When to throw out the rules

(This post by Reid Hoffman and Chris Yeh.)

One of the reasons that many businesspeople (especially experienced executives) have problems grasping and applying the principles of Blitzscaling is that it requires you to throw out many of the normal rules of business. Careful planning, cautious investment, and courteous service may end up being tossed aside in favor of rapid guesstimates, inefficient capital expenditures, and ignoring angry customers. Why would you ever want to pursue such a risky and unintuitive course of action? In a word, speed.

The objective of Blitzscaling is to achieve “lightning” growth despite the increased risks and costs. The only circumstance under which it makes sense is when, whether for offensive or defensive reasons, speed into the market is the critical success strategy.

The classic offensive reason for Blitzscaling is to achieve a critical mass that confers a lasting competitive advantage. Sometimes, this is simply a matter of economies of scale, as with Amazon or Walmart. Other times, critical mass triggers network effects, as with Uber or Airbnb. It's important not to confuse critical mass with first-mover advantage; rather, it is a first-scaler advantage. Being first only helps if you're also able to achieve critical mass.

Another offensive reason for Blitzscaling is the opportunity 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.

Yet despite these offensive reasons to scale, the most common driver of Blitzscaling is the threat of competition. Without competition, you would still want to achieve critical mass and climb the learning curve, but you might prefer a less risky, more gradual approach to growth. With competition, you have to ask yourself, “Can somebody else realize this opportunity before me?” If the answer is yes, moving faster reduces the risk of competition more than it raises the risk of execution. The more intense the competition, the faster you should try to move.

One of the reasons that startups tend to rely on Blitzscaling is that speed is one of the primary advantages they hold vis a vis large companies. Startups 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 those companies on an even playing field, which means that the big company's resources will likely confer massive advantage.

The Implications of Blitzscaling

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. It's doing things that other companies normally don't do, or choosing not to do things that they do. For example, one blitzscaling tactic that Uber has employed to speed up engineering hiring is to ask each new hire for the contact information of his or her three smartest engineering friends. Uber then mails each of those contacts an offer letter. Clearly, this is riskier than actually interviewing and evaluating candidates. But it is also clearly faster, and has allowed Uber to grow its engineering team (which is typically a major challenge) at higher rate.

Finance

Raise more money than you need.

Entrepreneurs try to avoid raising more capital than they need. Raising excessive amounts of capital dilutes their stake in the company, and introduces a preference overhang (all that money has to be paid back before the founders and employees get to participate in the upside). Yet when Blitzscaling, raising “excessive” amounts can be an effective technique. The capital 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. A major raise can also have signalling 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.

Organization

Be willing to tolerate organizational messiness and unhappiness.

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 Blitzscaling, you may need to tolerate “bad” management to maintain maximum speed (though you should never tolerate the unethical or illegal).

You may need to reorganize the company three times in a single year, or repeatedly churn through members of your management team. When your organization is growing 300% per year, you might have to promote people before they're ready, and then swap them out if they sink rather than swim. You don't have time to be patient and wait for things to “work out”; you have to act quickly and decisively. There's always a lot of change, and much of it isn't voluntary. You're building the team and company simultaneously. In the interests of speed, you might even surprise or blindside your people to cut down the time required to make and implement important decisions.

One common symptom of this messiness is the presence of problems relating to job titles. You don't have time for a careful promotion process. You might either do nothing, and just keep everyone's titles the same even as they fail to reflect organizational progress and importance. Or you might do things that no rational company would do, like deliberately inflating job titles to keep people happy, counting on the ability to correct the situation “later.” Either way, you're taking on organizational risk in exchange for being able to focus efforts wholly on growth.

Culture

Don't set your culture, evolve it.

It's fashionable these days to emphasize the importance of culture. Culture is important, and can be a critical tool for Blitzscaling because it allows executives to drive a cohesive and unified organization. However, especially in the early stages of a startup, it's a mistake to devote substantial resources to defining the culture. You can't set a culture at 10 employees, and expect it to be unaffected by the next 100 employees you hire. Instead, recognize that your culture is going to evolve, and rather than hiring for static fit, hire people you think can add to the culture you're building.

