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Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies

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Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies

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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.

Blitzscaling drives “lightning” growth by prioritizing speed over efficiency, even in an environment of uncertainty.

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.

Network effects generate a positive feedback loop that can allow the first product or service that taps into those effects to build an unassailable competitive advantage.

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.

Yes, disruption produces losers as well as winners, but, as a whole, it is a vital source of growth and opportunity that you can’t afford to ignore.

People should be part of building the future rather than feeling like the future is being forced upon them.

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.

“It’s like harpooning a whale. The good news is, you’ve harpooned a whale. And the bad news is, you’ve harpooned a whale!”

When a market is up for grabs, the risk isn’t inefficiency—the risk is playing it too safe. If you win, efficiency isn’t that important; if you lose, efficiency is completely irrelevant.

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.

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.

blitzscaling is prioritizing speed over efficiency in the face of uncertainty.

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.

  1. BLITZSCALING IS BOTH AN OFFENSIVE STRATEGY AND A DEFENSIVE STRATEGY.
  1. BLITZSCALING THRIVES ON POSITIVE FEEDBACK LOOPS, IN THAT THE COMPANY THAT GROWS TO SCALE FIRST REAPS SIGNIFICANT COMPETITIVE ADVANTAGES.

Once a scale-up occupies the high ground in its ecosystem, the networks around it recognize its leadership, and both talent and capital flood in.

  1. DESPITE ITS INCREDIBLE ADVANTAGES AND POTENTIAL PAYOFFS, BLITZSCALING ALSO COMES WITH MASSIVE RISKS.

THE FIVE STAGES OF BLITZSCALING   Stage 1 (Family) 1–9 employees Stage 2 (Tribe) 10s of employees Stage 3 (Village) 100s of employees Stage 4 (City) 1000s of employees Stage 5 (Nation) 10000s of employees

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. In contrast, when the number of employees grows faster than users, customers, and revenues, it’s a major red flag that could indicate issues with the fundamental business model.

TECHNIQUE #1: BUSINESS MODEL INNOVATION

The first technique of blitzscaling is to design an innovative business model that can truly grow.

A major mistake made by many start-ups around the world is focusing on the technology, the software, the product, and the design, but neglecting to ever figure out the business.

while figuring out the right combinations of services to bring together into a breakthrough product has become a major differentiator.

Business model innovation is how start-ups are able to outcompete established competitors who typically hold a host of advantages over any upstarts.

“If your playbook is the same as your competitor’s, you are in trouble, because chances are they are just going to run your playbook with a lot more resources!”

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.

The key is to combine new technologies with effective distribution to potential customers, a scalable and high-margin revenue model, and an approach that allows you to serve those customers given your probable resource constraints.

TECHNIQUE #2: STRATEGY INNOVATION

To achieve your goals, you have to know what you plan to do and, just as important, what you plan not to do. Also, growth doesn’t create value in and of itself; for that, it has to be paired with a working business model.

The answer is that blitzscaling businesses tend to play in winner-take-most or winner-take-all markets. The greater risk for a successful, growing business is to move too slowly and allow its competitors to win market leadership and first-scaler advantage.

TECHNIQUE #3: MANAGEMENT INNOVATION

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.

You can’t transplant a heart from one species into another and expect it to thrive.

In contrast, and much to their misfortune, start-ups that relied purely on technology innovation without any real business model innovation largely went bust.

The real value creation comes when innovative technology enables innovative products and services with innovative business models.

a company’s business model describes how it generates financial returns by producing, selling, and supporting its products.

GROWTH FACTOR #1: MARKET SIZE

The most basic growth factor to consider for your business model is market size.

A big market has both a large number of potential customers and a variety of efficient channels for reaching those customers.

Ideally, the market itself is also growing quickly, which can make a smaller market attractive and a large market irresistible.

When evaluating market size, it’s also critical to try to account for how lower costs and product improvements can expand markets by appealing to new customers, in addition to seizing market share from existing players.

“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.

but the cold and unromantic fact is that a good product with great distribution will almost always beat a great product with poor distribution.

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.

Despite these dangers, leveraging existing networks can be a critical part of a business model, especially if these networks can provide a “booster rocket” that is later supplemented with virality or network effects.

“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.

