Reid and Chris were recently invited to join McKinsey Senior Partner and session moderator, Rock Khanna, Americas Leader for McKinsey Marketing & Sales, and Ari Libarikian, the Global Leader of Leap by McKinsey (the firm's digital venture building practice), for a 60 minute Zoom conference that reached over 1,700 executives representing dozens of industries and 500+ McKinsey team member.
Blitzscaling is the strategy some of today’s most valuable companies have used to achieve huge market shares, insanely fast growth, big profit margins, and become corporate giants in a very short time. It presents a set of processes and frameworks for startups that have successfully achieved traction and are now looking to scale.
Reid and Chris define “Blitzscaling” as prioritizing speed of growth over efficiency. The key difference from traditional growth strategies, which they call “fastscaling”, is that “blitzscaling” assumes substantial risks in the pursuit of scale.
One of the largest hurdles to this tactic is that it requires a substantial mindset shift among executive management as the cultural, strategic, operational, financial and leadership philosophies required for success in a Series B+ company (i.e. a “scaleup”) are often diametrically opposed to those of a Seed or A stage company (i.e. a “startup). While Steve Jobs likened working at a startup to “being a pirate”, Reid argues that growing a scaleup is akin to “joining the Navy” (i.e. it’s a transitional phase where startups begin to adopt mature company processes and strategies).
If you'd like to schedule a virtual talk like this with Chris Yeh for the members of your organization or group, contact us.
Here's an excerpt from Reid's remarks that sums up the message to attendees:
"So if you think about every industry, every company that's been a lasting leader, been one of these iconic companies. It's not because they did one thing perfectly for 50 years. It's because they continue to innovate and continue to create new things. Walmart is today very different than the Walmart that Sam Walton first started back in Arkansas. The Amazon of today is not a small online bookstore, it has many different businesses. Apple went so many different ways, whether it was personal computers or the iPod, and ultimately the iPhone. Microsoft is no longer the maker of just a desktop operating system but a cloud provider and a productivity software maker.
So, whatever your industry, whatever your situation, because the world is continually changing faster than ever before, you have to create new businesses, you have to blitzscale before someone blitzscales against you. And so as you're going around and thinking about the future of your company, developing the 5 or 10 year plan or wherever you think you're doing, remember to build in the notion that you're going to have to build new businesses to replace the ones that are being discussed.
So the thing to remember is that risk taking is not just like driving on the highway and then you close your eyes and put your foot on the gas. It's actually intelligent risk management that is a core part of innovation and a core part of Blitzscaling, and what you're looking at is what are the ways that I can set it up, and measure it. Blitzscaling is not saying just any risk matters, rather which risks do you take as part of being successful at adapting to the new world, adapting to the new market, and having a chance at being a market leader.
When you do, you can have this kind of platform change."
The following are additional highlights shared by Reid and Cheris relating to blitzscaling in large organizations:
- We are now all moving to global competition. So while Silicon Valley has a bunch of expertise, part of the reason we wrote this book was to try to actually get folks like you on the call. At the core is a pattern which Silicon Valley is learning about how to grow and shift toward creative disruption, which is building something new.
- Every company greater than 100 people is becoming a technology company, because the technology is becoming is part of how you operate out of your product and service and how we're all getting instrumented by data, and using data to make decisions about what we're doing.
- All businesses only scale for a while. Blitzscaling matters to everybody because it is what can get you established until you have a technological platform that allows you to move into that area of competition.
- China is beginning to do that in extremely strong ways. It isn't just Bytedance and TicToc going global but also what they're doing in just-in-time manufacturing lines, which has many interaction effects. Its deep Blitzscaling being acted out.
- A classic challenge to Blitzscaling, even when you know you have a bunch of capital, is that you have to have a mindset of a tech company and everyone should be moving in that direction.
- You have to have a coherent culture that you can maintain and build around. because human capital is even more important than financial capital to Blitzscaling.
- When people look at the advantage that Silicon Valley has it is largely human capital advantage. There are all these people there that have experience building companies. And so as a startup company grows in Silicon Valley, it is relatively easy for them to bring in the human capital that allows them to grow
- During the early days of a company, when you are what we call the family stage, where you have less than 10 people and they're all in the same room, then everyone needs to be a generalist. You cannot afford to specialize and have a person saying "I only do this."
- Over time, as the business begins to stabilize you need to bring in specialists people who are able to manage the specifics of globalization translation of being able to attack new markets or the life.
- When you consider this in the context of an established company this is one of the reasons why it's so important to be able to bring in the right people to any Innovation Initiative. Many of the people in your organization are specialists, because the business has been stable and has specialized around specific functions, but when it comes to innovation they need to get out of this mindset and your should involve generalists with a mindset that is willing to go far beyond the traditional job description.
- "Hire Ms 'Right Now' " not "Ms Right" is a real thing. Among companies there's a war for talent to get the best people, and of course you want to get people who are smart, hardworking, have good values, as you're growing rapidly between different stages you need to know that you get the best person for right now and so that you don't don't lose three months looking for the perfect hire. Get the right people for the stage you're in right now, and get people who are able to grow.
