by Peter High |
Reid Hoffman is one of the legends of Silicon Valley, having been part of two of the most influential tech companies: PayPal and LinkedIn. His start in business came much earlier, however, for as a precocious 12 year old, he found his way into the offices of a company called Chaosium, which produced one of his favorite video games, RuneQuest. He advised the CEO on improvements he should make to the game, and was given other assignments to help improve the company's games.
Hoffman's first attempt at entrepreneurship, a social media company called SocialNet, failed, but it would provide invaluable insights that he would use in founding LinkedIn years later. In the interregnum between those experiences, Hoffman would become a member of the "PayPal mafia," an extraordinary group of entrepreneurs who were successful in launching one of the original fintech companies. He cemented his legacy as an entrepreneur identified by his first name only through LinkedIn.
Hoffman has gone on to become a successful investor with Greylock Partners, having invested in companies such as Airbnb, Aurora, and Convoy, among others. He shares the lessons from across his career in his book, Blitzscaling: The Lightning-Fast Path to Building Massively Valuable Companies. He shares lessons from the book and from his career in this in depth interview.
(To listen to an unabridged podcast version of this interview, please click this link. This is the 32nd interview in the Tech Influencers series. To listen to past interviews with the likes of former Mexican President Vicente Fox, Sal Khan, Sebastian Thrun, Steve Case, Craig Newmark, Stewart Butterfield, and Meg Whitman, please visit this link. To read future articles in this series, please follow me on on Twitter @PeterAHigh.)
Peter High: You told a great story in a recent episode of Masters of Scaleabout your love of gaming. There was a gaming company called Chaosium that had a game called RuneQuest, which you were obsessed with as a kid. Through a friend of yours who lived near the offices of the organization, you were able to get some feedback about the game to the executives. Could you please re-tell that story?
Reid Hoffman: Many kids have total focus obsessions, and when I was 12, fantasy role-playing games were mine. My friend told me, "The offices of the gaming company that we play are in my neighborhood, and I can go in.” The company was not supposed to have offices in a residential neighborhood, so they were nice to the neighbors. In response, I asked him if I could go in with him. I had previously looked at one of the games the company had published, and I believed it was done wrong because the story arc needed to be different, the math was bad in some places, and the gameplay design needed to be fixed. I was a geek, and at the time, fantasy role-playing was on my mind all day long. With these edits in mind, I followed my friend in, and they sarcastically felt, "Great; 12-year-olds." I told them the edits that I had in mind, and I can still see Steve Perrin rolling his eyes. To his credit, he opened what I had, and he said, "Interesting. Alright, I have something else that I am working on, would you mind taking a look at it for us?" I took it home on that Wednesday, I worked on it for the next four days straight, and I went back in on Monday because I did not have school. He said, "This is great work. I am going to give you a check." I took my first check home, which shifted my father's thinking from, "I have lost my son to this weird cult fantasy role-playing system," to, "Maybe this is a job." I stayed fairly closely connected to Chaosium for a few years, and I even had coffee with one of the founders about five years back to catch up. The experience was a delightful journey that showed me how I could start to express my creativity and be entrepreneurial.
High: It is amazing to think of a 12-year-old having the chutzpah to do that. I can only imagine the confidence you gained from this.
Hoffman: This may be a bit strange, but I did not feel proud, arrogant, nor insecure. If he told me, "This feedback is totally wrong," I would have asked why, and I would use it as a learning opportunity. Everything else was extraneous because all I cared about was doing it well. For me, part of what made fantasy role-playing games interesting was that it was a way to play being adults. It was about determining, "What is the narrative arc of how we are going on the hero's journey of our lives?” That was what made me so obsessed with the game, so once I started becoming an adult and going through my own life, I felt as if I did not need the game anymore.
High: There are many entrepreneurs who go into business with the advantage of never having been in that particular industry before. As a result, there is no inherited logic that they are adhering to, and there are no shibboleths that they bow to. This allows them to view a problem that has been around for a while in a completely different light. As I am reflecting on your story, you had a similar advantage because you did not know enough to be aware that what you were doing was abnormal.
Hoffman: Exactly. Sometimes a lack of knowledge is extremely helpful. The nature of a problem changes when the experts do not realize it has changed. A personal experience on the entrepreneurial side was PayPal. When we launched PayPal, none of us knew what a credit card chargeback was because we were incredibly out of touch with how the financial system operated. We did not know that the reason no one tried to do something similar to PayPal was that they knew about fraud, criminal agents, and industries that were potentially trying to steal money from credit cards. We did not know about any of that, so we simply thought it would be a useful service. Fortunately for us, we were quick learners because we would have been dead otherwise.