If your distribution strategy focuses on virality, you also have to focus on retention. Bringing new users in through the front door doesn’t help you grow if they immediately turn around and leave.

Virality almost always requires a product that is either free or freemium (i.e., free up to a certain point, after which the user has to pay to upgrade—Dropbox, for example, offers 2 GB of free storage). We can’t recall a single instance of a company that grew to a massive scale by leveraging the virality of a paid product.

GROWTH FACTOR #3: HIGH GROSS MARGINS

Software businesses have high gross margins because the cost of duplicating software is essentially zero. Software-as-a-service (SaaS) businesses have a slightly higher cost of goods sold because they need to operate a service, but thanks to cloud providers like Amazon, this cost is becoming smaller all the time.

Most of the valuable companies we’re focusing on in this book have gross margins of over 60, 70, or even 80 percent.

High gross margins are a powerful growth factor because, as noted below, not all revenue is created equal. The key insight here is that even though gross margins matter a great deal to the seller, they are irrelevant to the buyer. How often do you consider the gross margin involved when you make a purchase?

Typically, you focus solely on the cost to you, and the perceived benefits of the purchase. This means that it’s not necessarily any easier to sell a low-margin product than a high-margin product. If possible then, a company should design a high-gross-margin business model.

As Jeff Bezos is fond of saying, “Your margin is my opportunity.”

Finally, most of a company’s operational challenges scale based on revenues or unit sales volume, not gross margin. If you have a million customers who generate 80 million in gross margin to spend rather than $10 million.

Conversely, it’s a lot easier to sell and service 125,000 customers who generate 10 million in gross margin than it is to have to sell and service a million customers who generate 10 million in gross margin. That’s eight times as many customers and eight times the revenues, which means eight times as many salespeople, customer service representatives, accountants, and so on.

Designing a high-gross-margin business model makes your chances of success greater and the rewards of success even greater.

GROWTH FACTOR #4: NETWORK EFFECTS

Market size, distribution, and gross margins are important factors in growing a company, but the final growth factor plays the key role in sustaining that growth long enough to build a massively valuable and lasting franchise.

A product or service is subject to positive network effects when increased usage by any user increases the value of the product or service for other users.

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.)

Rather than simply imitate specific features, the best blitzscalers study the different types of network effects and design them into their business models.

Direct Network Effects: Increases in usage lead to direct increases in value. (Examples: Facebook, messaging apps like WeChat and WhatsApp) Indirect Network Effects: Increases in usage encourage consumption of complementary goods, which increases the value of the original product. (Example: Adoption of an operating system such as Microsoft Windows, iOS, or Android encourages third-party software developers to build applications, increasing the value of the platform.) Two-Sided Network Effects: Increases in usage by one set of users increases the value to a different set of complementary users, and vice versa. (Example: Marketplaces such as eBay, Uber, and Airbnb) Local Network Effects: Increases in usage by a small subset of users increases the value for a connected user. (Example: Back in the days of metered calls, certain wireless carriers allowed subscribers to specify a limited number of “favorites” whose calls didn’t count against the monthly allotment of call minutes.) Compatibility and Standards: The use of one technology product encourages the use of compatible products. (Example: within the Microsoft Office suite, Word’s dominance meant that its document file format became the standard; this has allowed it to destroy competitors like WordPerfect and fend off open-source solutions like OpenDocument.)

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. Economists would say that the business has to get past the “tipping point” where the demand curve intersects with the supply curve.

A company can also reshape the demand curve by designing the product to be valuable to the individual user regardless of network adoption. At LinkedIn, for example, we discovered that public LinkedIn profiles had some value independent of the user’s network, since they served as an online professional identity. This gave people a reason to join LinkedIn even if their friends and colleagues hadn’t done so yet.

This is why the best entrepreneurs try to design innovative business models that leverage network effects.

Product/market fit enables rapid growth, while the lack of it makes growth expensive and difficult.

“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.

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.

Most nonobvious opportunities arise from a change in the market that the incumbents aren’t willing or able to adapt to. In many cases, this can be a disruptive technological innovation, but it can also be a change in the law or financial regulations, the rise of a new group of customers, or any other major shift.

Frequently, you won’t be able to fully validate product/market

Designing a scalable economic model isn’t enough if you can’t scale up your operations to meet demand.

