups that were recently funded by venture capitalists at the Series A and Series B stages because these tend to be on the cutting edge of emerging trends. For example, Coinbase raised its Series A and Series B funding in 2013. If you invested in learning about cryptocurrencies in the years following Coinbase’s Series A, there would have been an abundance of life-changing crypto career opportunities for you, in part because at that time crypto knowledge was rare in a growing market. Study what venture capitalists are investing in to glimpse the trends or markets on the rise.”
66. “One of the challenges in networking is everybody thinks it’s making cold calls to strangers. Actually, it’s the people who already have strong trust relationships with you, who know you’re dedicated, smart, a team player, who can help you.” – Reid Hoffman
67. “In 2014, Aswath Damodaran, a professor of finance at NYU’s Stern School of Business, estimated that Uber was probably worth roughly $ 6 billion, based on its ability to ultimately win 10 percent of the global taxi market of $ 100 billion, or $ 10 billion. According to Uber’s own projections, in 2016 the company processed over $ 26 billion in payments. It’s safe to say that the $ 10 billion market was a serious underestimate, as the ease of use and lower cost of Uber and its competitors expanded the market for transportation-as-a-service.”
68. Pixar started as a company that sold a special computer for doing digital animation; it took a while till they got into the moviemaking business. Similarly, Starbucks originally sold only coffee beans and coffee equipment; they hadn't planned to sell coffee by the cup. - Author: Reid Hoffman
69. “What is your organization trying to do? How are you trying to achieve those goals? What acceptable risks are you incurring to achieve those goals more quickly? When you have to trade off certain values, which ones take priority? What kind of behavior do you hire, promote, or fire for?”
70. “To achieve massive success, you need to have a big new opportunity—one where the market size and gross margins intersect to create enormous potential value, and there isn’t a dominant market leader or oligopoly. A big new opportunity often arises because a technological innovation creates a new market or scrambles an existing one.”
71. “Over the last 20 years, I’ve worked on or invested in many companies that scaled to 100 million users or more. But here’s the thing: You don’t start with 100 million users. You start with a few. So, stop thinking big, and start thinking small.” – Reid Hoffman
72. “The HR department is like the soldiers in the movie 300, holding the line. They have no power to say ‘yes’ but enormous power to say ‘no.’ Their job is to prevent you from moving forward. Find a way to vault past them by getting introductions to people who can say ‘yes.”― Reid Hoffman
73. “Get out of the weeds. Go where there’s fast growth, because fast growth creates all opportunities.”[2] It was outstanding advice: Work in a market with natural momentum, as we discussed in the preceding chapter. Ride the big waves. Some industries are growth loops in and of themselves, and that’s where you want to be.”
74. “Even organizations outside the business world can use blitzscaling to their advantage. Upstart presidential campaigns and nonprofits serving the underprivileged have used the levers of blitzscaling to overturn conventional wisdom and achieve massive results. You’ll read all these stories, and many more, in the pages of this book. Whether you are a founder, a manager, a potential employee, or an investor, we believe that understanding blitzscaling will allow you to make better decisions in a world where speed is the critical competitive advantage. With the power of blitzscaling, the adopted son of a Syrian immigrant (Steve Jobs), the adopted son of a Cuban immigrant (Jeff Bezos), and a former English teacher and volunteer tour guide (Jack Ma) were all able to build businesses that changed—and are still changing—the world.”
75. “The ideal, of course, is to hire an executive with past experience at a blitzscaling start-up that has already dealt with the challenges your company currently faces. This is why investors have more confidence in serial entrepreneurs. One of the major advantages that companies in Silicon Valley enjoy is generations of rapidly scaling companies that have produced a rich supply of executives with blitzscaling experience. Yet even if you can’t land an ideal candidate, second best is to hire a manager who has previously worked with successful executives in a very rapidly growing company, or an executive who earned her executive experience at a larger or more traditional business but who also worked at a blitzscaling start-up at another time in her career.”
76. “This is why you may need to blend quantitative and qualitative analysis. Our friend John Lilly likes to distinguish between “genius-driven design” (e.g., Apple) and “data-driven design” (e.g., Google). Both approaches have their strengths and weaknesses. Data-driven design is great at optimizing products with incremental changes, but it could steer you to the top of a local hill rather than the highest peak. Genius-driven design may be the only way to build a revolutionary product, but it usually needs to be supplemented with data-driven refinement”
77. “Having “extra” capital gives you a cushion for when outcomes do not in fact follow your plan. Moreover, it increases your optionality—if you need to invest in growth, you can do much more without having to go through the time-consuming process of raising another round. As Mariam Naficy, CEO of Minted, told me, “Act like you’ve got half the amount you have in the bank because you’ve got to factor in all the failures and all the optimizations that kill great entrepreneurs and businesses all the time. Both of us know so many people who had good ideas and were on the right track, but just ran out of money.” At both PayPal and LinkedIn, we raised large financing rounds right before a market meltdown (2000, 2008), and we sure were glad we did. In the case of PayPal, that money allowed us to keep growing during the dot-com bust; without it, we wouldn’t have made it to our IPO. In the case of LinkedIn, the situation wasn’t as dire, but I realized that the value of the optionality from additional funding far outweighed the potential negatives of equity dilution.”
78. “Another example of how blitzscaling applies to a completely different type of business is the rapid rise of the shale oil and natural gas industry in the United States during the 2000s. The energy sector scores well on the growth factors we’ve defined. Oil and gas is an enormous, high-margin industry, with a very efficient distribution system. And while the shale industry doesn’t feature many network effects, it has its own source of powerful long-term competitive advantage. In the energy industry, rather than buy land outright, the usual practice is to lease the drilling rights for ninety-nine years for a combination of guaranteed lease payments and royalties. This means that leasing the right land is tantamount to holding an unbreakable monopoly on the oil and gas underneath that land,”
79. “The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.”
80. “So play with your assets, aspirations, and the market realities until you see compounding potential in one of the combinations. Sure, being faster, better, or cheaper for a given job will make you more competitive. But if you find a growth loop for the intersection of what you do well, what you value, and what the market wants, then you’ve got something even better.”
81. “When you are blitzscaling your start-up, growth is so rapid and your organization is pushing its limits in so many ways that multiple things are always breaking. It’s tempting to fix these things with money, but you have to resist that temptation. Only spend money to fix things that are on the critical path to reach the next phase of scale; everything else can wait. As I described earlier, at PayPal we deliberately avoided spending money on customer service because we knew it wasn’t a critical path. The more you can keep juggling and defer spending, the more likely you’ll be able to raise money without the pressure of a short runway.”
82. “Managing risk is a key variable, frankly, for all aspects of life. Business is just one of them. And one of the things that most people do in terms of managing risk, that’s actually bad thinking, is they think they can manage risk to zero. Everything has some risk to it. So what you’re doing is you’re actually trying to get to an acceptable level of risk.”
83. “blitzscaling. It is an idea that applies to many different industries, as he and Chris explain in the last section of this book. But prioritizing speed over efficiency—even in the face of uncertainty—is especially important when your business model depends on having lots of members and getting feedback from them. If you get in early and start getting that feedback and your competitors don’t, then you’re on the path to success. In any business where scale really matters, getting in early and doing it fast can make the difference. This is especially true for two-sided business models, where you have two user groups that create positive network effects for each other. For example, LinkedIn wants to attract people who are looking for work as well as employers who want to hire them. Airbnb wants guests looking for a place to stay as well as hosts with space to rent. Uber wants to attract drivers as well as riders.”
84. “Remember: if you don’t find risk, risk will find you. Take intelligent and bold risks to accomplish something great. Build a network of alliances to help you with intelligence, resources and collective action. Pivot to a breakout opportunity.”
85. “Yet despite these offensive reasons to scale, the most common driver of blitzscaling is the threat of competition. Even without competition, you would still want to achieve first-scaler advantage and climb the learning curve, but you might prefer the less risky fastscaling approach to growth. Ask yourself, “Can somebody else realize this opportunity before me?” If the answer is yes, moving faster probably reduces the risk of competition more than it raises the risk of failure. The more intense the competition, the faster you should try to move.”
