Expertise in scaling up is the visible secret of Silicon Valley

September 17, 2015 •

The visible secret of Silicon Valley

Silicon Valley and the surrounding Bay Area has become a global leader in innovation, technology and new industry creation. This small region, with only 7m residents, boasts more than 150 technology companies valued at more than $1bn.

Most observers instinctively conclude that Silicon Valley is great because it has a unique ability to create start-ups. Most observers are wrong. Many parts of the world now have the necessary ingredients to create start-ups. There are brilliant technical graduates everywhere. Venture capital has gone global.

This even applies to more subtle elements once unique to Silicon Valley, such as broad first-hand knowledge of the start-up process and a cultural acceptance of failure as a necessary byproduct of risk-taking. Through the internet, this essential start-up knowledge is available anywhere. Meanwhile, belief in entrepreneurship is spreading, creating receptive cultures in many regions (from “Silicon Alley” to “Silicon Glen”).

Why does Silicon Valley continue to produce a disproportionate share of industry-transforming companies like Google, Facebook and LinkedIn? Or the next generation of companies like Airbnb, Dropbox, and Uber? The answer, which has been hiding in plain sight, is Silicon Valley’s ability to support scale-ups.

When you examine the history of the best Silicon Valley companies, they quickly increase the number of their customers, revenue and raise organisational scale to fit a global market. Most of the impact and value creation in Silicon Valley actually occurs after the start-up phase ends and the scale-up phase begins.

Building great, world-changing companies requires more than just building a cool app and raising money. Entrepreneurs need to build massive organisations, user bases and businesses, at a dizzyingly rapid pace. That’s how Mark Zuckerberg built Facebook from dorm-room to the world’s most popular internet service in just six years.

So what makes Silicon Valley so good at scale-ups? The obvious answers are talent and capital. Both offer a scale-up positive feedback loops. The competitor that gets to scale first nearly always wins. First-scaler advantage beats first-mover advantage. Once a scale-up occupies the high ground in its ecosystem, the networks around it recognise its leadership, and talent and capital flood in.

Top professionals understand that they can have the greatest impact working for the market leader. Meanwhile, joining a scale-up that is clearly a “rocket ship” offers many of the financial rewards of working for a start-up, with more certainty and less risk. By attracting the best, scale-ups increase their ability to build and bring to market great products, which in turn increases their ability to scale.

A parallel calculus applies to investors. Achieving scale makes it easier for venture capitalists to decide to invest. And because networks disseminate this information quickly and broadly, a rapidly expanding scale-up can raise massive capital. This can fuel explosive, self-reinforcing growth.

Yet talent and capital are necessary but not sufficient. The key success factor is actually a comprehensive and adaptable approach to scale. A scale-up grows so fast that conventional management approaches are doomed to fail. For example, the conventional wisdom is to hire senior management with relevant experience. But if you’re Uber or Airbnb, you can’t simply put up a listing that states: “This job requires at least five years of management experience running a sharing economy service.” The only candidates that can meet that requirement already work there.

With each order of magnitude of scale, you must rethink and rebuild your organisation and processes. Sometimes through existing team members; sometimes by recruiting outside talent, such as when Mr Zuckerberg hired Sheryl Sandberg. Sometimes this means building new products internally, like Google with Gmail, and other times it means acquiring breakthrough technology like Android.

Change, not stability, is the default state at every stage and in every facet of the company. Continually reinventing yourself, your product and your organisation won’t be easy, but it will allow you to use rapid scaling as a strategic weapon to attain and retain market leadership. This is the visible secret of Silicon Valley.

This post originally appeared on Financial Times.

CS183C: Technology-enabled Blitzscaling: The Visible Secret of Silicon Valley’s Success

September 14, 2015 •

Blitzscaling Class with John Lilly
This fall I’m teaching a Stanford class on how to scale at speed — which we call ‘blitzscaling’ — with John Lilly, Allen Blue and Chris Yeh. We’ve already lined up some great speakers such as Sam Altman, Elizabeth Holmes, Jeff Weiner, Selina Tobaccowalla, Jen Pahlka and many others. The application deadline is September 18.

