The fine art of upscaling
In 2004, when Tobi Lütke decided to sell snowboards online for his company Snowdevil, he found himself frustrated with the e-commerce software solutions available at the time. So, he coded the entire website from scratch and began selling the snowboards. As sales soared, he also started getting interest from people who wanted him to build the back-end software — payments, order processing and listings updates — for their own online stores. Taking the hint, Mr Lütke decided to shift his focus and pivoted sharply to building a global ecommerce platform for retailers. We now know this platform as Shopify.
This interesting anecdote illustrating the key principle of the art of the pivot features in the new book Masters of Scale written by Reid Hoffman, with June Cohen and Deron Triff. The book is based on the popular podcast Mr Hoffman hosts. Many of you may know him as the legendary founder of the professional networking site Linkedin and as an investor at Greylock. He is also the author of books such as The Alliance, The Start-up of You and Blitzscaling, the latter named after a word he coined and which refers to “the pursuit of aggressive growth by prioritising speed over efficiency; or risk-intelligent scaling.” In his current book, Mr Hoffman has distilled compelling ideas for scaling a company from his conversations with over 70 business leaders and the book has a chapter devoted to each of the 10 principles that serve as a guide to the reader.
For a book on scaling a business, it seems counterintuitive that it would include a chapter titled “Do Things That Don’t Scale”. Paul Graham, founder of Y-combinator, has talked about this topic and he once described it as doing things manually for your early customers. At Mr Graham’s nudging, Brian Chesky and Joe Gebbia, founders of Airbnb, went to New York to meet their local hosts and took pictures of the properties which they then uploaded to the site. They knew that this activity wouldn’t scale but they gained valuable feedback in the process. As Mr Hoffman notes, “Passionate feedback is the foundation of scale” and these home visits eventually proved to be Airbnb’s secret weapon for future expansion.
Another counterintuitive principle the book identifies is “Learn to Unlearn”. In the 1980s, nearly two decades after building Nike, Phil Knight sensed that his company was falling behind Reebok and “he’d have to unlearn everything he thought he knew about how to win.” He reached out to the advertising firm Wieden+kennedy, despite the fact that he hated advertising.
The result was the legendary ad campaign “Revolution” and the hit slogan “Just Do it”. The company also started emphasising design and Nike transformed itself from a shoe company to an iconic brand. The author underlines the key theme here by quoting the saying: “What got you here, won’t get you there”. He points out that we are constantly learning. Given the rapidly evolving tech and business landscape, one must embrace the concepts of being “an infinite leaner” and being “in permanent beta”.
Towards the end of the book, the author highlights the need for business to become a force for good. Integrating social impact with scale can yield overall positive results for the community at large. For instance, Bumble, the online dating firm, started with the objective of improving the online dating experience for women. With success and growth, Bumble has now launched a fund that provides early-stage investments for companies founded by women of colour and those from underrepresented groups. The author urges successful entrepreneurs to consider paying it forward by either investing in other start-ups, mentoring or encouraging others. He also reminds the reader: “You can always pivot to good”. This message is best savoured slowly.
The reader may also find some more flavoursome nuggets of information embedded in the pages. For example, the author speaks of the need for the founder to create time and space amidst her hectic daily schedules to open up herself to grand ideas, and it reveals how some entrepreneurs have managed to achieve this. From creating a “fake commute” to getting on a surfboard, different people have cultivated different means to tune into their best thoughts. The author himself admits to doing “his best thinking in cafes and other places with a little bit of bustle”.
Masters of Scale is written in accessible language and interspersed in each chapter are salient takeaways and insights neatly packaged as Reid’s Theories and Reid’s analysis. Though the advice may occasionally appear generic, even mawkish, the crisp storytelling and inspirational vignettes more than make up for that. In the end, the book offers rich rewards not just for the budding entrepreneur but also for the executive from the traditional company who wants to expand his division.