86. “To mitigate the downside of the risks you take, you should try to focus them—line them up with a small number of hypotheses about how your business will develop so that you can more easily understand and monitor what drives your success or failure. You also have to be prepared to execute with more than 100 percent effort to compensate for the bets that don’t go your way.”
87. “Zara takes only two weeks to develop a new product and get it into stores—the industry average is six months—and launches over ten thousand new designs per year, a rate several times that of competitors like H&M and Gap. Zara holds just six days of inventory, while rival H&M holds nearly ten times as much.”
88. “Successful blitzscaling means that you’re maintaining at least some level of control by rapidly fixing the things that will inevitably get broken so that the company can maintain its furious pace without flaming out or collapsing in on itself.”
89. “The scaling curve applies to every blitzscaler, regardless of industry or geography. The same multiple S-curve graph that describes Facebook or Apple also describes Tencent, which launched with QQ, then added a second curve for WeChat after QQ reached maturity in 2010. Just when you’ve finished blitzscaling one business line, you need to blitzscale the next to maintain your company’s upward trajectory. And as blitzscaling continues to spread, established companies with mature business lines should consider turning to intrapreneurs to blitzscale new business units.”
90. “The magic of network effects is that they generate a positive feedback loop that results in superlinear growth and value creation. This superlinear effect makes it very difficult for any node in the network to switch from an incumbent to an alternative (“customer lock-in”), since it is almost impossible for any new entrant to match the value of plugging into the existing network. (Nodes in these networks are typically customers or users, as in the canonical example of the fax machine, or the more recent example of Facebook, but can also be data elements or other fundamental assets valuable in a business.)”
91. “It’s important not to confuse critical mass with first-mover advantage. Being first to launch in a market might earn you congratulations on being a product visionary, but if you aren’t also the first to scale, you’ll end up as a footnote in a Wikipedia article about your competitor who did.”
92. “In a 2004 working paper, “Schumpeterian Profits in the American Economy: Theory and Measurement,” Yale economist William Nordhaus examined the US economy from 1948 to 2001. Based on the data he collected, he concluded that only 2.2 percent of “profits that arise when firms are able to appropriate the returns from innovative activity” went to the disrupters. “Most of the benefits of technological change are passed on to consumers rather than captured by producers,” he concluded. Like it or not, change is inevitable—but it doesn’t have to be wholly unexpected.”
93. “One of the metaphors that I use for start-ups is, you throw yourself off a cliff and assemble your airplane on the way down. If you don’t solve the right problem at the right time, that’s the end. Mortality puts priorities into sharp focus.” – Reid Hoffman
94. “I believe that there is a Maslovian hierarchy of fires that applies to most rapidly growing start-ups, where the top of the list is the most important fire to fight first: Distribution Product Revenue model Operations Competition What’s next? What this means is that for most consumer Internet start-ups, the most important fire is distribution; if your distribution goes up in flames, your company is doomed. If you are able to contain that fire, however, it will make fighting the other fires a whole lot easier. Acquiring users gives you feedback on how to improve your product. Acquiring millions of users or thousands of customers makes it a lot easier to generate revenue. Generating revenue makes it easier to pay for the infrastructure and personnel to scale up your operations, either out of cash flow or by raising investment. And if you have a successful and growing business, then it makes sense to worry about the competition.”
95. “One area that undergoes the most change during blitzscaling is the internal communications process. As the company grows, you have to shift from informal, in-person, individual conversations to formal, electronic, “push” broadcasting and online “pull” resources.”
96. “Taken together, Silicon Valley’s 150 most valuable publicly traded technology companies are worth $3.5 trillion. That number is so big it doesn’t mean anything to most of us. So consider this: those 150 companies alone make up 50 percent of the value of the NASDAQ, and they account for over 5 percent of the entire world’s market capitalization. That’s a lot of value created by a region with an estimated 3.5 to 4 million residents, or roughly 0.05 percent of the world’s population.”
97. “Relationship builders, on the other hand, try to help other people first. They don’t keep score. They’re aware that many good deeds get reciprocated, but they’re not calculated about it. And they think about their relationships all the time, not just when they need something.”
98. “Making a decision reduces opportunities in the short run but increases opportunities in the long run. To move forward in your career, you have to commit to specific opportunities as part of an iterative plan, despite doubt and despite the inconvenience.” ― Reid Hoffman
99. “This story also highlights why you need people on your team who have a tolerance for chaos, risk, and uncertainty. Most of us are willing to fight fires; it’s a smaller subset of people who are capable of noting the presence of a roaring blaze that might soon cut off all escape routes without allowing it to distract them from their laser-focused effort to fight an even more urgent fire.”
100. “Success … is no longer a simple ascension of steps. You need to climb sideways and sometimes down, and sometimes you need to swing from the jungle gym and establish your own turf somewhere else on the playground.” -Reid Hoffman, Founder of LinkedIn
101. “DVD technology allowed Netflix to create a completely new business model. Rather than renting out individual movies and being charged exorbitant late fees if they failed to return the VHS tape in time, Netflix customers paid $20 per month for a subscription to “unlimited” movies—provided they checked out just one movie at a time. This allowed Netflix to eliminate Blockbuster’s widely loathed late fees and capture the powerful and certain revenue stream from the proven model of a subscription service. Netflix took off, and even went public as a DVD-by-mail service. But Hastings never lost sight of his ultimate vision for Netflix—on-demand television delivered via the Internet”
102. “WhatsApp had a freemium business model; the service was free for a year, after which it cost $1 per year. This low-friction model essentially eliminated the need for people working in functions like sales, marketing, and customer service, allowing WhatsApp to grow to five hundred million monthly active users by the time of its acquisition by Facebook, with a staff of just forty-three employees, a ratio of over ten million active users per employee!”
103. “the Internet has made it possible to access global markets and tap into massively scalable distribution channels in a way that wasn’t feasible during earlier eras. But perhaps the most important impact for businesses has been the rising significance and prevalence of so-called network effects that occur when increased usage of a product or service boosts the value of that product or service for other users.”
104. “One metaphor I use to explain this shift is to take yet another analogy from military history: the marines take the beach, the army takes the country, and the police govern the country. Marines are start-up people who are used to dealing with chaos and improvising solutions on the spot. Army soldiers are scale-up people, who know how to rapidly seize and secure territory once your forces make it off the beach. And police officers are stability people, whose job is to sustain rather than disrupt. The marines and the army can usually work together, and the army and the police can usually work together, but the marines and the police rarely work well together. As you blitzscale, you may need to find new beaches for your marines to take rather than ask them to help patrol the existing ones.”
105. “one of the signature strategies for blitzscaling is rapid, parallel market development. When Airbnb made the decision to blitzscale, its chosen strategy was to rapidly expand from a single office in the United States to a score of offices around the world, especially in Europe. This kind of growth is highly inefficient—think of all the new knowledge and infrastructure and personnel an organization has to acquire to successfully open offices around the world—but it can allow a company to stand out from its competitors. It would have been more efficient for Airbnb to expand one country and one office at a time, refining its approach based on the lessons of each rollout, but that would have allowed its competitor Wimdu to be the faster mover. In other words, when it needed to grow from a forty-person company to a global company in a single year, Airbnb couldn’t afford to be cautious with its capital and focus on efficiency.”
106. “Getting to market fast allows you to start getting the feedback you need to improve it. Any product that you’ve carefully refined based on your instincts rather than real user reactions and data is likely to miss the mark and will require significant iteration anyway. The ideal is a tight OODA loop—observe, orient, decide, act—over and over again. Speed really matters, and launching early lets you climb the learning curve to a great product faster.”
107. “One interesting approach is to have all employees use a teleconferencing service rather than allow headquarters employees to have a better in-person experience than the rest of the company. For example, at the asset management company BlackRock, certain meetings are held by teleconference, even for the subset of employees who could gather in a single conference room so that all employees are on an equal footing.”
108. “Matt Cohler, now a partner at Benchmark Capital, spent six years in his late twenties and early thirties being a lieutenant to CEOs at LinkedIn (me) and Facebook (Mark Zuckerberg). Most supertalented people want to be the front man; few play the consigliere role well. In other words, there’s less competition and significant opportunity to be an all-star right-hand man.”