That freshness of approach allowed us to experiment in ways that the traditional industry did not try. It is likely that when the traditional industry learned how to deal with fraud, the new tools were not yet available. We learned and applied the new tools, and we drove out halfway into a minefield. Once you are halfway into a minefield, you may as well go all the way.
High: Prior to LinkedIn, you started a company called SocialNet. Could you talk about why that business did not succeed?
Hoffman: I believe the idea was incomplete. This was back when the Internet was considered a weird new space that was totally different. At that time, people would go into cyberspace, and they would adopt a pseudonym. People went there because it was this dangerous wild west space. However, what truly matters to us is how we go through our personal, romantic, and work life, and I knew that at SocialNet. The idea around SocialNet was trying to figure out how to make a great bi-directional matching system that was a platform across all of the contexts of human life. That is still a useful idea, and there may still be some way that gets expressed in a company. However, part of successfully starting a company is having some knowledge or a theory of how a business is grown in the space. The mistake I made was not thinking of the Internet as an entirely new medium. How you go to market and acquire your customers is just as important as the business you construct. I thought all that mattered was having a genius new business, and from there, all I would have to do was go and traditionally market it.
At SocialNet, we had partnerships with newspapers and magazines. Specifically, we put a great deal of effort into a partnership with a newspaper in Arizona. Despite all the hard work we put in, we only got six signups from that partnership in the first month. When I was debriefing with my team, I told them that if we had taken the time and energy that we put into the partnership and simply open the phonebook and called people down the white pages, that we would have signed up many more people. That is an example of why you need to know what your go to market strategy should be. The failures at SocialNet were around not comprehending the dynamics of search engine optimization. We did not understand the patterns that worked in that space. Further, sometimes in the early Internet, there was a natural growth because people would be intrigued by something new on the web. This experience taught me that as an entrepreneur, you need to have as firm a grasp on your go to market strategy as your product. I needed to learn how to be an entrepreneur.
High: Prior to launching LinkedIn, Peter Thiel convinced you to stay with PayPal before going off to launch your own business. What was it about that opportunity that pushed you to sideline the idea you had been thinking about?
Hoffman: Max Levchin and Peter, who met through a talk that Peter gave at Stanford, came up with the idea of encryption on mobile phones as an interesting platform. Each of them decided to have their closest entrepreneurial friend on the board to help them. I was Peter's friend, and Scott Bannister was Max's. They came to me and said, "We have this great idea, we want to start a company, you have been in the startup space for a while, so will you come and help us?" My answer was, "You are a close friend, I am super happy to go down this path with you, but it is a terrible idea that is never going to work." This is because getting people to generically adopt an encryption platform on their mobile device with the theory that people would start using digital cash on their phone was arcanely difficult to do. This was back in the era of flip phones, so this was not similar to driving through a landmine field, but it was similar to lining up the landmines and deliberately driving over each one of them. From this experience, I learned that super smart, hard-driving talent that is capable of learning and pivoting can go places. On the board, they went from an encryption platform on flip phones to encryption technology on PalmPilots to an economic payment service on PalmPilots and the web. They quickly focused on the web, which was beginning to take off. Peter's pitch to me was, "We got traction, we have done a ton of pivoting, and we found our way to our product market fit.” He told me it was a better tour of duty for me to join PayPal first and then do whatever else I wanted to. I said in response, "Yes, product market fit truly matters, that is difficult to find, and I will help." That is when I stepped off the board and joined the company full-time.
High: One of the keys to LinkedIn is carving out the space to connect people, especially in a business context. LinkedIn allows individuals to develop and leverage a great network for the pursuit of ideas and to find new colleagues. The network that was developed within PayPal is almost miraculous. The group consisted of extraordinary entrepreneurs, such as yourself, Peter Thiel, Max Levchin, and Elon Musk. What was it about that idea that brought these people together, and to what extent did that experience become instrumental in launching all of the ideas that have come since?
Hoffman: Max, Peter, and later Elon learned a great deal from me, and I learned a great deal from them. In particular, one of Peter and Max's philosophies from the early stages is now part of my tool chest. When I fund startups at Greylock Partners and when I build companies myself, I borrow their idea of the learning curve. As opposed to hiring someone who had 10+ years of experience doing something similar, they put together a group of people who were voracious and quick learners. These people, who were typically in their late twenties, had baseline engineering skills, but they wanted the job to prove themselves because they believed it was their shot. This applied to me as well because I was still a young kid who wanted to show that I could do what was important to the world. While I wanted to make that contribution, I had not yet proven that I could do so.
