Blitzscaling: The Barbarian Rules of a Boom and Four Stages of Battle

Normally, I still encourage entrepreneurs to follow the standard Lean Startup approach: understand needs and do something they feel passionate about. But there is that one-in-ten-thousand chance you happen to catch a boom. If you have that extraordinary luck, it is time to blitzscale. Blitzscaling, by LinkedIn founder Reid Hoffman, presents ideas and practices that explain questions that have puzzled and troubled many people in recent years. Recent examples include Didi, Meituan’s food delivery, internet finance, Pinduoduo, Kuaishou, and Douyin. Almost all grew from startups to giants within a few years. Every day and every step of their growth brought controversy, doubts, and predictions of failure. Blitzscaling matters because it identifies the critical practices by which companies that caught a boom competed, widened gaps, and determined winners. It also clarifies a principle: a boom calls for business rules different from those of ordinary times—rules we might even call “barbarian rules.” The barbarian rules Even today, many friends fondly remember early Yidao and its good experience. If interested, read 重新理解創業 (Rethinking Entrepreneurship, descriptive title). In May 2010, Zhou Hang put up 10 million of his own money to establish Yidao. He imagined courteous, articulate drivers serving China’s high-income customers. Yidao once designed a feature letting customers specify preferences while waiting for a car: whether they wanted to chat with the driver, their preferred music, and so on. These were touches usually associated with resort hotels. Zhou was a ride-hailing pioneer. Uber was founded three months later. Two years later, in 2012, Cheng Wei started Didi with 800,000. Why did Zhou lose this battle? In the book’s terms, when faced with a barbarian onslaught, he chose a civilized response: remain rational, develop steadily, and avoid a barbaric war. ---- What does Blitzscaling say? One central idea and four stages of battle. The central idea: when you catch a boom and face market uncertainty, prioritize speed rather than efficiency. Let me repeat: when the market suddenly before you is huge and uncertain, speed first, speed first, speed first. It matters enough to say three times. For speed, as long as you can still hold things together, accept chaos, tolerate poor management, overlook customer complaints, and raise excess capital. Let the flames burn! Speed takes priority. Capture the largest territory as fast as possible. Those are the barbarian rules. Hoffman’s proposition runs sharply against conventional wisdom. The rational elites represented by Zhou could not accept Didi and others burning money on subsidies, managing chaotically, duplicating development, and wasting resources. Zhou believed in business common sense, ethics, economic principles, and the widely accepted idea that growth without efficiency is slow suicide. But Didi won. Other blitzscaling companies subsequently followed almost the same pace and the same widely criticized path. Whenever a new market opens and a new continent enters a frontier war, the civilized almost always lose and the barbarians win. Where did the civilized go wrong? Blitzscaling’s answer is: the stage. Markets and companies at different stages need different ways of fighting. The book discusses four modes for four stages: pirates, marines, an army unifying the continent, and police. Steve Jobs famously said, “It is better to be a pirate than join the navy.” Many startups are indeed like pirates: they survive by taking risks and attacking. That sounds convoluted. Fishermen also take risks at sea, but they need not attack. Mountain bandits attack and rob proactively, but face relatively little risk living in the mountains. Pirates survive at sea by taking risks and attacking. Once exposed, they invite retaliation from stronger opponents. Many Silicon Valley startup teams think of themselves as pirates. They depend on flexibility and members’ familiarity and rapport, with few formal processes. They recognize opportunities and strike quickly, taking risks established companies cannot or will not take. This builds the startup’s initial resources. The beachhead After the rough-and-ready pirate phase, more resources require a larger organization to manage and operate them. You cannot drift forever; you need a base and roots. You move successively through the marine, army, and police stages. Marines take the beach, the army occupies the continent, and the police maintain order. Xiaomi’s early years of blitzscaling corresponded to marines taking a beachhead. Lei Jun described a famous Xiaomi management characteristic then as “demanagement.” Xiaomi had only three layers: senior executives, core supervisors, and employees. Its offices put product on one floor, marketing on another, hardware on another, and ecommerce on another, each with a founder in charge for direct execution all the way down. The partners did not interfere with one another. Unless something came up, they did not even know what the others were doing. Each made decisions in their own area, ensuring extraordinary speed. Does this resemble the Normandy landings in Saving Private Ryan? Each squad leads its people into gunfire. Rather than everyone being led by the CEO, everyone faces the same objective and the market’s fire, responding, feeding back, and adapting continuously. At Normandy, could you worry about who fired one more or one fewer round? Could you manage leanly as you would a police force? Impossible. The only aim at that stage is to move forward as fast as possible, break through, and take the position. Even moving at full speed may fail. But if you hesitate to fire at the beachhead to save ammunition, you will probably fail to take the position against a ferocious opponent. In recent blitz battles, positions were generally won or lost in precisely this way. Didi’s and Yidao’s attitudes toward subsidies marked a turning point in their development. Kuaishou’s and Douyin’s approaches to promotion also created a divide. Kuaishou once held that paying for promotion showed insufficient product appeal. It liked to say, “We have not spent a penny on promotion.” What did Zhang Yiming choose? During Chinese New Year 2019, he decided to use the holiday to give Douyin a major push. He asked for an aggressive promotion budget. The proposal was RMB100 million over eight days. He asked the CFO how much money could be mobilized at most. The answer was US$500 million. Zhang said to spend the entire US$500 million over eight days. Everyone had free time during those eight holiday days, and entertainment was central. That was how the gap opened between Douyin and Kuaishou. When two products have similar appeal, but one promotes decisively while the other refuses because burning money conflicts with its values, a gap in user numbers—and therefore competitiveness—naturally emerges. I have seen several similar cases in recent years. Education and recruitment products offered similar experiences. The difference was that one founder understood scale and set large-scale spending, user acquisition, and revenue in motion. The other clung to a purist view, unwilling or afraid to act during the promotion window because of spending concerns. Later, organic growth could not deliver users at scale, and thus could not produce revenue at scale. The company remained small, unwilling to give up but unable to grow, lingering and slowly dying. Such beachhead moments divide companies’ paths. In a newly opening large market, companies drawn actively or passively into blitz warfare generally face two fates: charge ahead wildly and grow aggressively, or lose resources and slowly die. Avoiding the barbarians while remaining rational and developing independently is difficult in such a frenzy. That is why Blitzscaling matters: its ideas relieve a group of entrepreneurs of blame. It tells those who survived: I made the right choice at that stage. I wasted resources, accumulated management debt, and left problems to clean up later. But that is how this stage is fought. On the fundamental choice, I was right. Army and police After marines storm the beach, they cannot fight that way forever. Blitzscaling also ends when market headroom becomes insufficient. Headroom means how many eligible users have yet to adopt the product. For smartphones, a 10% share means 90% headroom. Once everyone uses a smartphone, headroom depends on replacements. With insufficient headroom, blitzscaling must stop. We then see Xiaomi focus on management, reorganize, and introduce grades, moving from three layers to ten. Its management increasingly resembles an older organizational form: the army. What organizations resemble police? Mature ones such as banks and foreign companies. A substantial share of their employees mainly ensures that customers and business operate according to their established order. --- #得到 (Dedao) #梁寧增長思維30講 (Liang Ning’s 30 Lectures on Growth Thinking, descriptive title)