Reif Hoffman is a name that most people will be familiar with. But if you don’t know who he is, you are forgiven. Hoffman is a renowned name among Silicon Valley elites. He has co-founded two companies that are well-known globally. The first company is PayPal where Hoffman later served as the COO. He also co-founded LinkedIn in 2003 and later sold it to Microsoft for a whooping sum of twenty-six billion in cash. Hoffman also has an impressive record as an investor.

He was one of the earliest investors in Facebook. He also invested in Airbnb and Aurora which was later acquired by Uber. Hoffman’s impressive resume shows his extensive knowledge of the startup industry and in an interview with HBR, he talked about one of his profound ideas - Blitzscaling. In this article, we will dive into the concept of blitzscaling and how founders can leverage this knowledge to grow their businesses fast.

What is Blitzscaling?

Hoffman defines blitzscaling as the art and science of building a company rapidly to serve a global market with the goal of becoming the first mover at scale. Think of companies like Amazon and Google whose original ideas revolutionized entire industries. Before now, there was no playbook to go by and entrepreneurs had to figure things out along the way. Hoffman puts it this way, it’s like

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Throwing yourself off a cliff and assembling your airplane on the way down. If you don’t solve the right problems at the right time, that’s the end.

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This is where blitzscaling comes in. Think of it as a guide to help startups scale up and do so really fast. The origin of the name blitzscaling according to Hoffman was inspired by the fast-paced warfare tactics used by German soldiers during the Second World War. The strategy known as blitzkrieg was a combination of sudden attacks carried out simultaneously with the intent of disorganizing enemy troops and creating a psychological shock within their ranks. The strategy was very successful and Hoffman uses this idea when describing the startup industry and how scaling up rapidly can mean success or failure of startups.

Why is blitzscaling important to startups?

Startups have two major competitions, the first ones are bigger companies with more resources and the second ones are other startups. This is a precarious situation to be in because if a startup is moving too slowly, a bigger company could easily swoop in with a similar idea and take over the market. On the other hand, other startups with similar or even lesser resources but that are moving much faster could equally take over the market in no time.

This means that the moment a startup comes up with a scalable idea, it needs to move as fast as possible if it wants to beat the competition. This fast-paced approach is what Hoffman refers to as blitzscaling. Hoffman also revealed that one of the underlying reasons for the fast-paced startup ecosystem we see now is that we are in a networked age. We’re all interconnected and this globalization ensures the competition is not limited to your local markets only but also international markets.

Blitzscaling is both an offensive and defensive strategy. Offensive in the sense that a startup may need to hit certain milestones to become valuable and needs to do so as quickly as possible. Defensive in the sense that sometimes, startups are faced with a winner-take-all situation where the first to get to a customer wins. In both situations, scaling up fast gives the best possible outcome.

The three dimensions of scale

According to Hoffman, there are three dimensions of scale but most people focus on just two which are; growing revenue and growing customer base. The third dimension is scaling organisation and this is as important as the first two. Scaling an organization is increasing the organization’s capability and capacity to handle rapid growth. The size of an organization and its capacity will determine how many customers it can handle.

The different levels of scaling an organization;

To further illustrate this concept, Hoffman broke down the idea of scale into three stages or levels; Family level, Tribe level, Village level, City level, and Nation level.

At the family level, the company only has a few employees, usually in single digits, and at the tribe level, the company’s employees are usually in the tens. At the village level, the company may have hundreds of employees. A city level company has thousands of employees while a nation level company has tens of thousands of employees. Aside from the number of employees, there is also a difference in how certain functions such as financing, hiring, onboarding, and product marketing are carried out at each level.

The hard questions that need to be answered

Some of the difficult questions entrepreneurs must answer when blitzscaling are;

Which parts of the company to scale first? All aspects of the company will not be scaled at the same rate. So entrepreneurs must decide which departments to scale first. Typically this will be the customer service and sales departments.

How will you allocate talent? Knowing the strengths and weaknesses of your employees will be crucial at this point. Along with knowing how to allocate talents, you should also think about growing these talents. As the organization scales, employees may have to take on more responsibilities and that means they may need additional training. All of these must be taken into consideration.

How will you maintain the company’s culture? This is an important question considering the growing number of employees. It is easy to build and maintain a strong culture at the family and village level. However, once the company has scaled to the city and national level, maintaining a culture becomes quite challenging.

How will you communicate? Internal communication is another key to organizational growth. It determines how effectively information flows within the organization, and it also helps to create a strong bond among employees and strengthens organizational culture.

When should you start to blitzscale?

Looking at the different levels of scaling an organization can attain, Hoffman identified the right level for scaling. According to him, companies at the family level have barely scratched the surface and are still trying to figure out what their product or service is. At the tribe level, a company has started gaining momentum and may even have launched a product. This will most likely be the minimum viable product (MVP).

Most companies are ready to blitzscale once they get to either the tribe or village level because, at this point, they should have figured out their target market and may have also figured out the product-market fit. Hoffman believes it’s at this point a company should think of blitzscaling. Yes, there are still risks to be considered because once you make yourself known, the race is on. The competition will now be aware there’s a new market and will surely want to get a part or all of the market share.

This is where focus and speed are important for the startup. Big brands have other things to worry about, so even if they may want to compete, they usually aren’t so focused, and competing startups often lack momentum. Despite these advantages, some startups have been snuffed out because they got too comfortable and neglected the competition.

Challenges you may encounter during blitzscaling

Two major challenges startups face during blitzscaling are managerial inefficiency and capital intensity. Blitzscaling will require pulling together all the resources needed and moving the company ahead as fast as possible. This would mean making quick hiring decisions that would usually take longer and burning through cash quickly. Hoffman cites an example of hiring during a blitzscale.

Most times, the company does not go through the usual hiring process of interviewing and reviewing potential employees. They simply send an offer letter to those they believe fit the role they want in the company. Another challenge startups face during blitzscale is figuring out solutions to unique problems quickly. Startups that are first movers may have to confront unique challenges that have not been addressed and do so fast enough to avoid being caught off guard by the competition.

Having come so far,

You should know there is no one-size-fits-all approach to blitzscaling. Hoffman’s insightful ideas from his conversation with HBR have been well documented in this article. But this shouldn’t be considered a rule book but a guide on how to approach blitzscaling. As an entrepreneur, you’ll have to figure out a lot of things for yourself along the way. But it helps to have pointers and I hope this article will help.

Also read: Building A Successful Newsletter: Part 1 - Identifying Your Niche