On top of this, when you have a 10-20 year plan for where the company needs to get, many people feel as if they did what they needed to do by the end. PayPal got acquired in just three years, so there was all this talent that still felt that they needed to prove themselves. These people had some money in their pocket because the company worked. Moreover, in 2002, the general feeling in Silicon Valley was that the Internet was over and played out. People thought that the big players, such as Yahoo!, Amazon, Google, eBay, and PayPal, had already arrived. However, many of us from PayPal were contrarian enough to say, "No. While it might be in a dip, it is just getting started." We had the ability to angel invest together and talk about which ideas we were going after, so we were all in communication. We all believed that we had more to do because the Internet was just getting started.
High: Talk a bit about the inception of LinkedIn, which was next for you after PayPal. What was different between SocialNet and LinkedIn?
Hoffman: I was able to reflect on what worked and what did not work at SocialNet. At SocialNet, we emphasized the dating service because we knew that was what people would most naturally want. SocialNet was a platform across areas, but we were more similar to Match.com. Everyone knows that single people are more willing to put the effort in to find someone to connect with. I learned that as an entrepreneur, you have to do what people think is crazy at the time and what they will think is obvious several years down the line. That is the contrarian and the right part of it. Rather than emphasizing the dating part, I had to focus on the professional and economic side. This is the side where people would say, "What? I know your network matters, but those networking people who introduce themselves and give me their card at a cocktail party make me uncomfortable." That said, I had to focus on that side because it involves the transformation of people’s economic lives. Once you begin to prove to people how important and valuable that is to them, you are then unique in a category, rather than competing against dozens of players. From there, I applied much of what I learned at SocialNet. These lessons included using your real identity, rather than an avatar, using real relationships, and having vitality as a core measure. I had these ideas when I was exiting SocialNet, but Peter convinced me to stay at PayPal before I was able to chase them. When PayPal was bought by eBay, I realized that the idea was still there. Because of the contrarians, people had yet to occupy that space. As I began to get into it, I realized that people were just beginning to do the same because there were enterprise versions. Specifically, there were ideas where the company would drive your social network. This included ZeroDegrees, Spoke, and Visible Contacts. When I saw that others were beginning to occupy the space, I knew that I needed to go right then and fast.
High: I want to pivot into your book, Blitzscaling. In the book, you talk about having an offensive aspect to this, but you also say to avoid the other blitzscalers. You were an early investor in Facebook, and while you are not the same company, you were generally in similar situations. How did you think about the evolution of your idea while there was another one that was likewise blitzscaling?
Hoffman: There was definitely somewhat of a difficult shadow in the early days. First, there was Friendster, then Myspace, then Facebook. In each case, the height and volume of the social network arc were so large that when we launched LinkedIn, the only way we could get journalists to cover us was that we were Friendster but for business. Journalists saw that there were a bunch of people using Friendster, and we represented something else, the “business thingy.” While Friendster for business did not make much sense, it is better to have press than not, so we were totally fine with them talking about us that way.
People began realizing that, in fact, they had different expressions of their identity. Who they connected with, how they filled out their profile, how they represented themselves, and what they shared was dependent on the platform. There are many people in their work lives that they would not be sharing family and vacation pictures with, and there many people from their personal life that they would not want to be connecting with in their professional life. For example, if someone was trying to make clear what their professional skills are, it would look odd in a social context. It took a while to realize that. This was partially because entrepreneurs tend to go after the biggest possible idea. If an entrepreneur went to the social network, people would say, "Professional networks are included, but they are just a small part of what we do." This represents the small vertical that will go away versus a distinct network.
There were at least three times during the LinkedIn path where a meme that essentially declared LinkedIn dead was accepted as true in the business press. The meme was of the moon orbiting the Earth, which suggested that LinkedIn was over. Specifically, the business press was suggesting that Facebook had this new idea. The biggest arc of that was the launch of its platform and social graph at F8 where they said that "this is the platform that all social networks are going to be on." People believed that LinkedIn was just going to be built there. In a short period of time, we had to make some difficult decisions around where we wanted to make our strategic bets. In each case, I made the right calls and said, "No, the Facebook platform is the wrong network, it is the wrong identity system, and it is the wrong social contract." I knew there would be 30 new developments that would try to be LinkedIn on the Facebook platform. That said, we believed that none of them were going to work. We monitored, watched, and we fundamentally continued to allocate all our resources to continue building. Within about three months, in each of these cases, we turned out to be correct, and what the business press was saying about us was overturned.