109. “We tried a number of single-threaded efforts to meet the challenge. We rolled out features one after another, such as a recommendation engine for people that our users should meet and a professional Q&A service. None of them worked well enough to solve the problem. We concluded that the problem might require a Swiss Army knife approach with multiple use cases for multiple groups of users. After all, some people might want a news feed, some might want to track their career progress, and some might be keen on continuing education. Fortunately, LinkedIn had grown to the point where the organization could support multiple threads. We reorganized the product team so that each director of product could focus on a different approach to address engagement. Even though none of those efforts alone proved a silver bullet, the overall combination of them significantly improved user engagement.”
110. “Slack had spent nearly five years and $ 17 million on development prior to its public launch in February 2014. Just two months later, before the end of April, it had raised another $ 43 million. Both of these investments took place before Slack had proven its revenue model and started generating significant sales. Slack’s freemium business model (offering a free service and encouraging users to upgrade later to becoming paying customers) meant that even after two months of rapid user growth, the company hadn’t proven its ability to make money. Fortunately for Slack and its investors, this aggressiveness paid off. As the initial wave of free users started converting to paid, Slack was able to raise an additional $ 120 million six months later to accelerate its growth even further.”
111. “In fact, the same basic ingredients can easily be found in numerous start-up clusters in the United States and around the world: Austin, Boston, New York, Seattle, Shanghai, Bangalore, Istanbul, Stockholm, Tel Aviv, and Dubai. To discover the secret to Silicon Valley’s success, you need to look beyond the standard origin story. When people think of Silicon Valley, the first things that spring to mind—after the HBO television show, of course—are the names of famous start-ups and their equally glamorized founders: Apple, Google, Facebook; Jobs/ Wozniak, Page/ Brin, Zuckerberg. The success narrative of these hallowed names has become so universally familiar that people from countries around the world can tell it just as well as Sand Hill Road venture capitalists. It goes something like this: A brilliant entrepreneur discovers an incredible opportunity. After dropping out of college, he or she gathers a small team who are happy to work for equity, sets up shop in a humble garage, plays foosball, raises money from sage venture capitalists, and proceeds to change the world—after which, of course, the founders and early employees live happily ever after, using the wealth they’ve amassed to fund both a new generation of entrepreneurs and a set of eponymous buildings for Stanford University’s Computer Science Department. It’s an exciting and inspiring story. We get the appeal. There’s only one problem. It’s incomplete and deceptive in several important ways. First, while “Silicon Valley” and “start-ups” are used almost synonymously these days, only a tiny fraction of the world’s start-ups actually originate in Silicon Valley, and this fraction has been getting smaller as start-up knowledge spreads around the globe. Thanks to the Internet, entrepreneurs everywhere have access to the same information. Moreover, as other markets have matured, smart founders from around the globe are electing to build companies in start-up hubs in their home countries rather than immigrating to Silicon Valley.”
112. “The thing that changes your professional life, your capabilities, your learning, your understanding, your opportunity flow, your ability to make things happen, is the center relationships you have with powerful and effective people around you in the industry, in the activity that you want to be doing.”
113. “However, there was a technological innovation that would allow Netflix to get partway to Hastings’s ultimate vision—the DVD. Hastings realized that movie DVDs, then selling for around $20, were both compact and durable. This made them perfect for running a movie-rental-by-mail business.”
114. “The Rise of Portfolio Careers Around the world, we see increasing fragmentation of a single individual’s career into several different jobs, and their earnings coming from multiple sources. The popular name for this phenomenon is “the gig economy”:”
115. “This is what happened when I cofounded LinkedIn. The key business model innovations for LinkedIn, including the two-way nature of the relationships and filling professionals’ need for a business-oriented online identity, didn’t just happen organically. They were the result of much thought and reflection, and I drew on the experiences I had when founding SocialNet, one of the first online social networks, nearly a decade before the creation of LinkedIn. But life isn’t always so neat. Many companies, even famous and successful ones, have to develop their business model innovation after they have already commenced operations. PayPal didn’t have a business model when it began operations (I was a key member of the PayPal executive team). We were growing exponentially, at 5 percent per day, and we were losing money on every single transaction we processed. The funny thing is that some of our critics called us insane for paying customers bonuses to refer their friends. Those referral bonuses were actually brilliant, because their cost was so much lower than the standard cost of acquiring new financial services customers via advertising. (We’ll discuss the power and importance of this kind of viral marketing later on.) The insanity, in fact, was that we were allowing our users to accept credit card payments, sticking PayPal with the cost of paying 3 percent of each transaction to the credit card processors, while charging our users nothing. I remember once telling my old college friend and PayPal cofounder/ CEO Peter Thiel, “Peter, if you and I were standing on the roof of our office and throwing stacks of hundred-dollar bills off the edge as fast as our arms could go, we still wouldn’t be losing money as quickly as we are right now.” We ended up solving the problem by charging businesses to accept payments, much as the credit card processors did, but funding those payments using automated clearinghouse (ACH) bank transactions, which cost a fraction of the charges associated with the credit card networks. But if we had waited until we had solved this problem before blitzscaling, I suspect we wouldn’t have become the market leader.”
116. “Can you find, hire, and manage good people, then transfer work over to them so you can tackle the challenges you’re uniquely suited to tackle? Many founders are so talented that they have a hard time letting go of tasks once they start performing them. They often think things like “Will someone else be able to do this as well as I can?” The answer is almost certainly “No, especially not at first, but they’ll probably figure it out over time, just like you did.”
117. “Blitzscaling means that you’re willing to sacrifice efficiency for speed, but without waiting to achieve certainty on whether the sacrifice will pay off. If classic start-up growth is about slowing your rate of descent as you try to assemble your plane, blitzscaling is about assembling that plane faster, then strapping on and igniting a set of jet engines (and possibly their afterburners) while you’re still building the wings.”
118. “If you’re willing to accept the risks of blitzscaling when others aren’t, you’ll be able to move faster than they will. If the prize to be won is big enough, and the competition to win it is intense enough, blitzscaling becomes a rational, even optimal strategy.”
119. “Viral” distribution occurs when the users of a product bring more users, and those users bring additional users, and so on, much like an infectious virus spreads from host to host. Virality can either be organic—occurring during the course of normal usage of the product—or incentivized by some kind of reward.”
120. “As Aaron Levie, the founder of the online file storage company Box noted in a tweet in 2014, “Sizing the market for a disruptor based on an incumbent’s market is like sizing a car industry off how many horses there were in 1910.” The other factor that can lead to underestimating a market is neglecting to account for expanding into additional markets. Amazon began as Amazon Books, the “Earth’s Biggest Bookstore.” But Jeff Bezos always intended for bookselling to serve as a beachhead from which Amazon could expand outward to encompass his massive vision of “the everything store.” Today, Amazon dominates the bookselling industry, but thanks to relentless market expansion, book sales represent less than 7 percent of Amazon’s total sales. The same effect can be seen in the financial results of Apple. In the first quarter of 2017, Apple generated $ 7.2 billion from the sale of personal computers, a category the company pioneered and once dominated. That’s a great number to be sure, but, over that same financial quarter, Apple’s total revenue was a whopping $ 78.4 billion, which meant that Apple’s original market accounted for less than 10 percent of its total sales.”
121. “Start-ups can act quickly to capitalize on the new opportunities created by technological advances. If they dawdle and proceed at the same pace as a big company, they’re fighting on an even playing field, which means that the big company’s resources will likely confer massive advantage.”
122. “While this new motto might seem self-contradictory, Mark explains that it focuses on a higher-level goal. “The goal is to move fast,” Mark told me. “When we were smaller, being willing to break things allowed us to move faster. But as we grew, the willingness to break things actually started slowing us down, because increasing complexity made it harder and harder to fix things once they broke. By taking the extra time to focus on stable infrastructure, we reduce the impact and time to recover from breaking things, so that we can actually move faster.”
123. “Most of the orthodoxy in Silicon Valley is about building a good product. I think that’s because most companies in the Valley don’t survive beyond the building-the-product phase. You have to be good at building a product, then you have to be just as good at getting users, then you have to be just as good at building a business model. If you’re missing any of the links in the chain, the whole chain is broken.”
124. “Culture is a key part of the hiring process at Airbnb too. Each candidate also goes through a values interview, conducted by an Airbnb employee who isn’t that candidate’s hiring manager. This ensures that values are considered independently of how much the organization needs that candidate’s particular job skills.”
