hyper-growth companies

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8 Rules Sociabble has Applied for Dealing with Competitors in Hyper-Growth

Picture of Jean-Louis Benard By   Jean-Louis Benard  

Over the last decade, Silicon Valley has developed a model of hyper-growth that has made the success of companies like Uber, Airbnb, and many others possible: Blitzscaling. Which begs questions like: In what ways is this model interesting, but also questionable? What other types of models can we suggest in its place? And how can small businesses compete with big competitors? In this article, I will provide tips specifically for self-financed companies, including how to deal with highly funded and hyper-growth competitors, and how to take advantage of their rapid transition from one stage of maturity to another.

In his book “Blitzscaling,” Reid Hoffman describes the different stages of maturity of hyper-growth companies: the family (less than 10 employees), the tribe (up to 100 employees), the village (up to 1000 employees), the city (up to 10,000 employees), and then the nation beyond. The transition from one stage to another is manifested by important changes in the teams, which are relevant for the purposes of this discussion.

It’s not simply a question of a broadening of the teams, of a transition from generalist profiles to specialists; of the emergence of managers, then of “executives.” It also involves different modes of operation, ones that Reid Hoffman describes with the help of some rather martial imagery: the commando takes the beach, the army conquers the country, and then the police maintain order. Thus, as the size of the company changes, the company moves from “startup people” to “scale-up people,” only to end up with “stability people.”

 

hyper-growth chart

 

In this context of hyper-growth, one could expect Reid Hoffman to recommend the recruitment of high-potential employees to prepare for the future. But no. The philosophy of the Blitzscaling model is to recruit people who respond only to the needs of the moment. “Hire Mr. or Ms. Right now, not Mr. or Ms. Right.” If they have the potential to evolve, so much the better; if they do not, they will probably be replaced, no matter the cost. Speed ​​is the key factor. The money raised allows for them to work with recruiting firms that will find precisely the right profiles at the right time.

This model has proven itself more than once. Even if, as Reid Hoffman points out, it generates turn-over: the commando teams are often frustrated to have to reintegrate into “the army,” with the more specialized roles and less access to top management that so often define hyper-growth methods. But the arrival of the army, with its experienced profiles used to manage this hyper-growth (tools, process, organization, indicators, etc.) is a necessary step, expected by investors. It is indispensable.

How can small, self-financed companies in bootstrapping mode cope with armies that create such a competitive steamroller effect?

My recommendations are inspired by my own company, Sociabble, which provides a platform for internal communication, employee engagement, and employee advocacy. It is a very compartmentalized vision, adapted specifically to a B2B context. Add to that fact that Sociabble was not technically self-financed during its early years, as it received an investment of 5 million euros—admittedly a very small amount compared to our competitors in the US, some of which raised over 100 million dollars and will probably raise more, in view of their monthly losses.

To be honest, we could not have established Sociabble in Europe, the United States, and APAC without these initial funds. But the amount raised—quite small compared to our ambitions—forced us to work in permanent bootstrapping mode. Over the years, we have applied a number of rules to achieve success, which I will share here.

 

1. Get the Right Commandos from the Start

Don’t make missteps when it comes to the starting team. In a company that bootstraps, it simply is not possible to casually bring people in and out of harm’s way. Recruitment firms are rarely used, and “Hire Mr. or Ms. Right now, not Mr. or Ms. Right” is not really possible. We must surround ourselves with people who will build with us in the long term. This means very experienced, very strong initial commando members, who will stick with you through the family, tribe, city, and much later stages. People who are sufficiently pragmatic to think simply at first, but who have the vision of what will be built after, and who are able to plan a step ahead.

You also need very creative people. People who are able to go from 0 to 1. Not just those able to change things up, but to actually create what has not been thought of before. These are often sensitive people, more affected by quotidian difficulties than the standard “commando,” which must be balanced and taken into account.

If the ambition is to become a global company, it’s also necessary to hire English-native speakers from the outset, and to impose English as a working language for all. If it’s not done initially, it’s much more complex to do afterwards.

 

“You also need very creative people. People who are able to go from 0 to 1. Not just those able to change things up, but to actually create what has not been thought of before.”

 

2. Aim for Product Excellence

To lead armies, you need a good weapon. The decisive weapon is the product. And you need more than just a good product, you need a better product than the competition. Much better. This can seem extremely difficult against such large hyper-growth companies. Yet it is feasible—for several reasons. First, because most of the money raised by competitors goes to marketing and sales. The percentage assigned to the product is often limited—American corporate culture has it this way by design.

It’s actually rare that larger companies focus on the product. I became aware of this more than 20 years ago thanks to Borland, a development tool publisher that no longer exists. Back then, Borland dominated the C ++ compiler market, with colossal development teams. Anders Hejlsberg, the founder of Turbo Pascal (also the inventor of C #), proposed to Philippe Kahn, the founder of Borland, to write a new language and to make the associated compiler with only 7 developers. And as such, Delphi was born—an exceptional language and compiler, which drove the other C ++ teams crazy. The velocity of the Delphi team was simply amazing.

While the C ++ teams were totally bogged down trying to synchronize and manage internal politics, the Delphi commando team—made up of very experienced, compact developers—was making progress at an amazing speed.

This story profoundly impacted my vision of our product, and my conviction that with a very close-knit team, both experienced and compact, we can build not only good products, but products that evolve and adapt much more quickly to the pressing demands of the marketplace.