High: You have described blitzscaling as prioritizing speed over efficiency in an environment of uncertainty. Could you talk a bit about that?
Hoffman: Being the first to scale is extremely important. One of the ways we try to make this visceral for people is through a great movie and play called Glengarry Glen Ross. In an increasingly hyper-connected world, there are more Glengarry Glen Ross markets. In the movie, there is a sales contest, and Alec Baldwin's character says if you get first place, the prize is a Cadillac, the second prize is steak knives, and the third prize is you are fired. The general awards within the Glengarry Glen Ross markets follow this. It truly matters if you are the first to scale because the first to scale represents winning a Cadillac. There can sometimes be room for second, and steak knives are a decent prize. However, if you get the third prize, you are going to be fired. Since the first to get there is the Cadillac, you have to determine what you have to do to prioritize speed. This does not just mean getting big fast because you want to have a valuable business at the end. Instead of just having a blind adhesion to size, you need to determine which components put you in the best possible position. For example, if you scale fast, but you do not have network effects, it likely will not play out that well for you or for society.
The book explains lessons that are not taught at business schools. Instead, they are generally learned through the network of learning, experience, and trial and error within Silicon Valley, China, and some other places. The paradox of moving as fast as possible to get to scale is that you lose efficiency. Part of the environment of uncertainty is that you frequently may not know what your customer acquisition cost is, what your long-term value is, what your unit economics are, and sometimes, what your business model is. When we were building PayPal, we were iterating through whether we were a bank, whether we were doing loans, or something totally different. When we got down to it, we realized that we only had one shot, but for a while, we did not fully know. While you may not know exactly what you are doing, you know that the player who gets to the network first is the player who is going to have the best shot to create the world transforming company. You need to determine how you can make that happen. The book is a combination of theory, techniques, and stories from some of these iconic companies, including LinkedIn and PayPal, that have made that journey.
High: The nine counterintuitive rules of blitzscaling include embracing chaos, hiring Ms. Right Now rather than Ms. Right, practicing bad management, launching a product that embarrasses you, and letting fires burn. A special type of leader is required who can lead through that and motivate a team so they do not get disheartened. It seems as if you need to focus on your culture and on who you are hiring to be able to thrive in an environment such as that. Could you elaborate on this?
Hoffman: You have to have a high willingness to make and survive mistakes, learn from them quickly, change your mind, and have an infinite learning curve. Part of the reason we wrote the book is that there were two aspects that we were trying to help companies do, even those in Silicon Valley who were already doing so.
We do not suggest embracing all chaos, but instead, you have to tolerate certain chaos. You have to accept that you are going to get chaos in certain areas because you are trying to move quickly. What matters is how you are going to make a judgment on that. We wanted to distribute the book across the employees. For example, when Airbnb CEO Brian Chesky read the book, he bought it for his entire executive staff, and they bought it for their teams. The book helps create the culture of, "Here is what is ok, here is what we will fix later, and here is what we need to fix now." That notion was a personal delight to me because this was not just directed towards the general business audience, but it is how the technology companies of the future are going to be built. Further, these are the ways to see how technology trends are coming, the ways to think about how you need to play when you are in a Glengarry Glen Ross market, and they even apply to Silicon Valley people;
We have a chapter called responsible blitzscaling in the book. As you are growing and becoming multi-threaded, you need to determine how you pre-identify the risks that may be important for your customers and for society. From there, you need to start investing in these risks early. You are not going to be risk-free, but you need to determine how you are going to be responsible as you are blitzscaling. In a super competitive global market, you do not want the company with no ethics moving extremely fast while the ones who take their social responsibilities seriously go extremely slow. If that is the case, only the unethical ones will be left. The question is how to get the ethical fast ones, how to blend that, and how to add ethics to your tool kit while not slowing down.
Regarding your talent question, there needs to be a willingness to know that you are operating in an environment of risk and uncertainty, which means that you will inevitably fail sometimes. It is impossible to not fail when you have risk and uncertainty. You have to be focused on what the key aspects are to win the game, and you have to be constantly correcting. Sometimes this means you will not succeed, but you will have a higher probability of doing so by being part of this infinite learning curve.