125. “I am fond of pointing out to entrepreneurs and executives that “in theory, you don’t need practice.” What I mean is that no matter how brilliant your business model and growth strategy, you won’t be able to build a real-world (i.e., non-theoretical) blockbuster company without a lot of practice. But that problem is magnified when you’re trying to blitzscale. The kind of growth involved in blitzscaling typically means major human resources challenges. Tripling the number of employees each year isn’t uncommon for a blitzscaling company. This requires a radically different approach to management than that of a typical growth company, which would be happy to grow 15 percent per year and can take time finding a few perfect hires and obsessing about corporate culture. As we will discuss in more detail later in the book, companies that blitzscale have to rapidly navigate a set of key transitions as their organizations grow, and have to embrace counterintuitive rules like hiring “good enough” people, launching flawed and imperfect products, letting fires burn, and ignoring angry customers. Over the course of this book, we’ll see how business model, growth strategy, and management innovation work together to form the high-risk, high-reward process of blitzscaling.”
126. “If you have a billion-dollar opportunity, it makes sense to invest more resources and eke out a 5 percent gain ($50 million) than to grow a nascent million-dollar opportunity by a factor of 1,000 percent ($10 million). This is why it’s generally better to have your ten best people working on a single important project rather than splitting them to attack two different opportunities”
127. “When you blitzscale, you deliberately make decisions and commit to them even though your confidence level is substantially lower than 100 percent. You accept the risk of making the wrong decision and willingly pay the cost of significant operating inefficiencies in exchange for the ability to move faster. These risks and costs are acceptable because the risk and cost of being too slow is even greater.”
128. “Blitzscaling is what you do when you need to grow really, really quickly. It’s the science and art of rapidly building out a company to serve a large and usually global market, with the goal of becoming the first mover at scale. This is high-impact entrepreneurship.” – Reid Hoffman
129. “For example, in 2015, Payal Kadakia, the founder of ClassPass (a monthly subscription service for fitness classes) decided that she needed to double the size of her staff in just three months so that ClassPass would be able expand into more cities. To achieve this kind of speed, Kadakia and her team abandoned traditional hiring processes and followed two simple rules. First, they hired people from their personal networks, with an emphasis on “branded” talent. For example, if an employee had a friend, and that friend worked for the management consulting firm Bain & Company, that friend got hired because ClassPass could assume that the person was smart and would get along with people. Second, some of the time saved by not interviewing for skills allowed the team to interview for alignment with the company’s mission. Crazy? Perhaps. But ClassPass was in a crowded, emerging market, and being able to hire faster than the competition helped it maintain and increase its leadership position. Blitzscaling also requires a strong focus on risk management. While blitzscaling requires risk taking, it doesn’t require unnecessary risk taking. Indeed, the higher level of risk associated with blitzscaling makes risk management even more valuable and important. As Yahoo! cofounder Jerry Yang told us in an interview for Reid’s Masters of Scale podcast, “All bold strategies have a risk. If you don’t see it, you’re flying risk-blind.”
130. “Gross margins, which represent sales minus the cost of goods sold, are probably the best measure of long-term unit economics. The higher the gross margin, the more valuable each dollar of sales is to the company because it means that for each dollar of sales, the company has more cash available to fund growth and expansion.”
131. “What happened? Many things. But the overriding problem was this: The auto industry got too comfortable. As Intel cofounder Andy Grove once famously proclaimed, “Only the paranoid survive.” Success, he meant, is fragile—and perfection, fleeting. The moment you begin to take success for granted is the moment a competitor lunges for your jugular. Auto industry executives, to say the least, were not paranoid. Instead of listening to a customer base that wanted smaller, more fuel-efficient cars, the auto executives built bigger and bigger. Instead of taking seriously new competition from Japan, they staunchly insisted (both to themselves and to their customers) that MADE IN THE USA automatically meant “best in the world.” Instead of trying to learn from their competitors’ new methods of “lean manufacturing,” they clung stubbornly to their decades-old practices. Instead of rewarding the best people in the organization and firing the worst, they promoted on the basis of longevity and nepotism. Instead of moving quickly to keep up with the changing market, executives willingly embraced “death by committee.” Ross Perot once quipped that if a man saw a snake on the factory floor at GM, they’d form a committee to analyze whether they should kill it. Easy success had transformed the American auto”
132. “the “Standard Start-up Leadership Vacuum,” and the result is that inexperienced founders find themselves having to hire and integrate experienced executives from the outside. The situation is made worse when those founders wait until the strain on the organization has become unbearable before making the new hires, meaning that all the leaders are new to the company precisely at the time when tension and uncertainty are running high. The key to navigating this transition is open-mindedness: insiders need to be open to the outside ideas of the new executives, while the outsiders need to be open to learning from what happened before they arrived.”
133. “Another way to use blitzscaling to create a lasting competitive advantage is to be the first to climb a steep learning curve. Some opportunities, such as self-driving cars, require you to solve hard, complex problems. The more rapidly you scale, the more data you have to drive learning (or train machine learning), which improves your product, making it easier to scale further in the market while your competitors who have just begun to learn lag far behind.”
134. “With the consumer Internet, if you're not embarrassed by your first product release, you've launched too late. Everyone wants their product to be shiny, great, and revolutionary, so they take too long in the development cycle to build this really shiny thing, when in fact time really matters.”
135. “As much as companies might yearn for a stable environment and employees might yearn for lifetime employment, the world has irrevocably changed. But we also can’t keep going the way we’ve been going. Trust in the business world (as measured by the proportion of employees who say they have a “high level of trust in management and the organization” they work for) is near an all-time low.6 A business without loyalty is a business without long-term thinking. A business without long-term thinking is a business that’s unable to invest in the future. And a business that isn’t investing in tomorrow’s opportunities and technologies—well, that’s a company already in the process of dying.”
136. “Melanie and her partners did not start their entrepreneurial journey knowing everything they needed to know. Nor should they have. When you have an idea that you want to make the foundation of your company, you can’t afford to spend twenty years prepping for the job you want one day. By the time you’re ready to start, someone else has long since taken your idea and run with it.”
137. “Given Mozilla’s small initial size, this growth necessitated hiring executives from the outside (“the graft”), which was particularly challenging because of the company’s strong engineering-driven culture (“the host”) that was already skeptical about outsiders. John was able to do this successfully by following the same three-step process that was used to hire him. Hire someone who is already a known quantity to at least one member of the team. John was hired by Mitchell Baker, his predecessor as CEO of Mozilla. The two had gotten to know each other by serving on a board together, and Mitchell’s personal endorsement of John carried weight with the team at Mozilla.”
138. “A team in the business world will tend to perform at the level of the worst individual team member. Relationship builders, on the other hand, try to help other people first. They don’t keep score. They’re aware that many good deeds get reciprocated, but they’re not calculated about it. And they think about their relationships all the time, not just when they need something.”
139. “If you’re in permanent beta in your career, 20 years of experience actually is 20 years of experience because each year will be marked by new, enriching challenges and opportunities. Permanent beta is essentially a lifelong commitment to continuous personal growth. Get busy livin’, or get busy dyin’. If you’re not growing, you’re contracting. If you’re not moving forward, you’re moving backward. You need to think and act like you’re running a start-up: your career.”
140. “The thing that changes your professional life, your capabilities, your learning, your understanding, your opportunity flow, your ability to make things happen, is the center relationships you have with powerful and effective people around you in the industry, in the activity that you want to be doing.” – Reid Hoffman
141. “Employee networks are extremely valuable to companies as a source of information. As Bill Gates wrote more than a decade ago, “The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.”1”
142. “Unfortunately, for far too many, focused learning ends at college graduation. They read about stocks and bonds instead of reading books that improve their mind. They compare their cash salary to their peers instead of comparing lessons learned. They invest in the stock market and neglect investing in themselves. They focus, in short, on hard assets instead of soft assets. This is a mistake.”
143. “By contrast, the role of the executive is to lead managers. For the most part, executives don’t manage individual contributors. Instead, they focus on vision and strategy. Yet they are still connected to the frontline employees because they are also responsible for the “fighting spirit” of their organizations; they need to be role models who help people persist through inevitable adversity.”