 

3. Prioritize Urban Guerrillas over Open Battle

When you have a small team of commandos, going head-on against large armies before you’re ready is unthinkable. Yet this is what many companies are trying to do, by diving too early into the American market, driven by the “American dream” culture and the consensus that if you don’t succeed in the US, you don’t succeed at all. The US market, and particularly the market for small and medium-sized businesses is the preferred playground for hyper-growth US companies. It is a huge, visible arena that allows for the industrialization of marketing and sales.

For large companies, it is enough to spend more money to make more leads, or to have more salespeople to service them. This is often the plan, with giant corporations lining up their tanks for battle, with a good chance at victory thanks to a strong strategy and solid logistics. But going to war on this same open terrain with only a handful of salespeople and small marketing budgets is death assured for a bootstrapping company. The smart bootstrapping company must therefore favor other battlegrounds, starting with Europe.

Europe is hell for a large American company. The multitude of markets, languages, and cultures, prevents the deployment of a homogeneous army. Companies have to recruit teams locally, using local means to make themselves known. In short, their army is dispersed. Not only is this very expensive, the “steamroller” effect completely disappears. They become a company like any other, not necessarily well known, and not especially favored in the local ecosystem. However, for local self-financed small businesses, accustomed to the complexities of Europe, it’s a much simpler battleground. The smaller local company has the advantage.

The other way to capitalize on urban guerrilla warfare when you’re a small company is to pick your battles. For example, focus your sales energy on select RFPs. Rather than blanketing potential clients across the spectrum like large companies do,  hone-in on potential clients identified as favorable, send in the best commandos, and put all the energy possible into that one sale.

Large companies will send in soldiers that may be experienced and motivated. But rarely will the team be accustomed to (or especially keen on) “storming the beach” under heavy fire. For a small company, your speed, your guts, your efforts to win the deal will be greater. For such a company, it is of vital importance, while for those bigger guys, it’s just a sales pitch among many. So you’ve got to take it one battle at a time. Street fight after street fight, bidding war after bidding war, you’ll slowly gain ground. You consolidate your references, which reassures new prospects. You’ll start beating out the competition—companies that are, in theory, much more powerful than you.

 

4. Benchmark as Much as Possible

Companies in hyper-growth mode are investing huge amounts to get advice on just about everything: marketing, sales, product, customer support, etc. They do A/B testing on all subjects before making a decision. When you only have a tenth or a hundredth of the budget of these companies, you obviously cannot do it that way.

But you do have eyes and ears. Your ability to monitor what the competition is doing, to benchmark all the topics to the smallest detail, to apply good practices right away without fumbling, is essential. Of course, it’s not a matter of simply copying—especially since not everything is adaptable and replicable—but of understanding what works and what does not, to draw lessons from that, and above all to constantly raise the bar on your internal practices.

 

“I like to tell my teams that they have joined the ‘Fellowship of the Ring’ rather than the army of orcs, and that by doing so, they will be able to tell the stories of their adventures for years to come.”

 

5. Recruit Hobbits, Not Orcs

A small company in bootstrapping mode does not escape, even during its growth, the need to integrate a middle management that structures, organizes, and coaches. Nevertheless, whether in operational teams or in management, it is essential to recruit people who will adapt to a commando culture. People who are not only unafraid of going up against much larger players, but who actually enjoy it. It’s better to recruit “hobbits,” ordinary people who, in the face of adversity, will become extraordinary, rather than recruiting “orcs,” who expect to integrate an army of interchangeable foot soldiers, who have the requirements of high-paid mercenaries, and who will have neither the guts, nor the aptitude, to succeed if conditions are not ideal.

And to those who have joined your crew, you have to offer so much more than a salary and an interesting job. They need to be made to advance by keeping them out of their comfort zone, helping them to grow, better and faster than they would have done elsewhere (especially at hyper-growth competitors). How? By having standards for the company even higher than those of larger companies with more means. By helping them, on a daily basis, to raise their level of personal expectations (by benchmarking, in particular) so that they have the satisfaction of doing not just a good job, but an exceptional one.

And lastly, by celebrating, even with limited resources, what has been accomplished—but with real, honest recognition, so that everyone understands how much their personal work has contributed to accomplishing these feats. I like to tell my teams that they have joined the “Fellowship of the Ring” rather than the army of orcs, and that by doing so, they will be able to tell the stories of their adventures for years to come.

 

6. Choose Your Clients Wisely

There are clients who like to casually mention their visits to Silicon Valley unicorns at fancy dinners. Clients who choose to work with these trendy American superstars because they know they won’t be blamed for it in the case of failure. These are not the clients of companies that bootstrap. The clients of bootstrapping companies don’t get distracted by the glitter and the buzz, they focus instead on making sure their products meet their clients’ needs. Good clients will choose you if you have a good product, if you show motivation and an ability to support them and solve their problems over the long term. Just as you have to pick your battles, you need to choose your clients carefully as well.

 

7. A Good Craftsman has Good Tools

We cannot compromise on the tools that we work with. When you have small teams, real commandos, you have to equip them with the best weapons. CRM, collaboration tools, project management, software equipment, etc. We must ensure that we have implemented everything required to optimize the productivity of teams and their ability to deliver quality work. Not necessarily the most expensive tools, or those adopted by competitors, but smart tools, developed by companies that also may not have the visibility they deserve.

 

8. Be Driven by Data

Last but not least, data-driven business isn’t just for the big players. Be excellent on this subject. Not only on the cashflow forecasts, but in all other areas as well: marketing, sales, customer follow-up management, product, etc. Build from the very start an information system that measures performance, but that can also provide predictive models for anticipating the future. This is yet another opportunity to benchmark KPIs, especially vis-a-vis the big players, and to always improve.

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