One approach is to design a business model that requires as few human beings as possible. Some software companies employ business models that allow them to achieve massive success with minimal numbers of employees.

“Do everything by hand until it’s too painful, then automate it.” Ultimately, even with clever business models and automation, nearly every massively successful company requires thousands or even tens of thousands of employees.

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.

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.

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.

In contrast, Salesforce.com and other SaaS vendors can sell software licenses in any quantity, not only to Fortune 500 companies, but also to midmarket and small to medium-sized businesses, significantly enlarging their potential market. Internet delivery and self-service allow new forms of distribution that weren’t possible in the packaged software world, such as Dropbox’s viral incentive of additional free storage for referring new customers.

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.

news feed pattern. The power of the news feed comes from its ability to drive user engagement, which in turn drives both advertising revenue and long-term retention.

Blitzscaling companies use automation. If they have the ability to perform a task (which is a big if), computers are almost always faster, cheaper, and more reliable than human beings.

“What important truth do very few people agree with you on?”

Brilliant thinking is rare, but courage is in even shorter supply than genius.

Being contrarian is often critical to the process of creating a massively valuable technology company. 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.

Second, we had to rapidly scale a salesforce while we were still developing the product they were selling. This took a lot of hard work on the part of LinkedIn’s CEOs, Dan Nye and then Jeff Weiner, and their teams.

Remember, the objective of blitzscaling is to achieve “lightning” growth despite the increased risks and costs.

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.

Why was YouTube at the right time? Networks were finally big enough to stream video. Cell phone cameras allowed everyone to record videos. And the investment environment allowed a very capital-intensive bet.

By jumping into a market where even other Latin American entrepreneurs feared to tread, MercadoLibre was able to gain a head start on the competition and achieve first-scaler advantage.

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.

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 world used to have a lot more businesses that were protected from competition by geographic fragmentation—such as regional newspapers and physical bookstores—much like Darwin’s finches on the Galápagos Islands. The rise of both the Internet and the Networked Age has connected those “islands” into a single, hypercompetitive market, with fierce competition for a few disproportionately valuable leadership positions.

The key nuance is that a company’s rate of growth needs to be measured on a relative rather than absolute scale. In a rapidly growing market, a company that grows 100 percent per year might be losing share; during turbulent times, a company that grows 50 percent per year might be gaining enough share to achieve market dominance.

No one truly knows whether the markets will go up or down in any particular year. But regardless of which direction they move, blitzscaling can be a key strategy for capitalizing on the biggest opportunities.

Once you decide to blitzscale, the key question you need to ask and answer is “How can we move faster?” This isn’t simply a matter of working harder or smarter with the same resources. It’s doing things that other companies normally don’t do, or choosing not to do things that they do because you’re willing to tolerate greater uncertainty or lesser efficiency.

One of the major challenges of blitzscaling is knowing when your business is outgrowing your current strategy, and when you need to change course. It’s unwise to wait until you stop growing to make the transition. Instead, you should pay attention to some of the leading indicators that can act as an early-warning sign that you’ve outgrown your strategy: Declining rate of growth (relative to the market and competition) Worsening unit economics Decreasing per-employee productivity Increasing management overhead

Blitzscaling can actually be dangerous when you reach the limits of your market. If you run out of market headroom, all that speed and momentum will come to a crashing halt as you slam into your market’s ceiling.

Successful blitzscaling is an exercise in serial problem solving. Each of the five stages requires different solutions to the same basic problems of people, product, finance, and so on. Each time you manage to solve a problem, the problem is never solved forever, it’s only solved for now. As the company continues to grow, you have to solve the same problem again, under a new and potentially radically different set of circumstances.

Step 1: Do things that don’t scale. Step 2: Reach the next stage of blitzscaling. Step 3: Figure out how to do one set of things that scale, while somehow also finding a way to do a completely different set of things that don’t scale. Step 4: Reach the next stage of blitzscaling. Step 5: Repeat over and over until you reach complete market dominance.

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.

Another important organizational arc is moving from generalists to specialists. During the early stages of blitzscaling, the need for speed and adaptability places a hefty premium on hiring smart generalists who can get many different things done in an uncertain and rapidly changing environment. But as the company grows, it needs to shift to hiring specialists who are less fungible but have expertise in an area that is crucial to scaling the organization.