High: What is the role of strategy in this type of environment, and how does that differ from past decades?
Hoffman: Strategy always has to be set against how the pace of the competitive environment looks. For example, if you have an industrial age where you build a plant, and your scope is for decades, then obviously your strategy should be measured in that type of time frame. Usually, the time frame is measured by competition and the speed they are moving at. That is because if you are moving at a slower speed, you will almost always lose. You can have a more clever strategy and the competition is not building the long-term the way it should, and while it can play out, it is extremely brittle. This is similar to putting all of your chips on a roulette table on one or two numbers.
There is still a deep role for strategy because you have to determine what is truly going on in the game, the key priorities you should and should not work on, what you have to get right earlier than your competition, how you prioritize different customers, which risk trade-offs you are willing to take, and how much you are going to invest in your product before you show it off. One part of strategy that many people mistake is that as the time frames get compressed, the ability to quickly react to opportunity becomes a much more important part of strategy. When you are on a decade-long strategy, it is extremely hard to have the visibility of how the decade opportunity looks. Because of this, you are more planning from your current assets, and you are thinking it through from your current position out while still looking at your competition. However, when you are in a market that moves in weeks and months, part of your strategy is about paying attention to what is going on around you. By doing so, you can learn and adapt to aspects that are unpredictable regarding which product may work, which technology might come onto the scene, or what your competitors are doing. That ability to respond and adjust quickly needs to be part of your toolkit, including your strategy toolkit. That becomes a different conception of how strategy plays. One of the Masters of Scaleideas we talk about is the OODA [observe, orient, decide, act] loop as one of the key ways to think about that.
High: Strategy innovation is one of three techniques that you talk about in your book. The other two were business model innovation and management innovation. Could you elaborate on both of these?
Hoffman: It is important to be connected to business model innovation when you are blitzscaling. This is because you are usually bringing in a huge amount of capital, both financial and human, and you are typically deploying that capital in a ridiculously efficient way. For example, you may be hiring twice as many people as usual over a six-month span. Nobody can do that without massive chaos and inefficiency. You need to recognize that on the other side, you are likely to have a truly interesting business model. While you may be putting the components in now, you should at least have a theory of how it may play out. One of the benefits of a business model built on a network is that the network tends to be super difficult to rebuild, so you can build out your business model on top of it. When I was giving my series A and series B pitch to Greylock for LinkedIn, I argued that it was good that we had not done revenue yet. That was because we wanted to be totally focused on building the network first, and that showed that we knew what we were doing. We would get to the revenue part later. My advice to entrepreneurs is to take what your audience might believe are weaknesses and position them as strengths. If you do not know how to do that, that makes you weaker as an entrepreneur. Typically, in the consumer internet space, each massive company at scale has a unique business model. In the LinkedIn case, our model is at the intersection of enterprise and consumer with the network as an underlier. In the social network case, it tends to be about the sponsored ads and the feed. It is important to think about what your model is going to be even if the implementation is years into it. For example, Google did not have AdWords when they were starting because they thought they were going to be enterprise search. However, they were always thinking about how their plan B, C, or D could look, so they had AdWords in mind for a while. When they realized they needed to do advertising, they saw that they already had some great ideas on how to do that and build it out.
Regarding management innovation, when you are building a company, it is key to realize that you are all going on a learning journey together. You likely do not have the time to read books, listen to podcasts, and do coursework, so it is not just about learning as individuals. Instead, you need to learn together and set up the intensity of that learning environment. You want to hire executives who are learners, and you want to have a culture which spreads explicit information and learning as much as possible. This should be in terms of operating fast while sharing what you are learning, what you are changing, and what you are doing. For example, at PayPal, I learned from Peter that you have to quickly make decisions. As a result, a tool that I have, which I did not have at SocialNet, was that when you are confronted with every single decision, you need to think about what decision you would make on the spot. You do not have time to talk to people about it, so you need to think fast. This could involve hiring somebody or making a complete shift in your business model. From there, you need to figure out how the cost curve looks when you go out and talk to specific people, research a certain idea, or understand something specific. You need to determine the time frame that you have, the cost-benefit of additional ideas you anticipate, and whether you should make the decision now or delay it for something specific. The speed in which you make these decisions are key, so you want a culture of quickly making decisions together.
