This book is based on more than 100 interviews, most of them aired on Reid Hoffman’s podcast Masters of Scale. Mr. Hoffman is widely viewed as a highly successful investor, having co-founded LinkedIn, and is one of Silicon Valley’s most prolific angel investors who sits on a number of technological corporations’ boards in the area, including Microsoft. He is a partner of the leading venture firm Greylock Partners and is the author of several books on startups and scaling, including Blitzscaling (with Yeh).
The present book seems to be largely written by Cohen and Triff but is structured along similar lines as Mr. Hoffman’s webinar, and also with some 35 “insights” from Mr. Hoffman. Whoever might have contributed what to the book may be less significant however, in that the end result is both impressive and enlightening. Any entrepreneur with startup ambitions, as well as any serious venture investor should study what can be found between the covers of this book – it is a must read!
To develop a working concept of scaling is at the center to this book, where scaling is more than a science, but also a mindset, both in terms of a faith and a willingness to fail. Scaling requires knowledge about a specific business domain, insight regarding how a business might work, as well as inspiration.
Most entrepreneurs tend to receive primarily negative replies from potential investors. The author makes the point here that patience is critical, however, and that most no’s, in the end may lend inspiration to further improvements in given business models. Mr. Hoffman discusses five types of rejections from investors:
The “lazy” no – from ignorant, complacent investors. Nothing to learn here!
The “squirmy” no – where investors might want to say “yes”, and often say “yes, but”, but end up saying “no”, in the end. Here there might be a lot to learn from such struggling, doubtful investors.
The affirmative no – here an investor might have some clear principles, which, in turn, might lead to a no. Again, not much to be learnt.
The honest no – this might be seen as a clear sign to stop, and to try something else.
The unhelpful no – an investor might simply be totally negative, and such individuals should be avoided.
The early phase of a project, i.e., before any scaling attempts, should focus a lot on understanding passionate feedbacks from those few customers that typically might appreciate one’s offering. These must be served. These customers often have the clue to scaling later on. Find them and ignore all the other customers.
To build trust is key. This typically requires hands-on responses to their suggestions and making specific improvements to what those few suggest. To forge a strong connection with these few customers is important And, once more, one should ignore the many others!
A “big” idea, the foundation for a new venture, almost never comes as an “a-ha” idea. Rather, it is typically something one would have actively looked for, testing it or them out on the network of people around the entrepreneur. And success is never evitable. It is thus key to never give up! Note that a good “big” idea often tends to be relatively simple.
“Big” ideas typically come from entrepreneurs interacting with others, who might mount effective challenges all in the network setting. The cliché that a successful entrepreneur should be working on this in splendid isolation, alone, is mostly false. Good feedback might after come from prospective investors. It is important to ask, “what is wrong with my idea”, not merely “what do you think”.
Good ideas may actually be nearby, virtually “hidden in the closet”, or stemming from being unsatisfied, even annoyed, regarding how a conventional approach might function. According to Mr. Hoffman, it is key to look for underlying patterns that might support an idea. Main trends might be noticed and built on. And patterns might be “translated” into business ideas. As the lead author stresses, speed in doing this is paramount. And it should always be kept in mind that a good idea might be hidden. What was perhaps initially considered to be a “bad” idea, might, in the end, be “good”.
Successful entrepreneurs typically will have different “places” to “think big”, in the car, in a café, on one’s running machine, etc. What matters is to be intentional and to test these embryonic thoughts out on critical members of one’s network.
The book’s lead author has pointed out that no’s can often yield valuable insights for the development of a good idea. Early crises when it comes to a new business might have such effects, likewise. And, once more, good business ideas typically do not have to be all that fundamental, but more frequently rather quite similar to common sense, i.e., no need to search for “reinventing the wheel”.
The culture in a new business venture is usually of critical importance, and the entrepreneur often provides significant impact here. The entrepreneur should avoid making a few common mistakes in this respect:
Do not ignore the cultural dimension but work on it from the start. It can then more easily be “molded” in relatively small teams.
Culture is always evolving, reflecting the people who work in the company. They define the firm’s culture, not some more or less abstract dictum. Watch out for misplaced early hires and try to hire what Mr. Hoffman calls “co-founders”.
Thus, be cognizant to cultural impacts from hiring and try to avoid the inclusion of new members in the team that might have a “dysfunctional” culture.
Always try to develop cognitive diversity, an eclectic culture.
Try to build a culture that is able to evolve, always asking “what is best for the company”.
Speed is essential when growing. The lead author quotes Peter Thiel; as always tries to seize the initiative, so as to outgrow competition. This typically calls for making key decisions rapidly. What may be particularly important is to try to figure out how many resources and efforts to put on one’s existing business versus new products versus new markets. It is important to try to direct one’s growth in a productive way. Strategy means choice!
There will always be problems, even mini crises, popping up. Mr. Hoffman is clear on how to handle such “fires” that might reflect in efficiencies – ignore them for now. As he says in his other book Blitzscaling, “let fires burn”. At some point in time, of course such mini crises should be dealt with, but only if there is a perceived probability of a disaster going up! And never panic!