In many cases, you should work to retain your generalists, both for their cultural and institutional knowledge, and for their ability to tackle new problems. But if you are unable to do so, and early generalists decide to leave the organization, you should try to maintain a positive relationship with them as members of your corporate alumni network.

Managers are frontline leaders who worry about day-to-day tactics: they create, implement, and execute detailed plans that allow the organization to either do new things or do existing things more efficiently.

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.

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.

Hire someone who is already a known quantity to at least one member of the team.

Bring the new executive in at a lower level initially and let the executive prove himself or herself.

Once the executive has earned the team’s trust and credibility, consider promoting him or her.

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. You also have to shift from sharing all information by default to deciding on what is secret and what is shareable. If you don’t manage to develop an effective internal communications strategy, your organization will become disjointed and start to fall apart.

The weekly meeting is most effective when it serves as a mechanism to bring together the entire company, and for company leaders to convey key messages to employees with whom they don’t work directly.

A Tribal meeting should be well organized, with an agenda and other materials provided in advance so that participants can engage in an interactive discussion rather than simply listen to senior leaders talking or, worse, suffer through text-dense PowerPoint presentations. The goal shouldn’t be to make decisions in these meetings (unless the topic is one on which everyone can and should have input, like where to hold the holiday party); rather, it’s to maximize input from smart people and make sure that everyone feels heard. As a leader, you should seek out opinions from across the organization on important issues, but you can’t abdicate your responsibility and rely only on group consensus to make tough decisions.

Regular e-mails to all employees are a common best practice.

“If this is a decision based on opinions, then my opinion wins,” said Jeff. “However, data beats opinion. So bring data.”

Data is the lifeblood of decision making for any company, but it is particularly fundamental if it informs the design of your product, or if acquisition marketing is your key distribution strategy.

What matters isn’t what you collect but what you convey to decision makers.

The key stats will evolve as your company grows. You can’t simply “set it and forget it” when it comes to data. The critical metrics for predicting the long-term viability of your business may be very different as you achieve scale, particularly if the environment is changing rapidly. For that matter, your definition of “long-term” will change a great deal.

A growth team also helps by making growth a number one priority rather than a second- or third-class citizen. Elman likes to compare a typical marketing team to a Dickensian orphan, pleading with the product and engineering teams for resources: “Please, sir, may I have another landing page?” Any product changes or engineering infrastructure needed to drive growth, no matter how potentially valuable, typically end up taking a back seat to the product or engineering team’s own road maps. In contrast, a growth team’s engineers can move far faster because building scalable and extensible testing infrastructure is a core part of their jobs.

This is why you may need to blend quantitative and qualitative analysis.

“Don’t try a second channel until you have your main flywheel working. Most successful companies dominate one channel.”

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.

One important technique for making this decision is to consider both the magnitude of the opportunity as well as its potential for gain.

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.

Conversely, when the potential for gain associated with your core opportunity declines, multithreading is often the answer to attack better growth opportunities.

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!

Poorly designed incentives can make it nearly impossible to shut down a thread, even if its performance is poor, since its leadership might fight tooth and nail to stay open.

Each product leader was the owner of a primary thread, but was also partially accountable and compensated for his or her work in supporting a fellow product leader as a secondary thread. This produced an additional layer of alignment, which reinforced the alignment of all being part of the LinkedIn “holding company.”

The reality is that many start-ups are like pirates: they lack formal processes and are willing to question and even break rules. This flexibility is critical in the early stages of building a great company. Pirates don’t convene a committee meeting to decide what to do when an enemy ship is approaching—they act quickly and decisively, and are willing to take risks because they know that the default outcome is death.

One of the key ways to assess whether you’re being an ethical pirate or a sociopath is to ask, “Am I trying to change the rules for everyone, or just trying to get away with a personal exemption?”

Rules are not holy scripture—they exist to make the world a better place, and thus if you can improve the rules, you should. On the other hand, rules usually exist for a reason. You need to have some humility when breaking rules and recognize that you might not understand all the consequences. It’s not always cheating to break the rules, but it is always a high-beta activity, hence the need for caution and compassion.