144. “In addition to simply supplying data and insights to existing business units, many of the top-performing companies create a dedicated growth team, which combines marketing, product, and engineering to drive and coordinate the response to these insights. Most companies, even in the highly competitive world of the consumer Internet, still think it’s sufficient to conduct a lot of A/B tests and iterate accordingly. This is an effective tactic but poor strategy, since local optimizations do not necessarily lead to a globally optimal result. A dedicated growth team can look at the big picture and see how product and marketing decisions interact to produce (or not produce) the desired results.”
145. “Regular e-mails to all employees are a common best practice. Blitzscaling masters Patrick Collison and YouTube’s Shishir Mehrotra also employed this technique to manage their rapidly growing organizations. “I was a big believer in writing a weekly email,” Shishir told our Blitzscaling class at Stanford. “Leaders [who] write things down tend to deal with [fewer] communications issues. You have to clarify your thought processes in a completely different way.”
146. “Brian Chesky of Airbnb defines culture in a simple and concise way: “a shared way of doing things.” Clearly defining the way an organization does things matters, because blitzscaling requires aggressive, focused action, and unclear, hazy cultures get in the way of actually implementing strategy. Netflix cofounder and CEO Reed Hastings told me, “Weak cultures are diffuse; people act differently, and don’t understand each other, and it becomes political.” Mark Zuckerberg and Sheryl Sandberg have done many wonderful things at Facebook, and one of them is building a unified culture that is devoted to aggressive experimentation and data-driven decision making, as summarized by Mark’s original motto “Move fast and break things.” Facebook’s culture helps employees understand that they shouldn’t be afraid to try things that might fail. This allows Facebook to move faster, and to move on from failed experiments quickly. Imagine if someone asked a random employee from your start-up the following questions: What is your organization trying to do? How are you trying to achieve those goals? What acceptable risks are you incurring to achieve those goals more quickly? When you have to trade off certain values, which ones take priority? What kind of behavior do you hire, promote, or fire for?”
147. “Your competitive advantage is formed by the interplay of three different, ever-changing forces: your assets, your aspirations/values, and the market realities (i.e., the supply and demand for what you offer the marketplace relative to the competition).”
148. “People change. You change. Some relationships just aren’t meant to last beyond a certain point. It’s okay to simply let those friendships fade. This is a natural evolution of some relationships. Unlike romantic relationships, with friendships there’s rarely a reason to have a full-on breakup. Even if people go in different directions and the friendship slowly peters out, trust can endure. And unlike most exes, it is possible to rekindle/reactivate friendships later on when your lives are more aligned.” – Reid Hoffman
149. “If a platform achieves scale and becomes the de facto standard for its industry, the network effects of compatibility and standards (combined with the ability to rapidly iterate and optimize the platform) create a significant and lasting competitive advantage that can be nearly unassailable. This dominance lets the market leader “tax” all the participants who want to use the platform, much as levies were imposed in the bygone Republic of Venice. For example, the iTunes store takes a 30 percent share of the proceeds whenever a song, a movie, a book, or an app is sold on that platform. These platform revenues tend to have very high gross margins, which generate cash that can be plowed back into making the platform even better. Amazon’s merchant platform, Facebook’s social graph, and, of course, Apple’s iOS ecosystem are great examples of the power of platforms.”
150. “blitzscaling. It is an idea that applies to many different industries, as he and Chris explain in the last section of this book. But prioritizing speed over efficiency—even in the face of uncertainty—is especially important when your business model depends on having lots of members and getting feedback from them. If you get in early and start getting that feedback and your competitors don’t, then you’re on the path to success. In any business where scale really matters, getting in early and doing it fast can make the difference.”
151. “Because blitzscaling is—by definition—an inefficient use of capital, it only makes sense when speed and momentum are important. Blitzscaling is like the afterburners on a fighter jet that allow you to fly at double or triple normal speed but consume fuel at a shockingly high rate. You don’t just switch on the afterburners and never turn them off.”
152. “There’s a common misconception that Silicon Valley is the accelerator of the world. The real story is that the world keeps getting faster—Silicon Valley is just the first place to figure out how to keep pace. While Silicon Valley certainly has many key networks and resources that make it easier to apply the techniques we’re going to lay out for you, blitzscaling is made up of basic principles that do not depend on geography. We’re going to show you examples from overlooked parts of the United States, such as Detroit (Rocket Mortgage) and Connecticut (Priceline), as well as from international companies, such as WeChat and Spotify. In the process you’ll see how the lessons of blitzscaling can be adapted to help build great companies in nearly any ecosystem, albeit with differing degrees of difficulty. That’s the mission of this book. We want to share the secret weapon that has allowed Silicon Valley to punch so much (more than a hundred times) above its population index so that those lessons can be applied far beyond the sixty-mile stretch between the Golden Gate Bridge and San Jose. It is sorely needed.”
153. “Observe, orient, decide, act. It’s fighter pilot terminology. If you have the faster OODA loop in a dogfight, you live. The other person dies. In Silicon Valley, the OODA loop of your decision-making is effectively what differentiates your ability to succeed.” – Reid Hoffman
154. “Broadcast television succeeded by providing the same thing to all its viewers—a model driven by the technological innovation of broadcasting content via wireless signals and later coaxial cable. Netflix succeeds by providing a carefully personalized experience to each of its many viewers, giving it a huge advantage over its traditional television competitors. Moreover, Netflix produces exactly what it knows its customers want based on their past viewing habits, eliminating the waste of all those pilots, and only loses customers when they make a proactive decision to cancel their subscription”
155. “As Bill Gates wrote more than a decade ago, ‘The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information.’ How you gather, manage, and use information will determine whether you win or lose.”
156. “My friend Marc Andreessen has argued that “software is eating the world.” What he means is that even industries that focus on physical products (atoms) are integrating with software (bits). Tesla makes cars (atoms), but a software update (bits) can upgrade the acceleration of those cars and add an autopilot overnight. The spread of software and computing into every industry, along with the dense networks that connect us all, means that the lessons of blitzscaling are becoming more relevant and easier to implement, even in mature or low-tech industries. To use a computing metaphor, technology is accelerating the world’s “clock speed” (the rate at which Central Processing Units [CPUs] operate), making change occur faster than previously thought possible. Not only is the world moving faster, but the speed at which major new technology platforms are being created is reducing the downtime between the arrivals of each wave of innovation.”
157. “its market. Blitzscaling requires capital—whether from investors or from cash flow—to fund relatively inefficient growth. If investors are willing to act quickly and provide large amounts of capital, the risk that a competitor decides to blitzscale is higher.”
158. “When he thought about how he wanted to build his career coming out of college, Hahn took inspiration from Theodore Roosevelt’s famous dictum, “Far and away the best prize that life has to offer is the chance to work hard at work worth doing.”5”
159. “In non-internet businesses, there are also growth loops: A client who brings you new clients (perhaps by posting about you on their well-followed social media account) is more valuable than a new client who doesn’t. By the same token, a product feature that converts onetime customers into repeat customers is more valuable than one that brings in onetime customers. And a production innovation that increases efficiency across the whole business is more valuable than one that increases efficiency in just one area.”
160. “Craig Newmark simply started e-mailing his friends about local events in 1995; almost twenty-two years later, network effects have kept Craigslist a dominant player in online classifieds despite operating with a skeleton crew and making seemingly no changes to the website design during that entire period! This is where an emphasis on speed also plays an important role. Because Silicon Valley’s entrepreneurs focus on designing business models that can get big fast, they are more likely to incorporate network effects. And because the fierce local competition forces start-ups to grow so aggressively (i.e., blitzscale), Silicon Valley start-ups are more likely to reach the tipping point of network effects before start-ups from less aggressive geographies. One of the motivations for this book is to help entrepreneurs from around the world emulate these successes by teaching them how to systematically design their businesses for blitzscaling. When you design your business model to leverage network effects, you can succeed anywhere.”
161. “Because blitzscaling often requires spending significant amounts of capital in ways that traditional business wisdom would consider “wasteful,” implementing a financial strategy that supports this aggressive spending is a critical part of blitzscaling.”
