E183 | How to Plan for and Execute Blitzscaling with Chris Yeh
Why do some organisations grow really quickly? How do they reach the scale that they do? If you’re looking for the secret sauce to make your company grow exponentially, then don’t miss Chris Yeh on this week’s episode of The Melting Pot.
Chris is a venture capitalist with Blitzscaling Ventures, educator at the Blitzscaling Academy, and co-author with LinkedIn founder Reid Hoffman, of bestselling books Alliance and Blitzscaling (among others).
In this latest episode, Chris explains why companies and employees lie to each other, why we all need to be having more grown up conversations, and why he wrote Blitzscaling.
He also discusses the algorithm his VC firm has built to score companies as they come to market looking for money, and shares his thoughts on the most interesting businesses to come to market in recent years (and the ones to avoid).
Download and listen today.
On today’s podcast:
- The lies employees and companies tell each other
- What Blitzscaling is
- Successful companies and ones to be wary of
- What makes a business attractive to investors
- The meaning of life in 60 seconds
- Book (Blitzscaling): Blitzscaling
- Podcast: The Chris Yeh Podcast
- Twitter – @chrisyeh
- LinkedIn – Chris Yeh
- Website – Chris Yeh
The secret sauce behind why some companies grow exponentially with Chris Yeh
Chris Yeh is the co-founder of the Blitzscaling Academy, an organisation which teaches individuals and organisations how to plan for and execute on hypergrowth, and of Blitzscaling Ventures, which invests in the world’s fastest-growing startups.
He’s also co-author (with Reid Hoffman, co-founder of LinkedIn) of best selling books Alliance and Blitzscaling.
Chris was the first investor in a company called Ustream, a live video pioneer. He helped the company raise, as their interim CEO, their first million dollars, before selling the company to IBM for $160 million in 2016.
Having been a part of Silicon Valley for so long, Chris decided to distil his knowledge into Alliance, a book he co-wrote with Reid Hoffman, exploring the ways that employees and companies, and employees and managers, relate to each other, and why it’s based on a lie.
“And that lie is which we all agree to go along with for whatever crazy reason is that when we join this company, we will loyally stay with this company until we retire, which may have been true once upon a time, but it’s completely false now.”
The manager is unlikely to be there in 10 years, says Chris, nor is the employee, yet everyone pretends that this union is a permanent state of affairs.
How did we get into this situation? Chris thinks it’s because we tend to talk about organisations as ‘family’, and as such we draw comparisons between how a family loves and supports one another, and how everyone in the business does as well.
And while families are bound together for life, companies and employees aren’t, yet we still get disappointed when employees leave.
The tour of duty
The core of the book, Alliance, is about the concept of the Tour of Duty, a phrase Chris and Reid borrowed from the military. Tour of duty means treating everyone as grown ups and admitting that almost every employment relationship is not going to last the length of someone’s career. That people are likely to work for multiple companies throughout their work life.
So, says Chris, let’s make sure that the time someone spends at a company is the best it can be, doing good for both the employee and the company. And you do that by carefully defining what the mission is that the employee is embarking on.
“What constitutes success in that mission? How does that mission help the company? And how does that mission help accelerate the employee’s career? And if you do that, then it’s very easy to know where you stand and to have that adult conversation.”
And having this adult conversation means that when the tour of duty ends, you set your company up to have a great relationship with that former employee. Because one of the most important elements of building a strong company brand is your current employees and your former employees.
Having this honesty and openness benefits everyone, says Chris. The employee doesn’t have to lie, they can say: ‘here’s what I’m looking to do,’ and the company isn’t miffed when someone hands in their notice because you knew all along what the employee was trying to accomplish during their time with you.
“Instead, we can have a relationship and have a conversation like adults and try to figure out the best way to actually both get what we want.”
In 2015, Reid Hoffman and Chris co-authored Blitzscaling. The world around them was changing rapidly – there were unicorns – a new term at the time meaning highly valued, privately held companies. Meanwhile there was a changing of the guard at the biggest, most valuable companies i.e. Google, Facebook etc. And they kept getting asked – what’s the secret of Silicon Valley? It isn’t foosball tables after all. And that inspired them to write a book that explores what powered the meteoric rise of the giants, and what they do differently:
“Our conclusion was, the reason why these technology companies were becoming so valuable so quickly, and becoming so powerful overall, is because technology and the networked world we live in today lends itself towards the winner taking most markets.”
So if the goal is to win one of these winner-takes-most markets, how do you do that? And the answer is by being the first one to reach critical scale:
“Because when you reach critical scale, various things like network effects kick in that cause you to become that enduring market leader, that one big winner that brings more value to the world, and also, by the way, tends to become very valuable.”
And that’s exactly what Blitzscaling is.
“We made up the word because it’s very useful to make up your own word, you can always tell when people are talking about you. And Blitzscaling refers to prioritising speed over efficiency, but it’s for the sake of winning a winner take most market.”
The thing that sets aside a Blitzscaling company from just a regular, good company is the winner takes most market dynamics that’s usually driven by network effects and the ability to have distribution that enables them to grow faster than the competition.
“Uber is a great example of value creation through Blitzscaling. But where the long term future is a little murky, I mean, this goes all the way back to in the early 2010s. And the endgame of Uber is obviously self-driving vehicles.”
Chris isn’t a fan of all companies that grow fast, there are some he’s actively wary of. For example, a company in a specific area within Web 3 called Play To Earn games. The concept behind a play to earn game is simple – it’s a video game, and while you’re playing the game you can earn virtual goods in the form of NFTs that are the equivalent of earning actual money, and you can convert these tokens to real life money.
But the question Chris hasn’t found the answer to is where’s the money coming from? Because players aren’t paying to play the game. So why are the tokens worth anything?
“What’s the economic model? I read this Harvard Business Review article about it. And it’s like, oh, so we made more tokens to pay the interest. And then the tokens become more valuable? Because the more people who have the tokens, the more valuable the token becomes? I’m like, well, you just said this weird magic thing that goes against all of economics.”
What makes a business attractive to investors
So what makes a business attractive to Chris? What do they have to do to be a viable investment?
“What I look for are businesses that are solving real problems with technology, because that’s the bottom line: technology enables us to do things that people could not do before. That it makes it easier to do things that were previously difficult, and allows us to make the world a better place.”
The meaning of life in 60 seconds
Finally, most of us focus on external motivations: we want to be rich, famous, good looking, but it turns out those things don’t make us happy.
And even if we achieve them, that still doesn’t make us happy. What really matters are intrinsic motivations and the most important ones are having great relationships with people you care about. Having a sense that you’re growing and having a sense that you’re giving back and helping something bigger than yourself.
That really is the bottom line – the meaning of life and if you can do those things, you’re going to be very happy, says Chris.
- Dan Pink – Power Of Regret
- Whitney Johnson – Smart Growth
- Dale Carnegie – How To Win Friends And Influence People
- Edward Dieci – Why Do We Do What We Do?
- Naomi Novik – A Deadly Education
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