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Blitzscaling

What is Blitzscaling

The fastest way to scale a company is through blitzscaling. The main goal of blitzscaling is market acquisition by establishing a several 100 million – billion dollar business. The idea is to scale so fast that you eventually become the market leader and competition is unable to keep up, forcing them to become limited to smaller niche markets. This method prioritizes speed over all other aspects of the business, making it quite costly. You will essentially be creating a business that never existed before, this is why there will be many uncertainties during process. Because most decisions are made without full confidence, the business environment needs to be well understood to mitigate the risks. If you don’t think your business is a 100 million dollar idea, check out our article on fast scaling for a different method of rapid growth.

Who Should Consider Blitzscaling

Blitzscaling is best for entrepreneurs who have a clear target of what they want to achieve and have the ambition to go fully in. Software and technology markets are good areas to focus on. These markets pair well with blitzscaling because companies are able to work on shorter time scales as new innovations are allowing them to have both speed and flexibility whilst developing faster. Furthermore, tech itself is being integrated into all industries, creating great opportunities for new startups.

Stages of Blitzscaling

1. Beginning

At the start, the business owner must take care of managing and implementing blitzscaling themselves. They need to come up with a clear goal and a rough idea of how to achieve it. It will have to be a ‘billion dollar idea’ to attract angel investors who will help fund the project.

As blitzscaling is an all or nothing strategy, some important factors to be considered at this time include:

  • The steep learning curve of implementing blitzscaling
  • Whether or not the end goal will be worth the costs
  • If there is already a dominating force in the market

2. Gathering Employees

As the company grows, a team of talented employees will be gathered to help with operations and boost productivity. Managers need to make sure that the employees are scaling up along with the business so that the business can run smoothly.

Blitzscaling as a team

3. Decision Making

At this stage, important decisions about how the company should go forward are made. Although there will be risk no matter what, the business owner must still do their best to access all situations to make a well-informed decision. They need to keep track of not only capital scale, but revenue scale and customer scale as well. To ensure fast yet controlled growth, constant changes should be made so that the internal functions of the company are able to scale up at the same rate. This can be done through things such as maintaining company culture, hiring senior-level people with specialized skill sets, and using heuristics. The company then needs to have enough funds in reserves to recover from any missteps that may occur.

It is also necessary to decide when to stop blitzscaling as it is not an indefinite method of continuous growth. This is because of how much capital is used in the process. The method may eventually backfire and lead the company to bankruptcy. Owners need to stay alert to any decrease in productivity and decline in unit economics.

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Growth Graph

Graph by Reid Hoffman and Chris Yeh

This graph can be applied to all blitzscaling companies no matter what industry they are in or where they are located. To maintain upward growth, the business needs to continuously apply blitzscaling tactics.

Pros of Blitzscaling

Competitive Advantage

As the fastest method of scaling, blitzscaling allows a business to have a strong competitive advantage. They will quickly surpass competition and bypass niches. The competition will have to work towards catching up rather than devising counterattack plans. Additionally, generating rapid growth will help the company reach a larger network to connect with. Visibility and brand recognition will both increase, which in turn will attract talented employees.

Potential to Become a Monopoly

Speed will give the business a better chance at cornering the market, thus allowing them to potentially become a monopoly. Investors are always looking for the next big thing, and so this will make your business an attractive investment. The financial assistance can then be used to buy up competition, further strengthening your company’s position.

Cons of Blitzscaling

Massive Risks

When making decisions, focus will be put more on growth rate than accuracy. There will not be enough time for thorough planning and calculations, the entrepreneur needs to be quick on their feet when deciding how the company should move forwards. This means that they must be prepared to take the risk of committing to decisions even if they’re not completely confident.

Expensive

Business owners must quickly overcome challenges, and so there needs to be a lot of funds to recover for any potential mistakes. Both financial capital and human capital need to be taken into account. Owners need to accept the cost of operational risks in exchange for business growth speed.

Growing fast by scaling quickly

Constant Adjustments

With rapid growth comes rapid changes. The business owner will need to be making constant adjustments to adapt to the business environment. From a managerial perspective, this entails updating products, switching up leadership styles, and reorganizing every few phases. Both staff and strategies must be scaled up as well. Business owners need to maintain some control over operations so that the company does not become unstable and fall apart.

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Example

Amazon is a great example of successful blitzscaling. From 1996 to 2017, the company was able to grow from 151 employees to roughly 541,900. Now in 2021, Amazon is generating a net revenue of around $49.9 billion. For this type of high speed growth, the company continuously invested in their future even if there were losses along the way. With this tactic, Amazon has been able to get a strong standing in online retail and e-book markets.

Helpful Videos

This quick video by You Exec helps cover main points from Reid Hoffman and Chris Yeh’s book on Blitzscaling.

This in-depth lecture by Allen Blue, Reid Hoffman, John Lilly, and Chris Yeh talks about blitzscaling in general and further provides a case study example.

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