What is Blitzscaling?
Insights From 'Blitzscaling' by Reid Hoffman and Chris Yeh
The German word for lightning is blitz. This should give you a hint as to what blitzscaling is.
It’s a term Hoffman and Yeh use to describe lightning-fast growth by a start-up to scale up, when it prioritizes speed at all costs, even in uncertain times.
Blitzscaling is a concept that runs contrary to everything they teach in B-school.
It is inefficient, it’s risky, it’s aggressive and it’s expensive.
And yet, this is what has made companies such as Amazon, Apple, Twitter, Facebook, Google, Airbnb, and Uber the incredible successes they are today. They all took uncomfortable risks, ignored efficiency, usually temporarily, and focused single-mindedly on speed of growth.
The objective – To charge ahead so fast that competitors and wannabe rivals are left gasping in the dust.
Consider Uber. The ride-sharing app could have grown slowly and steadily, making some money at every step.
Instead, it launched operations in city after city, country after country, offering subsidized rides and going all out to become the first choice for both riders and drivers.
It was risky, and very expensive but the result was worth it.
Uber has over 70% market share in the US, has expanded into food delivery and courier and package delivery and earned revenue of over $11 billion in 2020.
It’s still making losses, though.
Uber is a great example of the kind of company that adopts blitzscaling as a strategy for growing at breakneck speed.
These companies tend to be start-ups in high-tech industries. This is because, by their very nature, the world of software, Internet and start-ups is more suited to the type of quick reactions and counterintuitive decisions blitzscaling requires.
But really, any industry with opportunities for growth where players can go unbeatable competitive advantage through hypergrowth would be a good candidate for blitzscaling.
As Hoffman and Yeh point out, every $100 billion scale-up, regardless of which industry it is from, got to its current size and position only one way: by blitzscaling.
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Which is why multibillion-dollar companies such as fast fashion retailer Zara and energy company Chesapeake are also on the blitzscalers’ list.
For instance, Zara continues to manufacture in expensive Europe, sacrificing economy for speed.
Chesapeake did something similar, leasing land for fracking, regardless of the cost and without knowing whether there were sufficient gas deposits to justify the lease.
So, the next time you see a company taking unimaginable risks, and going all out to get ahead of its rivals, not caring about costs or inefficiency, take a second look. They aren’t necessarily being foolhardy.
They are blitzscaling.