To go for ultra-rapid growth virtually always requires a lot of capital. There may be new opportunities coming up, in addition, that would then call for even more capital, at least if such opportunities are to be pursued. The bottom line therefore would be that an entrepreneur should always attempt to raise more capital than the minimum he/she might need at the moment.
To try to identify venture capital firms that could actually add value in terms of helpful advice, and not merely funding, might be key. According to the lead author, most venture capitalists tend to say no, and, say, only around 10% of this group might be ready to provide both money and other value. There will typically be need for more funds at later stages. To be able to secure backing from a venture capital firm that might indeed be comfortable with “going the full distance” could therefore be particularly critical. Such a venture capitalist will typically place much emphasis on an entrepreneur’s personal abilities and track record.
Most ventures enter into unfamiliar territories – new approaches for serving the customers, new channels of distribution, unfamiliar territories, etc. Things might typically often not work out entirely as expected. Thus, to unlearn fast becomes particularly critical, often to abandon much of what you know. We are all proud of our successes. But to merely repeat what has worked in the past may typically not be realistic. Conditions change frequently. So, for the entrepreneur to always ask “what to do better, and what to drop” is central. It is a constant race for new learning. As Hoffman says, we should “learn it all” not “know it all”.
Experimentation is of course a key part of this. Speed is also critical, so as to be able to learn quickly, and thus be able to improve on its product or service in a speedy way. To be embarrassed regarding what one might be in a position to offer customers at a particular stage does not work. One’s offerings always might become better. Thus, one should not be embarrassed about showing one’s products and services at early stages. It is all about learning, so as to be able to move away from what one might have “just now”. Experimentation is critical, and an open mind is essential – no vested interests!
Competitors are important and should be followed closely. They may come up with various statements that they, in the end, do not follow, however. To try not to be confused with such potentially distracting statements is key. This may indeed also be so when it comes to one’s customers.
To focus on a relatively small set of “trusted” customers, to treat them as scouts, might be particularly effective. To try to understand how to serve this relatively small group might be particularly critical. What do they want? What do this sub-group do? And how might they cheat?
To handle price increases is typically a particularly challenging issue, so as to avoid negative reactions, that they may be treated in what they may think might be unfair, unjustified manners. To provide something more, so as to be able to generate additional cash-flow in complementary manners, seems important. This may mean to offer additional services, for instance, but with a higher price tag. To avoid what Hoffman labels “pricing riots” or “mob reactions” might thereby be avoided.
To be able to obtain relatively reliable customer data is of course key, but this may often be hard. To test one’s theories of the human behavior of one’s main customer might often be an intuitional issue. Again, be sensitive to the customers, so as to react when necessary early, and with speed.
So-called “pivoting” is the next topic in the book. This involves generally dramatically changing ones’ product/service offering. Pivoting was extensively discussed in Hoffman’s earlier book Blitzscaling. Effective pivoting is essential for enhancing speedy business growth. Pivoting thus involves refocusing, so as to go after a new opportunity, and to leave behind a now old, more or less useless idea. The entire management team must, of course, be behind such a pivot. The core team must go for it. Again, strategy means choice here. It is thus not realistic to both continue with the old direction and to embrace a pivot. One must abandon the old.
When should one pivot? Ideally, one should do this when one might see something exceptional coming, such as the emergence of the COVID-19 pandemic. To make fast changes in such situations is critical, and, of course, try to avoid being forced to pivot only at such late stages when available financial resources might be more or less depleted.
Mr. Hoffman points out that pivoting might at times lead to dysfunctional effects when it comes to some of the firm’s employees. He points out, however, that while a “human” approach is always important, it is also to recognize that a healthy business, due to successful pivoting, in the end might tend to benefit the long-term well-being of one’s employees. Pivoting in a crisis might be difficult indeed, but best for all in the end.
Effective leadership is, of course, key to successful pivoting, “setting the drumbeat”, as Mr. Hoffman says. He stresses that it may be particularly key to focus on how to achieve a particular strategy, i.e., keep a constant drumbeat. When a company grows, in particular, a consistent focus by the leader on preserving the way for how a business is being operated is perhaps especially critical.
Debates, so-called Socratic thinking, is key. But some people tend to be more comfortable with this than others, of course. Debating should thus be tailored to such realities. Constructive conflict is typically good, however.
Mr. Hoffman summarizes what he sees as particularly important leadership challenges as follows:
Be an effective “drum major”
Be compassionate
Be thankful
Be a good connector, among many people in one’s network
Be a steady captain, to neutralize “pirates”
Develop one’s people to become stars!
In reading the book’s conclusions, a key issue raised is how to make good even better, and thus, which walls to break down – consisting of prejudice, inequality and lazy assumptions. It is important here to try to create changes that one would want to see. To align one’s firms’ mission with what might be a broadly shared motivation among many might be a precondition for successful crowdsourcing, for instance, and thus also for rapid scaling. Mr. Hoffman suggests that pivoting should always be made “for the good”, including going for add-on focuses. It is all about providing a healthy entrepreneurial mindset.
This reviewer finds this unusual book to be not only worthwhile to read, but absolutely essential. The recommendation is to study it carefully.
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