162. “In addition to seeking help on an ad hoc basis, I believe it’s a good idea to be systematic about learning from others. I advise entrepreneurs to have a personal board of advisers or “board of directors” who can proffer advice and help you fill the gaps in your knowledge. For example, I have a set of informal advisers who help me learn about the areas that matter to me, including very specific topics like virality or people management. If you’re serious about someday blitzscaling a company, you should think of your mentors as a board of directors. Regularly report to them on your progress, and ask them how you can do better.”
163. “Your competitive advantage is formed by the interplay of three different, ever-changing forces: your assets, your aspirations/values, and the market realities, i.e., the supply and demand for what you offer the marketplace relative to the competition.” ― Reid Hoffman
164. “Fastscaling means that you’re willing to sacrifice efficiency for the sake of increasing your growth rate. However, because fastscaling takes place in an environment of certainty, the costs are well understood and predictable. Fastscaling is a good strategy for gaining market share or trying to achieve revenue milestones.”
165. “What Do the Results of a Successful Tour of Duty Look Like for the Company? A successful mission objective delivers results for the company for either quantitative or qualitative goals, such as launching a new product line and generating a certain dollar amount in first-year revenues, or achieving thought leadership in a specific market category, as measured by the writings of industry analysts. At LinkedIn, for example, managers ask, “How will the company be transformed by this employee?” What Do the Results of”
166. “I learned this lesson the hard way when I was running my first start-up, SocialNet. I didn’t want to be embarrassed by our first release, so the approach we took was to complete the entire product before we pulled back the curtain and let people sign up. This approach delayed SocialNet’s launch by a year, and when we finally did launch, we quickly realized that half of the features we’d painstakingly implemented weren’t important, and half of the important things that our service would be useless without were missing because we hadn’t thought of them. While there were other reasons why SocialNet failed, not launching early and iterating based on market feedback was probably the main cause of death.”
167. “Keep in mind that you should be embarrassed by your initial release—not ashamed or indicted! The desire for speed is not an excuse to cut dangerous corners. If you trigger lawsuits or burn through your money without learning, it means you did launch too soon.”
168. “At LinkedIn, one of the key employees who fit the description of Ms. Right Now was Minna King. Minna is an incredibly accomplished professional who has carved out a valuable niche at a very specific stage in the life of a start-up. You see, Minna specializes in taking a successful software product and helping it go global.”
169. “While it may seem like blitzscaling is a strategy that only works in “hot” markets, it can be successful under any market conditions. The key nuance is that a company’s rate of growth needs to be measured on a relative rather than absolute scale.”
170. “Years later, Steve Blank and Eric Ries would dub this a “minimum viable product” (MVP). For LinkedIn, the MVP included a user’s professional profile, the ability to connect to other users, a search function to find other users, and a mechanism for sending messages to friends.”
171. “This formal philosophy of learning treats knowledge like a fixed asset: learn, then you have it forever! But as a modern professional, you can’t acquire knowledge this way, because the knowledge you need isn’t static—it’s always changing. Stockpiling facts won’t get you anywhere. What will get you somewhere is being able to access the information you need, when you need it.”
172. “Finally, many people simply think better thoughts when in dialogue with others. Remember I^We: an individual’s power is raised exponentially with the help of a network. This is partly because when information moves back and forth between knowledgeable people who care, the signal strengthens. Two (or more) well-coordinated brains beat one every time.”
173. “The purpose of hiring a management team is to solve the organization’s problems in a more scalable way. The CEO should be the hub, and the executive team the spokes that connect the CEO to the frontline managers and employees operating where the rubber hits the road.”
174. “When blitzscaling, speed is more important than having a “well-run” organization. Under normal circumstances, you should strive for organizational coherence and stability. Chaotic, unstable organizations make employees nervous and hurt morale. But when you’re scaling up at lightning speed, you may need to reorganize the company three times in a single year, or repeatedly churn through members of your management team.”
175. “Many start-ups believe they are pursuing a strategy of extreme growth, when in fact they have the goal and the wish for extreme growth but no understanding of an actual strategy that will get them there. To achieve your goals, you have to know what you plan to do and, just as important, what you plan not to do.”
176. “Blitzscaling organizations need organization, not just to coordinate their many resources and activities, but in order to maximize speed. The organization’s collective learning rate—especially within its leadership team—determines its ability to anticipate future trends, while the strength of its internal structure—especially in terms of its frontline teams—determines its ability to act quickly on those key insights and seize the competitive advantage.”
177. “if you’re building a global business, there are three key elements you need to put in place. A set of managers who are responsible for, and have strong executive control over, their individual markets globally An understanding of how those markets differ, which leads to a variety of plans for how to grow in each of those markets A unified executive team to coordinate global operations, including the activity of the individual managers leading operations in each country The first two elements involve a decentralized command structure that allows the individual “captains” of the ships in the fleet to operate with entrepreneurial vigor. The third involves a centralized staff that can help the “admiral” coordinate the actions of the fleet for maximum impact.”
178. “important, valuable companies that follow this pattern. One reason marketplaces are powerful is because they often tap into two-sided network effects. While it is difficult to create a successful marketplace from a cold start, the first marketplace that does manage to achieve liquidity—the ability for buyers and sellers to quickly and efficiently find a counterparty to conduct a transaction—becomes very attractive to both sides of the market. As buyers and sellers pour in, the marketplace becomes even more attractive to both parties, triggering a positive feedback loop that makes it very hard for new entrants to win any market share.”
179. “Blitzscaling requires more than just courage and skill on the part of the entrepreneur. It also requires an environment that is willing to finance intelligent risks with both financial capital and human capital, which are the essential ingredients for blitzscaling. Think of them as fuel and oxygen; you need both to propel the rocket skyward. Meanwhile, the infrastructure of your organization is the actual structure of your rocket, which you’re rebuilding on the fly as you rise. Your job as a leader and an entrepreneur is to make sure that you have sufficient fuel to propel your growth while making the necessary mechanical adjustments to the actual rocket ship to keep it from flying apart as it accelerates. Fortunately, this is more possible today than it has ever been in the past.”
180. “Making a decision reduces opportunities in the short run, but increases opportunities in the long run. To move forward in your career, you have to commit to specific opportunities as part of an iterative plan, despite doubt and despite inconvenience.”
181. “This book is for anyone who wants to understand the techniques that allow a business to grow from zero to a multibillion-dollar market leader in a handful of years. These techniques should be of interest to entrepreneurs who want to build massive companies, venture capitalists who want to invest in them, employees who want to work for them, and governments and communities who wish to encourage the growth of these companies in their own regions. And even if you don’t want to build, invest in, or work for any of these companies, you’ll still need to navigate the world that they’re building. If you are a manager or a leader who is trying to rapidly scale a project or a business unit within a larger company, blitzscaling can help you too. And while we draw these lessons primarily from the world of high tech, many of the principles and frameworks the book lays out (especially regarding people management) are applicable to high-growth companies in most industries worldwide, from European fast-fashion retailers to Texan oil shale companies.”
182. “Despite all the chaos, and the inefficiency of manufacturing and shipping in small batches, Zara’s gross margins continue to exceed those of its competitors H&M (55 percent) and Gap (29 percent). That’s because all that inefficiency incurred in the pursuit of speed allows Zara to avoid one of the biggest drags on gross margin for almost any apparel company—overstock of designs that failed to sell. Ortega devised this model when he was sixteen years old—don’t order inventory and hope it sells; instead, figure out what people want, and then make it.”
183. “One of the reasons businesses tend to rely on blitzscaling is that speed is one of the primary advantages they hold vis-à-vis large companies. Start-ups can act quickly to capitalize on the new opportunities created by technological advances. If they dawdle and proceed at the same pace as a big company, they’re fighting on an even playing field, which means that the big company’s resources will likely confer massive advantage.”
184. “Culture is critical because it influences how people act in the absence of specific directives and rules, or when those rules reach their breaking point. In a notorious example from 2017, acting at the request of United Airlines, Chicago Department of Aviation employees forcibly dragged passenger David Dao off an overbooked flight, breaking his nose, knocking out two of his teeth, and giving him a significant concussion in the process. The next morning, United CEO Oscar Munoz sent a rather perplexing e-mail to United Airlines employees.”