“How can we lock out the competition?” More blitzscaling is often the answer. Being the first scaler helps you acquire customers, lock in investors, and attract the best talent.

I like to generate fresh, innovative ways to play defense by asking my team, “If we were trying to compete with ourselves, what we would do? What if we were a start-up? Google? Facebook? Microsoft?” You can also seek outside perspectives, either by asking an independent board member or by leveraging network intelligence.

First, 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.” There are over 2,800 apps on the Salesforce AppExchange, and an International Data Corporation (IDC) study showed that the Salesforce ecosystem generates 2.8 times the revenues of Salesforce.com itself. That means that while Salesforce.com has revenues of “only” 32 billion company.

Second, offer a more complete solution, and try to outflank the competition. I like to say, “Both players are holding glasses of water, and are trying to tip over the other person’s glass.” In other words, if your competitor suddenly started offering its core product for free, could you still make money on your core product?

Financial strategy can also become competitive strategy. For example, Apple’s cash hoard allows it to move quickly and pay cash for any acquisition—two key advantages during a competitive bidding process.

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 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.

A strong executive team meets on a regular basis and focuses on the most important initiatives and issues, including active planning for the future.

In other words, you have to build management strategies that scale.

Any given management structure is likely to be temporary. You can’t run a Village the same way you run a Tribe, and you can’t run a City the same way you run a Village. But without structure, you won’t make it to the next stage of growth.

“I think a lot of entrepreneurs start with a lot of insecurity about what they don’t know. What you want is not to be paralyzed by it, but to harness it—to use that nervous energy to learn and make yourself better. You’ve got to keep your personal learning curve ahead of the company’s growth curve.” Maintaining a certain humility and a sense of perspective can help you navigate the changes in your role as you blitzscale your company. If you truly want to blitzscale, then speed has to take priority over everything—including your own ego. There are only three ways to scale yourself: delegation, amplification, and just plain making yourself better.

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.”

Rather than delegate work you’re doing to others, can you hire people who amplify the work you do? The goal here isn’t to free you up from your work so that you can do other things; it’s to make the things you do much more impactful. This is actually one of the areas I’ve tried to develop and refine in my own life.

Trusted employees, freelancers, or even a team of outside consultants can be your amplifiers. The official nature of the relationship is less important than having assistance that you can trust.

Because your company grows and changes so quickly as you blitzscale, it’s crucial for you to figure out how to make yourself better just as quickly so that you don’t become the bottleneck that holds your company back.

This means talking with other smart people, often, so that you can learn from their successes and failures. It’s usually easier and less painful to learn from another’s mistakes than from your own.

Annual plans. Revenue guidance. Traditional business strives for order and regularity in management, operations, and financial results. This desire for order and regularity makes sense, because it allows companies to fine-tune their approach to be as efficient as possible, and gives shareholders a pleasing sense of stability. But when you’re blitzscaling, you’re explicitly choosing to sacrifice efficiency for speed, which means that the traditional focus on order and regularity needs to be replaced with a unique willingness to embrace a level of chaos that would horrify most Harvard MBAs and their professors.

Yet simply throwing up your hands is unlikely to bring success; passively succumbing to chaos is not a winning strategy. Embracing chaos, on the other hand, means accepting that uncertainty exists and therefore taking steps to manage it. If you know that you’ll make mistakes, the answer isn’t to sit back and wait for answers to find you, nor is it to charge ahead without preparation or forethought. You can still make smart decisions based on your estimate of the probabilities, even without certainty. And, perhaps most important, you can make sure that you have the ability to correct your mistakes.

The salespeople you need to ignite hypergrowth are totally different from the salespeople you’ll need at scale. When you’re trying to sell your product for the first time, you need aggressive, adaptable salespeople who aren’t big on following rules. By the time you’ve achieved scale, you’ll need thorough, process-oriented salespeople who can keep a machine running smoothly. You’re not going to find one person who is great at both.

Very few people excel at being an individual contributor, a manager, and an executive, and even those rare employees are likely to have a preferred role.

We were also fortunate in our timing. One thing that holds teams together in the absence of management is an opportunity to win.

Is that “bad” management? Maybe. But if bad management saves you from building a warehouse in the wrong part of town and lets you quickly turn that structure into a successful hotel (or saves you from losing money on mobile cash and lets you quickly capture the market for global payments), then it might be the best approach you can take.

