We love the idea of Blitzscaling — rapidly growing your business to market dominance and crushing the competition — and for AirBnB, PayPal and LinkedIn it’s been the right thing to do. But if there are no rules to Blitzscaling, how do you know if it’s the right approach to grow your business? Here’s what Blitzscaling’s resident guru Reid Hoffman had to say to Harvard Business Review:
Sometimes freedom from normal rules is what gives you competitive advantage. For example, if we had understood how pernicious credit card fraud and chargebacks were in the early days at PayPal, I’m not sure we would have believed that such a service could be successful. We didn’t realize how staggering the losses could be. All the banking people knew the rules—you had to protect against fraud first. That prevented them from trying anything that looked remotely like PayPal. Our ignorance allowed us to build something fast, but then of course we had to fix it on the run, because we were already in the minefield. Most critics thought we were losing so much money in 2000 because of our customer acquisition bonuses. But that wasn’t the case. The industry’s average customer-acquisition cost through advertising was around $40. So when we gave customers who recommended a friend 10 bucks and gave the new customer 10 bucks, we were cutting costs in half. Why depend on heuristics rather than rules? Because you’re looking for an edge that distinguishes you from other competitors, who are following conventional wisdom. That’s not to say that there aren’t rules. Don’t allow anyone to embezzle your money. That’s a rule. But it doesn’t give anyone a competitive edge.
~ Reid Hoffman
Read more in Harvard Business Review’s inverview with blitzscaling guru Reid Hoffman — https://hbr.org/2016/04/blitzscaling
Learn more in this Boost.ai interview with co-author Chris Yeh
Go deeper in this series of videos on blitzscaling from Greylock Partners
Buy the book on Amazon