Book Summary: Blitzscaling

thumbnail
Reading Time: 3 minutes

Blitzscaling is a set of techniques that allows both start-ups and established companies to build dominant world-leading businesses in record time.

In other words, companies drive “lightning” growth by prioritizing speed over efficiency, even in an environment of uncertainty. It requires hypergrowth but goes beyond the blunt strategy of “get big fast” because it involves purposefully and intentionally doing things that don’t make sense according to traditional business thinking.

How to Blitzscale, Why to Blitzscale, and When to Blitzscale

Blitzscaling disrupts entire industries, such as music, video, and telephony, with both new technologies and new business models. iPod, iPhone, iTunes, and the iPad are a few examples from just a single company.

Disruption on its own is neither good nor bad, but it always involves change. Replacing a $10 product with a $1 product of equal or better quality looks like a disaster to someone whose product is being disrupted, but for society as a whole, it means greater productivity.

Netflix is one example of such. Bad news for broadcast and cable networks, but great news for fans.

Despite its incredible advantages, Blitzscaling also comes with massive risks. At Facebook, it took more time to fix bugs and issues than the speed that they were gaining by growing faster. A summer intern introduced a bug that brought down the entire Facebook site for thirty minutes. Blitzscaling came with massive risks.

Three Key Techniques of Blitzscaling

Business Model Innovation: A major mistake made by many start-ups around the world is focusing on the technology, software, product, and design but neglecting to ever figure out the business. And by ‘business’ it simply means how the company makes money by acquiring and serving its customers.

Strategy Innovation: The most obvious element of Blitzscaling is to pursue extreme growth, which, when combined with an innovative business model, can generate massive value and long-term competitive advantage. Many start-ups believe they are pursuing a strategy of extreme growth, which in fact they have the goal and wish for extreme growth but no understanding of an actual strategy that will get them there.

Management Innovation: 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 fraud and imperfect products and ignoring angry customers.

Business Model Innovation

Market Size: The most basic growth factor to consider for your business model is the market size. A big market has both a large number of potential customers and a variety of efficient channels for reaching those customers.

Distribution: Cold and unromantic fact is that a good product with great distribution will almost always beat a great product with poor distribution.

High Gross Margins: These are probably the best measure of long-term unit economies. 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.

Strategy Innovation

A Big Opportunity: 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.

First Scaler Advantage: Blitzscaling is unlikely to prove successful if another company has already achieved the first-scaler advantage. Sometimes there is no first-scaler advantage to be won. If you can’t identify any network effects or customer lock-in scaling might not confer sufficient advantage to warrant Blitzscaling.

Learning Curve: 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 to solve hard, complex problems. The more rapidly one scale’s, the more data there is to drive learning, which improves the product, making it easier to scale further in the market while competitors who have just begun to learn lag far behind.

Management Innovation

Small Teams to Large Teams: The ideal solution is to retain early employees in new roles that advance their careers and help the company build a larger team.

Generalists to Specialists: Think of generalists as the ‘stem cells’ of organization. Your body has a small number of stem cells that have the capability to morph into various other types of cells as needed. In a large organization, you may need a small number of people who can perform various functions as needed, whether exploring new products and technologies or tackling issues that lack a well-defined solution.

Contributors to Managers: 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.

Single Focus to Multi-Threading: As the company grows, the product focus will also undergo a major change, from a single-threading to a multithreading approach. What we mean by this is that start-ups in the early stages of Blitzscaling are generally single-product companies that focus on doing one thing extremely well. But to keep the company growing in the later stages, scale-ups need to manage multiple product lines or even business units. Most successful companies dominate one channel.

Also Read on FinMedium:  India's latest Deca-Unicorn is here! Byju's is only the third Indian startup wit...

Cover Image Source: Hyperweb

FinMedium

Every Wednesday and Saturday, we send Info-Graphic and FinMedium Weekly Digest newsletters to our 25000+ Subscribers.

Join Them Now!

Please Share :)
Vishnu Kapadia
Vishnu Kapadia is the founder of MJK Finvestment
Back To Top