It’s not that you should strive to produce a bad product. Rather, if you need to choose between getting to market quickly with an imperfect product or getting to market slowly with a “perfect” product, choose the imperfect product nearly every time. Getting to market fast allows you to start getting the feedback you need to improve it.

Speed really matters, and launching early lets you climb the learning curve to a great product faster.

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. The point of launching your product early is to learn as quickly as possible. But your learning is useless if you don’t have the ability to iterate.

A free consumer product can get away with the most flaws, because consumers tend to be very tolerant when it comes to something that doesn’t cost them anything. A free enterprise product needs to be more refined; even if it is free, the stakes are higher in a professional setting. A paid enterprise product needs to be even more refined, but it can still have significant flaws, because these types of products are intended for expert users who may have no choice but to use the product. A paid consumer product has the least room for error. While consumers are very tolerant of flaws in free products, they expect products they pay for to be nearly perfect and will grouse loudly about any significant flaws they find: “What am I paying for here?”

Plus, if your people can’t let fires burn, they’ll spend all of their time fighting them, which won’t leave any time for coming up with breakthrough opportunities to advance the business.

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.

The planning fallacy is that you make a plan, which is usually a best-case scenario. Then you assume that the outcome will follow your plan, even when you should know better.

Most blitzscaling start-ups have a high burn rate. This is because the drivers of growth, such as sales and marketing, often require significant investments that exceed the cash coming from product sales. It usually takes a lot of money to make a killer company, which is why we have venture capitalists!

For technology start-ups, the amount of money you need to raise will tend to be a function of two primary factors: people costs and the cost of outbound customer acquisition.

Remember, starting a company is like jumping off a cliff and assembling an airplane on the way down. If you run out of money for the fuel and parts you need to get airborne, no one will ever get to find out how efficiently you spent it along the way!

Nearly all founders, business gurus, and academics agree that organizational culture is important. While there are a lot of inefficiencies you can tolerate and fires you can let burn during your blitzscaling journey, ignoring your culture is not an option. 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.

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?

When organizations have strong cultures, their employees give consistent answers and act accordingly.

The primary culture of an organization typically originates in the functional area that is most critical to the success of the company. Early on, engineering predominated, and engineering culture formed the basis of things like the HP Way. As the technology industry matured, sales assumed a greater importance, and sales-oriented cultures arose at companies like Oracle and Cisco. Companies today might also have a product culture, design culture, marketing culture, finance culture, or even an operations culture. Any and all of these cultures can be successful, but you should focus on whichever function is key for your organization to succeed. In addition to the role this choice plays in the company’s values, the executive in charge of the functional area that drives the culture also tends to be the most likely successor to the CEO.

Most cultures begin to form organically. As we’ve discussed previously, the founders of the organization have a major influence on the culture, simply because of who they are. If a founder believes that certain beliefs and practices are fundamental keys to winning, those beliefs and practices tend to be transmitted to the people who work closely with him or her.

If you want to operate with very few rules, you need to set context.” Yet 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.

After all, the strongest influences on organizational culture are often who you hire, promote, and fire.

The problem is that you end up hiring mercenaries rather than missionaries. And if you’re tripling the company’s size each year, you can shift your company from a majority-missionary culture to a majority-mercenary culture in a single year.

You have to walk a fine line as you evolve your culture—evolve it too slowly, and it will hold you back from adapting to new businesses and the changing world around you. Evolve it too quickly, and the Ship of Theseus illusion breaks down, and people no longer feel like they belong.

“If we are to preserve culture, we must continue to create it.”

First, there can be a fine line between a strong culture and a cult. By definition, culture is narrowing to some degree. Building culture into your hiring processes means that you’re excluding people by design, and you have to be careful not to restrict your hiring to the point of total homogeneity. 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.

Just as start-ups incur “technical debt” by taking shortcuts with their code, they can incur “diversity debt” by taking shortcuts with their hiring practices.

Another pitfall is cultural hypocrisy. If you preach the gospel of your strong culture, you have to live up to it, or you’ll be doing more harm than good. When you talk the talk but don’t walk the walk, employees will recognize the hypocrisy. Credibility has to be earned, not simply asserted.