185. “Finished ought to be an F-word for all of us. We are all works in progress. Each day presents an opportunity to learn more, do more, be more, grow more in our lives and careers.” – Reid Hoffman (One of my favorite Reid Hoffman quotes on success. What’s yours?)
186. “Unlike John Lasseter’s bosses at Disney, Bezos was open to the entrepreneurial contributions of Amazon’s individual employees—even when those ideas were outside what Wall Street (and even his own board of directors) considered the company’s core business. AWS represents precisely the kind of value creation any CEO or shareholder would want from their employees. Want your employees to come up with multibillion-dollar ideas while on the job? You have to attract professionals with the founder mind-set and then harness their entrepreneurial impulses for your company. As Intuit CEO Brad Smith told us, “A leader’s job is not to put greatness into people, but rather to recognize that it already exists, and to create the environment where that greatness can emerge and grow.”
187. “If I received a nickel for every time someone asked me, “How is LinkedIn going to make money?” during those days I probably wouldn’t have needed another revenue model! But I knew that we should ignore that fire, because (1) the lack of revenue wasn’t going to be the proximate cause of death unless it prevented us from raising money and (2) the product fire was far more urgent and required our focused attention. If we couldn’t find the distribution to acquire a critical mass of at least a million users, and build a product they found compelling enough to become regular users of the service (or at least respond to LinkedIn requests), the revenue model would be irrelevant.”
188. “People will be discovering that the Internet helps their career. One of my theses is that every individual is now a small business; how you manage your own personal career is the exact way you manage a small business. Your brand matters. That is how LinkedIn operates.”
189. “infrastructure companies. Amazon is so good at infrastructure that its fastest-growing and most profitable business (AWS) is all about allowing other companies to leverage Amazon’s computing infrastructure. Amazon also makes money by offering Fulfillment by Amazon to other merchants who envy its mastery of logistics, which ought to strike fear into the hearts of frenemies like UPS and FedEx. In addition to its eighty-six gigantic fulfillment centers, Amazon also has at least fifty-eight Prime Now hubs in major markets, allowing it to beat UPS and FedEx on performance by offering same-day delivery of purchases in less than two hours. Amazon has also built out “sortation” centers that let it beat UPS and FedEx on price by shipping small packages via the United States Postal Service for about $ 1 rather than paying FedEx or UPS around $ 4.50.”
190. “What’s especially exciting these days is that software and software-enabled companies are starting to dominate industries outside of traditional high tech. My friend Marc Andreessen has argued that “software is eating the world.” What he means is that even industries that focus on physical products (atoms) are integrating with software (bits). Tesla makes cars (atoms), but a software update (bits) can upgrade the acceleration of those cars and add an autopilot overnight.”
191. “Some people mistake grit for sheer persistence – charging up the same hill again and again. But that’s not quite what I mean by the word ‘grit.’ You want to minimize friction and find the most effective, most efficient way forward. You might actually have more grit if you treat your energy as a precious commodity.” – Reid Hoffman
192. “The equivalent to AWS on the hardware side is China. Hardware start-ups are able to manage infrastructure limitations and scale much more quickly by tapping into Chinese manufacturing capabilities, either directly or by working with companies like the custom manufacturing design firm PCH. The smart thermostat maker Nest, for example, had only 130 employees when it was acquired by Google for $ 3 billion, largely because it had outsourced all of its manufacturing to China. In contrast, Tesla Motors has seen its growth held back by infrastructure limitations. Due to the complexities of its manufacturing process, Tesla’s production rates have lagged behind those of other automakers, the result being that its award-winning vehicles are almost always sold out, with back orders measured in months and even years. Demand generation is not a problem for Tesla; meeting that demand is.”
193. “Sadly, premature blitzscaling can sometimes kill a nascent market by “poisoning the well” so dramatically that investors and entrepreneurs avoid the space. For example, Webvan’s notorious failure kept most players out of the grocery delivery space for over a decade.” ― Reid Hoffman
194. “in one of the most influential business books of all time, Geoffrey Moore’s Crossing the Chasm. Moore argues that technology companies often run into problems when they try to transition from a market of early adopters to the mainstream—the proverbial “chasm.” He recommends that companies focus on niche beachhead markets, from which the company can expand outward using a “bowling pin” strategy in which these markets help to open up adjacent markets. This strategy is even more important for network effects businesses.”
195. “Back in 1990, the futurist George Gilder demonstrated his prescience when he wrote in his book Microcosm, “The central event of the twentieth century is the overthrow of matter. In technology, economics, and the politics of nations, wealth in the form of physical resources is steadily declining in value and significance. The powers of mind are everywhere ascendant over the brute force of things.” Just over twenty years later, in 2011, the venture capitalist (and Netscape cofounder) Marc Andreessen validated Gilder’s thesis in his Wall Street Journal op-ed “Why Software Is Eating the World.” Andreessen pointed out that the world’s largest bookstore (Amazon), video provider (Netflix), recruiter (LinkedIn), and music companies (Apple/ Spotify/ Pandora) were software companies, and that even “old economy” stalwarts like Walmart and FedEx used software (rather than “things”) to drive their businesses. Despite—or perhaps because of—the growing dominance of bits, the power of software has also made it easier to scale up atom-based businesses as well. Amazon’s retail business is heavily based in atoms—just think of all those Amazon shipping boxes piled up in your recycling bin! Amazon originally outsourced its logistics to Ingram Book Company, but its heavy investment in inventory management systems and warehouses as it grew turned infrastructure”
196. “Twitter came close to melting down in the same way, but managed to recover in time to build a massive business. When Twitter began its rise in the late 2000s, it became infamous for its “Fail Whale,” a whimsical error message that appeared whenever its servers couldn’t handle the load. Unfortunately for Twitter, the Fail Whale made fairly regular appearances, especially when big news hit, such as the death of the recording artist Michael Jackson in 2009 (to be fair, Twitter was hardly the only website that had these issues when the King of Pop passed away) or the 2010 World Cup. Twitter invested serious resources into rearchitecting both its systems and its engineering processes to be more efficient. Even with this strenuous effort, it took several years to “tame” the Fail Whale; it wasn’t until after Twitter made it through the 2012 US presidential election night without melting down that the company’s then–creative director Doug Bowman announced that the Great Blue Whale had been put to death.”
197. “A key element of leveraging network effects is the aggressive pursuit of network growth and adoption. Because the impact of network effects increases in a superlinear fashion, at lower levels of scale, network effects actually exert downward pressure on user adoption. Once all your friends are on Facebook, you have to be on Facebook too. But conversely, why would you join Facebook if none of your friends had joined yet? The same is true for the first user of marketplaces like eBay and Airbnb. With network effects businesses, you can’t start small and hope to grow slowly; until your product is widely adopted in a particular market, it offers little value to potential users.”
198. “people with the entrepreneurial drive required to make multithreading successful usually want to start their own companies, or apply their skills to the company’s main thread. One thing that can keep these employees motivated is making the various threads discrete projects—the equivalent of “apps” running on the main thread’s “platform.” This makes it easy to answer the question “Why shouldn’t I just start my own company?” by pointing out the benefits of building on the platform.”
199. “You might feel like you can’t afford to take time out from your busy schedule to make yourself better. After all, you might think, everyone is counting on me. This feeling, while natural, is counterproductive. Netflix CEO Reed Hastings warned our Stanford class, “[When I was running Pure Software,] I felt like investing in me was selfish. I thought, ‘I should be working.’ I was invited to join YPO [Young President’s Organization], but I thought, ‘I can’t take a day off.’ I was too busy chopping wood to sharpen the axe. I should have spent more time with other entrepreneurs. I should have done yoga or meditation. I didn’t understand that by making myself better, I was helping the company, even if I was away from work.” Plus, when you model the behavior of taking the time to improve yourself, you help encourage the rest of the company to develop a culture of learning.”
200. “Because traditional drilling techniques didn’t work on shale rock formations, the land above those formations had never been leased, which meant that when fracking made those hydrocarbons accessible for the first time, the market to acquire those mineral rights was completely wide open.”
201. “But prioritizing speed over efficiency—even in the face of uncertainty—is especially important when your business model depends on having lots of members and getting feedback from them. If you get in early and start getting that feedback and your competitors don’t, then you’re on the path to success. In any business where scale really matters, getting in early and doing it fast can make the difference.”
