An ill-defined and oft-abused word in the startup ecosystem is blitzscaling. Earlier this year,
Airlift shuttered its doors, leading to the inevitable questions about the effectiveness and
relevance of blitzscaling in in Pakistan. So, this article discusses:
1. What’s blitzscaling?
2. What are the conditions necessary for blitzscaling?
3. How would one know if blitzscaling is working?
Let’s dig in.
What is blitzscaling?
Blitzscaling — a term first popularized by Reid Hoffman — means prioritizing growth above all costs for a startup (and has nothing to do with the Wehrmacht). And the costs are plenty. Aside from the predictable cash burn — often no more than handing out money to customers — such companies may cut back on the quality of hiring processes, operational efficiencies and building out internal checks and balances in the pursuit of scale.
Why would a company do this?
Because in some industries, there are no prizes for being the second or third largest player.
Such industries gravitate towards a natural monopoly or a duopoly structure. The trick is figuring out which industries have those fundamental microeconomics. Indeed, if one were to spend millions of dollars to blitzscale in an industry that gravitates towards allowing multiple players, the only predictable result is that everyone loses money, and some companies go out of business.
What are the conditions necessary for blitzscaling?
Reid Hoffman points to the following necessary conditions for blitzscaling:
1....
Read Full Story: https://profit.pakistantoday.com.pk/2022/08/23/blitzscaling/
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