Founders and CEOs are cultural role models; if they don’t exemplify the culture, it will inevitably weaken.

Every exciting new technology or market that once supported massive wealth creation eventually becomes a stable, boring industry.

The best entrepreneurs and companies use successful blitzscaling in one market to jump into another.

The never-ending need for change should fill you with both fear and hope. Fear, because you can never rest or stand still. Hope, because new markets are always emerging,

“Give customers what they want and get it to them faster than anyone else.”

On the other hand, if a start-up can play the same game, scale may not provide a significant advantage unless there is a massive difference in scale. For example, when Airbnb was blitzscaling, it was competing with HomeAway, an established player that had much greater scale. However, HomeAway had achieved its scale via a string of twenty-one acquisitions, which meant that all of its acquisitions were running on different technology platforms and serving different clienteles. Indeed, HomeAway’s scale was actually a disadvantage! HomeAway itself was later acquired by Expedia, as part of that company’s response to the competitive threat of Airbnb.

To borrow an analogy from sports, you may need to take repeated shots on goal before scoring. Established players have a much easier time financing multiple shots on goal.

A major issue faced by established players is that the incentives tend to favor cautious expansion rather than aggressive blitzscaling. Successful companies generally assume that they already have something valuable, which means risk taking tends to be penalized. If you make the play and fail, you’ve destroyed a valuable thing. That’s not something a start-up faces—a start-up is dead by default, so there is nothing to lose.

The incentives that drive individual employees can also have a negative impact on blitzscaling attempts inside an established company. The employee or executive who proposes a risky blitzscaling initiative is the one who stands to gain the most (promotions, bonuses, clout, etc.) from its success. In contrast, other employees gain little from that success, and might even end up losing if that success allows its champion to jump over them for promotions or bonuses. And if the initiative is unsuccessful and costs the company a large sum of money, its employees all bear the cost of failure as well. Is it any wonder that so many bold initiatives are killed in committee?

Another (largely self-inflicted) disadvantage for large companies is the inability or unwillingness to stage their investments. This results from internal incentives, which tend to reward managers based on the revenues that they oversee, while penalizing failure and undervaluing growth opportunities.

“Staying in Day 1 requires you to experiment patiently, accept failures, plant seeds, protect saplings, and double down when you see customer delight.”

Uncertainty by itself isn’t risk; it simply produces unknowns, and unknowns aren’t inherently negative. As anyone who has ever read a mystery novel or traveled to a new city or learned a new language can attest, one of the great joys of life is the journey of discovery, of turning the unknown into the known. However, when you combine uncertainty with the possibility of a negative outcome, you produce risk. The magnitude of the risk is a function of the probability, and severity, of that potential negative outcome. Blitzscaling always involves risks, but all risks aren’t equal. This is why you need to distinguish between systemic and nonsystemic risk.

Speed and uncertainty are the new stability. The only way to thrive in this fast-changing world is to accept the inevitability of change. Use it to your advantage, whether you’re focused on your individual life or the fate of a nation.

First, be an infinite learner. The best and worst thing about the rapid pace of change today is that there are no experts with ten-plus years of experience in any emerging phenomenon. If you’re able to climb the learning curve faster than others, you have the opportunity to create massive value from it. While we wish we could write a simple, comprehensive list of rules that would guarantee your success, it’s unclear how anyone could describe a strategy that would apply to all the potential changes that will occur in the next few years, let alone decades. The landscape is always changing, and learning is how you adapt. Second, be a first responder. As new technologies and trends emerge, the uncertainty of where they are headed will paralyze many people and keep them from acting. Those who are willing to act—and act quickly—despite the uncertainty will have a disproportionate advantage. Seek out blitzscaling companies and markets; that’s where you’ll find the greatest growth and opportunity. Finally, and somewhat paradoxically, be a source of stability. In a world of constant change and uncertainty, people will need reassurance and support. Offering stability and calm in the middle of the storm while others are caught in the tumult will make you a natural leader.

We believe that the future can and should be better than the past, and that it’s worth tolerating the discomfort we feel when blitzscaling to get to the future as quickly as we can.

The companies that choose to blitzscale will soon set the pace of progress in every industry. It’s up to you to lead this change—for yourself, for your company, and for society as a whole. Race you to the future.

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