202. “while the personalities of the founding team play a critical role in defining an organization’s culture, it is more accurate to say that an organization’s culture emerges over time based on the actions of many people, not just the founders.”
203. “The downside, of course, is that the cost of failure is much higher than if you proceeded with deliberate caution and waited for proof before making commitments. But this additional cost can be dwarfed by the potential benefits of achieving first-scaler advantage in a valuable winner-take-most or winner-take-all market.”
204. “Blitzscaling is just about as counterintuitive as it comes. The classic approach to business strategy involves gathering information and making decisions when you can be reasonably confident of the results. Take risks, conventional wisdom says, but take calculated ones that you can both measure and afford. Implicitly, this technique prioritizes correctness and efficiency over speed. Unfortunately, this cautious and measured approach falls apart when new technologies enable a new market or scramble an existing one.”
205. “Today, multiple major waves seem to be arriving simultaneously—technologies like the cloud, AI, AR/ VR, not to mention more esoteric projects like supersonic planes and hyperloops. What’s more, rather than being concentrated narrowly in a personal computer industry that was essentially a niche market, today’s new technologies impact nearly every part of the economy, creating many new opportunities. This trend holds tremendous promise. Precision medicine will use computing power to revolutionize health care. Smart grids use software to dramatically improve power efficiency and enable the spread of renewable energy sources like solar roofs. And computational biology might allow us to improve life itself. Blitzscaling can help these advances spread and magnify their sorely needed impact.”
206. “When Brian Chesky was pitching venture capitalists to invest in Airbnb, one of the people he consulted was the entrepreneur and investor Sam Altman, who later became the president of the Y Combinator start-up accelerator. Altman saw Chesky’s pitch deck and told him it was perfect, except that he needed to change the market-size slide from a modest $ 30 million to $ 30 billion. “Investors want B’s, baby,” Altman told Chesky. Of course, Altman wasn’t telling Chesky to lie; rather, he argued that if the Airbnb team truly believed in their own assumptions, $ 30 million was a gross underestimate, and they should use a number that was true to their convictions. As it turns out, Airbnb’s market was indeed closer to $ 30 billion.”
207. “Making a decision reduces opportunities in the short run, but increases opportunities in the long run. To move forward in your career, you have to commit to specific opportunities as part of an iterative plan, despite doubt and despite inconvenience.”
208. “if you are a rare genius and can accurately and consistently predict what the market wants, trusting your instincts will be faster than using trial and error to iterate your way to a better product. Good luck with that approach! As a mere mortal, I prefer market feedback.”
209. “A company hires me over other professionals because …” How are you first, only, faster, better, or cheaper than other people who want to do what you’re doing in the world? What are you offering that’s hard to come by? What are you offering that’s both rare and valuable?”
210. “When you start a new company, the key product/market fit question you need to answer is whether you have discovered a nonobvious market opportunity where you have a unique advantage or approach, and one that competing players won’t see until you’ve had a chance to build a healthy lead.”
211. “Jeffrey Pfeffer, professor of organizational behavior at Stanford, has marshaled evidence that shows that when it comes to getting promoted in your job, strong relationships and being on good terms with your boss can matter more than competence.”
212. “Engineers hate doing throwaway work. Not only is it wasteful, it offends their sense of efficiency. They are firm believers in the conventional wisdom that says it’s better to build your product right the first time, so you only have to build it once. But when you’re blitzscaling, inefficiency is the rule, not the exception. To prioritize speed, you might invest less in security, write code that isn’t scalable, and wait for things to start breaking before you build QA tools and processes. It’s true that all of these decisions will lead to problems later on, but you might not have a later on if you take too long to build the product. A hack that takes a tenth of the time may be more useful than an elegantly engineered solution, even if it has to be thrown away later.”
213. “The people, the product, and the offices of a company can, will, and must change as it blitzscales. Culture is one of the few mechanisms that allow the ship to retain its essential identity. Culture is what helps Apple retain its “Apple-ness” with Steve Jobs gone, and Intuit retain its, well, “Intuit(ive)-ness” even as it shifted from selling packaged personal finance software to providing a cloud accounting suite.”
214. “Adecade ago, Bill Gates wrote: “The most meaningful way to differentiate your company from your competition, the best way to put distance between you and the crowd, is to do an outstanding job with information. How you gather, manage, and use information will determine whether you win or lose.”
215. “Pixar started as a company that sold a special computer for doing digital animation; it took a while till they got into the moviemaking business. Similarly, Starbucks originally sold only coffee beans and coffee equipment; they hadn't planned to sell coffee by the cup.”
216. “Successful organizations need a combination of conformity and diversity. The right kind of sameness (e.g., smart, driven, intelligent, hardworking, mission-driven) can give a company an edge, as was certainly the case at PayPal. But too much sameness can result in groupthink, bias, and stagnation.”
217. “The David Dao incident is a classic example of how a poor articulation of company values can weaken the culture. The employees on the ground believed they needed to bump passengers from the flight so that United could get another flight crew to their plane (i.e., “flying right”) and that meeting metrics such as on-time departures and flight cancellations was more important than treating customers with “respect and dignity” (which most of us would agree does not include breaking their noses and knocking out their teeth). In contrast, Southwest Airlines is not only clear about its company values but makes them the emphasis of hiring and management. The mentality isn’t: “We’ll know it when we see it.” Instead, it is: “Does this person already live the way we do?” The company uses behavioral interview questions to determine whether candidates are a cultural fit. For example, to determine someone’s ability to be a selfless team player, they might ask her to describe a time when she went above and beyond to help a coworker succeed. The airline acknowledges that certain positions call for specific skill sets. As Southwest puts it, “We’re not going to hire a pilot who has a great attitude but can’t fly a plane!” But, when it comes down to two equally qualified candidates, the one who lives Southwest’s values receives the offer. And, even when Southwest finds a qualified candidate who doesn’t have the right values, it will keep looking until it finds someone who does—no matter how long the job has gone unfilled.”
218. “If you’re in permanent beta in your career, twenty years of experience actually is twenty years of experience because each year will be marked by new, enriching challenges and opportunities. Permanent beta is essentially a lifelong commitment to continuous personal growth. Get busy livin’, or get busy dyin’. If”
219. “My friend Peter Thiel has written eloquently about the power of being a contrarian in his book Zero to One. Whenever I interview someone for a job, I like to ask this question: “What important truth do very few people agree with you on?” This question sounds easy because it’s straightforward. Actually, it’s very hard to answer. It’s intellectually difficult because the knowledge that everyone is taught in school is by definition agreed upon. And it’s psychologically difficult because anyone trying to answer must say something she knows to be unpopular. Brilliant thinking is rare, but courage is in even shorter supply than genius.”
220. “Sadly, premature blitzscaling can sometimes kill a nascent market by “poisoning the well” so dramatically that investors and entrepreneurs avoid the space. For example, Webvan’s notorious failure kept most players out of the grocery delivery space for over a decade.”
221. “The concept of product/ market fit originates in Marc Andreessen’s seminal blog post “The Only Thing That Matters.” In his essay, Andreessen argues that the most important factor in successful start-ups is the combination of market and product. His definition couldn’t be simpler: “Product/ market fit means being in a good market with a product that can satisfy that market.” Without product/ market fit, it’s impossible to grow a start-up into a successful business. As Andreessen notes, You see a surprising number of really well-run start-ups that have all aspects of operations completely buttoned down, HR policies in place, great sales model, thoroughly thought-through marketing plan, great interview processes, outstanding catered food, 30" monitors for all the programmers, top tier VCs on the board—heading straight off a cliff due to not ever finding product/ market fit. Unfortunately, it’s far easier to define product/ market fit than it is to establish it! When you start a new company, the key product/ market fit question you need to answer is whether you have discovered a nonobvious market opportunity where you have a unique advantage or approach, and one that competing players won’t see until you’ve had a chance to build a healthy lead. It’s usually difficult to find such an opportunity in a “hot” space; if an opportunity is obvious to everyone, the chance that you’ll be the one who succeeds is exceedingly low. Most nonobvious opportunities arise from a change in the market that the incumbents aren’t willing or able to adapt to.”
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