Culture is super important in businesses, and culture can be different depending on the organization. A culture can be, "We are all high IQ, we can tell each other whether we are idiots, that is how we operate, and that is who we are." People who want to be part of that culture will join that company, while people who are A-players will not. Another culture can be about being professional, studying ideas deeply, only arguing on the basis of data, and making sure that everyone's voice is heard. All of these are viable business cultures. There are a few cultural tests.
- Companies should not hire all A-players. Instead, you have to identify the unique A-players who you want to form a coherent team around;
- Culture is the worst behavior that you will tolerate, which is the downside of culture. You have to determine what that standard is. You may allow people to be a little snippy and angry because while that is not ideal, it is not the worst that could happen. In the book, we say we tolerate bad management, but we do not tolerate criminal management. If you have a sexual harassment problem in your company, stamp it out. That is unacceptable, and you would rather lose than tolerate that.
High: As an investor, how do you determine if somebody who has an idea and a small team have the necessary ingredients to blitzscale?
Hoffman: It is always a risk assessment, so there is no set of predictors. Some of the questions involve if they are hungry for the win, if they are savvy about learning, and if they truly care a great deal about the mission they are on as it relates to bettering society.
High: In your book, you mention that China is the land of blitzscaling. It was not too long ago that people hypothesized that China did not have the necessary ingredients to truly compete with Silicon Valley. Arguments ranged from the fact that China is not an immigrant culture, their venture culture was not as mature, and their risk tolerance was different. What are some of the aspects of China that impressed you such that you gave it this moniker?
Hoffman: Before I traveled to China, whenever I left Silicon Valley, everything seemed to move in slow motion. While others claimed to move faster, China truly does so. The speed at which China moves is off the charts. When they have a corporate strategy priority, they will highlight that it is important, and they will start three different groups in three different cities to compete against each other because they want one of them to win. This idea sounds crazy because the normal management theory here is to put your best people on it and take your shot. The idea of funding three different groups is insane because companies cannot fund three groups in three locations. Further, they do not have the raw talent to do so. On the contrary, having a massive amount of talent allows for that in China.
Everything that is written in the tech business world in English is translated to Chinese within minutes after it is written. On the flip side, if something is written in Chinese, we never translate it to English. China has an intensity of learning and drawing from anywhere.
While they are not immigrants, the Chinese are hungry to win. When I first met Lei Jun, the founder of Xiaomi, he told me that Silicon Valley entrepreneurs are lazy. I said to him, "Really? I do not feel lazy." He told me their policy is 9-9-6, which means for six days a week, you are discoverable at your desk from 9 AM to 9 PM. When I talked to some of the executives who worked for him, they told me that it was not atypical for them to be asleep at midnight, have the phone ring, and have to come into the office right then because a decision was being made. I do not believe that is sustainable, but it is competitively strong and powerful. Further, it leads to a set of interesting blitzscaling techniques. Blitzscaling is always a phase, so it is never forever. For new companies, it is most often the stage in which you establish your ecosystem.
High: Could you elaborate on the application of blitzscaling concepts to larger organizations?
Hoffman: It is certainly doable. For example, Amazon was thought to be just a bookstore, but they launched AWS. Not to pick on the business media too much, but the cover of many business magazines said that Amazon should just focus on the store. Of course, AWS is the new revolution, so it is clear that launching new ideas is possible. Through this, you must have buy-in from your investors in order to do blitzscaling. Having this allows you to go on extraordinary journeys, such as Elon Musk's with Tesla. When you are a traditional company and someone else is blitzscaling in an area that matters to you, it comes down to a judgment call. If you cannot blitzscale, you have to determine what they are going to do because it is going to have a big impact. While they could blow themselves up, you are going to have to deal with the ripple effects of that. If that is your bet, you have to determine how you are going to navigate that. Another approach would be to change and shift a bit, leave room for that, and go in your own direction. This is similar to the IBM saying of, "We are not doing hardware anymore. Instead we are going to do services. This is the way we are going to change the play, and we are going to stay a significant company through it.” Any company that is beginning to be transformed by software needs to pay attention to the blitzscaling techniques because they are most firmly rooted within software. You have to say, "As my industry is much more in touch with this, I need to be much more cognizant of these types of techniques. I need to constantly determine if I am deploying them or if others are, how I respond to them, and the way in which I need to operate in order to do that."
Peter High is President of Metis Strategy, a business and IT advisory firm. His latest book is Implementing World Class IT Strategy. He is also the author of World Class IT: Why Businesses Succeed When IT Triumphs. Peter moderates the Technovation podcast series. He speaks at conferences around the world. Follow him on Twitter @PeterAHigh.