- Create a specific "tour of duty" for your individual employees so they know what their mission is and what constitutes success. And if somebody's mission is to get the company from zero to a million, well, that's one of the things that makes Silicon Valley so great, because there are people who go from company to company just specializing in getting from zero to a million in sales, or just specialized going from a single market to a global market.
- The demographics of the workforce is changing and yet most companies are still using the "family" language of "come join our family" as if you will be there forever. When in fact, even in Japan, most people's careers will involve multiple companies. So you need to acknowledge that and find a way to get to a new form of employer-employee compact.
- As opposed to lifetime employment (that you may not even be able to provide) pivot to becoming lifetime allies-- help each other over time. In a transformational tour of duty, the employee helps the business and the business helps their career. In a foundational tour of duty, there's a vision that "this is my life's mission," but this normally only applies to founders and C-suite or others considered to be "culture carriers".
- To attract the best people in your company to a project, don't let them continue to get their full salary and give them upside. That doesn't work because what you want to do is set up a compensation system that prioritizes the people who have the confidence in succeeding. You want people to buy into the effort by reducing their salary or by buying into the stock somehow. But only those people who are most confident of their ability to make a difference, and successfully grow the business are going to say "that's the job for me," versus all the other people who just sort of say "wow, that's a great way to get some additional upside, let me just go for that." So, the compensation system you choose for your internal innovation effort is going to make a big difference.
- The purpose of those specialists to be able to come in at the right pace and execute at a higher level in a key area once capital really comes into play.
- Culture is so important, because you as the founder, or as the leader in-charge of the corporate innovation and growth project, cannot be everywhere at the same time. Each person you bring in is going to help change the culture hopefully into a culture that gets better, but you have to be intentional about the culture and realize its more than a bunch of words on the wall-- it's really about how you walk the walk.
- To create an operating model and culture that is much more entrepreneurial sometimes requires physically separating and having enough of a critical mass of new people that operate differently from the core so that you can you give something the chance to scale. If you just take the old culture, and the people running the incumbent, you're really rolling the dice and putting yourself at a disadvantage.
- Obviously, you don't like to have to prioritize speed over efficiency. It's not a great choice. Blitzscaling is not the goal. It's expensive and dangerous and really hard to manage and you've got to really focus on it.
- The primary reason why you're driven to Blitzscaling is competition, either extreme competition, or competition that you know it's possible will come. And so you blitzscale In order to get to the point where you can establish the network effect, get the critical mass, that then puts you in a very strong position and establishes your long-term advantage in the market.
- Blitzscaling is most often associated with technology, but we're in the process of all industries becoming technology industries. It's what helps you run an efficient airline and is what's driving tele-health. It's embedded in robotics, manufacturing, everywhere.
- But then there are examples like Chesapeake Energy which is a great example of a company that blitzscaled in a way that did not involve technology, namely by being more aggressive in the area of acquiring valuable mineral rights. It's also an example of why you should learn when to stop blitzscaling.
- Globalization is still more or less inevitable given the benefits that apply to consumer societies and most industries. So while it may get reconfigured to some degree, it isn't finished. Everything is getting so much more networked and it is not just the internet. It's also job markets, payment mechanisms, information sources and logistics and energy all around the world. The more globalized the world is the more markets that will be winner-take-all, emphasizing the need for compounding scale to get global.
- Blitzscaling is about relative speed, relative to the speed of the competition. To be first to scale product-market fit at scale you don't have to establish the absolute fastest tempo unless you think that the competitive tempo will break you if you don't.
- In the past two decades, we've gone from the Lean Startup era to the unicorn era to our current pandemic economy. There's been just a tremendous amount of change over that time, and people who think that they can just take a set of rules that are written in stone and apply them universally also need to realize that when circumstances change you have to change your approach as well.
- It's important to focus on these principles. If there's a winner-take-most market, understanding the ways you can prioritize speed over efficiency is critical. There isn't a single technique that necessarily works. As long as there are these new technologies, as long as they're these new markets, and consumers are making changes, and because of the pandemic there's more change than ever as people have adjusted to more versatile ways of doing things, then there's going to be the need for Blitzscaling.
- Figure out where you have a competitive advantage, because at the end of the day, Blitzscaling is all about competitive advantage, where prioritizing speed over efficiency allows you to generate those lasting competitive advantages.
- That's what has probably changed the most when it comes to this pandemic economy--the fact that there's such a great need for adjustment and adaptability.
- There's even a different way to think about this, which is how do you pursue rapid change by prioritizing speed over efficiency in an environment where there's an exponentially growing virus and rapid change requires you to be less efficient, and see if doing that allows you to gain a week or a month on your competitors.
- The reason why we keep putting out content at Blitzscaling, like this particular event, is because we know that the circumstances are changing and people are looking for guidance.