Product

If you're not embarrassed by your initial product, you've launched too late.

It's not that you should strive to produce a bad product. Rather, if you need to choose between getting to the market quickly with an imperfect product, or getting to the market slowly with a “perfect” product, choose the imperfect product nearly every time. Getting to the market fast allows you to start getting the feedback you need to improve the product. Any product that you've carefully refined based on your instincts, rather than real user reactions and data, is likely to be wrong, and will require significant iteration anyways. Speed really matters, and launching early lets you climb the learning curve to a great product faster.

Strategy

Ask for forgiveness, not permission.

When you're a large company with a lot to lose, it may make sense to take the cautious approach of getting every potential stakeholder to sign off your decision (though we doubt this is true in most cases). But when you're a startup, the default outcome is that if you fail to act, you will die. You don't have time to wait for everyone to weigh in, especially when folks are in Asia for a key customer meeting, or are slammed just trying to keep the servers running. As long as the decision doesn't have “below the waterline” implications, have a bias towards action.

Engineering

Invest in throwaway work.

Engineers hate doing throwaway work. Not only is it wasteful, it offends their sense of efficiency. The classic goal is to build your product right the first time, so you only have to build it once. But when you're Blitzscaling, incurring technical debt is the rule, not the exception. To prioritize speed, you might write code that isn't scalable and wait for things to start breaking before you build QA tools and processes. 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, which means that a hack that takes 1/10th the time may be more useful than an elegantly engineered solution, even if it has to be thrown away later.

Marketing

Let success drive your brand, rather than using your brand to drive success.

One of classic rules of marketing is that you only have one chance to make a first impression. On the Internet, that's largely untrue. People discover and rediscover brands and products all the time. What matters is moving quickly to achieve critical mass; success drives the brand. What would real marketing experts say about brands like Google, Facebook, or LinkedIn? “Too confusing. Too generic. Too difficult to say.” Yet because of the success these companies have achieved, their brands have become iconic. How many people realize that Facebook refers to a paper booklet that contains the photographs of incoming college freshmen?

Sales

Hire salespeople for now, even if they aren't scalable.

Entrepreneurs are sometimes advised to avoid hiring salespeople until they are able to secure a VP Sales who can scale the company to $100 million in sales. This is hogwash. The salespeople you need to start Blitzscaling 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.

Customer Support

Ignore your customers!

The fundamental rule of customer service has long been, “The customer is always right.” But for many Blitzscaling customers, the key rule is, “Provide whatever service you can as long as it doesn't slow us down...and that may mean no service!” Many Blitzscaling startups will offer email support only, or no support at all, relying on users to find and help each other on discussion forums.

A final word of caution—just because you can Blitzscale doesn't mean that you should. Throwing out the rules doesn't guarantee success any more than following the rules does. In the early days of LinkedIn, we knew that achieving a critical mass of users was going to be a challenge. We had to do a lot of education to get professionals to understand our value proposition. Most didn't realize the power of their networks, and how technology could help them enhance, extend, and leverage them better. One approach, which quite a number of people recommended we follow, was to raise a large amount of venture capital and embark on an aggressive advertising campaign to accelerate user growth. This would be a classic example of Blitzscaling—sacrificing efficiency for growth. But we decided against this strategy; we felt that keeping our burn rate lower would allow us to wait for the market to catch up to our point of view. As we pursued our “slow and steady” strategy, the people who recommended growth warned us that our competitors would leave us behind. We weren't worried and so didn't feel a defensive reason to blitzscale. If the market conditions aren't right for hypergrowth, premature Blitzscaling can kill a company. (Sadly, premature Blitzscaling can sometimes kill a nascent market by “poisoning the well” so dramatically that investors and entrepreneurs avoid the space; WebVan's notorious failure kept most players out of the grocery space for over a decade.)

If taking on additional risk and discomfort doesn't actually confer an advantage, it's better to follow the rules for the time being so that when Blitzscaling does become appropriate, your organization can be efficient, well-maintained, and readier to scale.