Read my full post on LinkedIn to learn more about the class and how to apply.


August 14, 2015 •

A Herd of Unicorns
Q: If the unicorn is the rarest creature in the universe, how can there be a herd of them?

A: The Networked Age. My full post on LinkedIn explains why.

Driving in the Networked Age

July 22, 2015 •

Driving in the Networked Age

How soon will it be illegal to operate human-driven cars on public streets? Read my full post on LinkedIn:

Today, as individual drivers compete for space, they often work against each other’s interests, sometimes obliviously, sometimes deliberately. In a world of networked driverless cars, driving retains the individualized flexibility that has always made automobility so attractive. But it also becomes a highly collaborative endeavor, with greater cooperation leading to greater efficiency. It’s not just steering wheels and rear-view mirrors that driverless cars render obsolete. You won’t need horns either. Or middle fingers.

Acquiring proven entrepreneurs is a smart way to innovate

July 1, 2015 •

Proven Entrepreneurs

Nearly every company understands the urgent need for innovation. Technology and globalisation have so accelerated change that scale and power — once the greatest strengths — have become weaknesses because they impair an organisation’s ability to adapt. The problem is, the term “innovation” is used so broadly that it has become virtually meaningless.

Consider the typical initiatives that companies pursue: some create labs to innovate, yet most labs fail to help companies adapt to the future. Others try methodologies such as the “lean start-up”, but find it difficult to act on potential breakthrough ideas. What these failures have in common is that they do not focus on the right talent.

To innovate successfully requires entrepreneurial talent, which is not simply being creative, smart and flexible. What sets entrepreneurs apart is that they envision a future that defies conventional wisdom, then assemble (and reassemble) the plans and resources needed to make it a reality.

You cannot teach this by sending your people to a two-day workshop; these skills come from months and years of hard-won experience. It is also incredibly difficult to hire this kind of talent; no entrepreneur worth his or her salt is looking for a traditional job.

In Silicon Valley, we have overcome these issues by using acquisitions to bring in innovative, entrepreneurial talent. I am not necessarily talking about “acquihires”, in which technology companies acquire start-ups as a recruiting strategy. Rather, you are trying to acquire leaders who have proven their ability to build a new business. Unlike most other skills, there is no academic degree or job title that can accurately predict this.

Even when you have identified one or more great entrepreneurs you want to acquire, you need to adopt a different approach to M&A. It is not simply a matter of buying the “right” company at a good price. The real challenge is finding talented entrepreneurs who are aligned with your mission and can function within a larger organisation. You have to make sure that the body does not reject the transplant.

At LinkedIn, we used acquisitions to fuel innovation when we acquired Pulse and Newsle. Both had built killer products. But we also wanted to transplant their entrepreneurs (and the future innovations they would create) into LinkedIn — Ankit Gupta and Akshay Kothari at Pulse, and Axel Hansen and Jonah Varon at Newsle.

Similarly, our business lines — talent, marketing and sales solutions — are run by acquired product leadership (Eduardo Vivas from, Russell Glass from Bizo and Sachin Rekhi from Connected).

To retain acquired entrepreneurs, you must build strong alliances with them based on closely aligned values and missions. In my book, The Alliance, my co-authors and I wrote about the importance of building open, honest and mutually beneficial relationships with employees. Each key employee should be on a “tour of duty”, which includes a clear objective (with agreed success criteria) that would help transform the company and the employees’ career. The same principles apply to any entrepreneurs you acquire, though their “signing bonuses” may include a few extra zeros.

When LinkedIn acquires a company, we work with the entrepreneur(s) to define a tour of duty that advances their career. Given the financial rewards they have already received, these tours focus less on compensation and more on learning opportunities.

For example, Ankit, Akshay, Axel and Jonah all came to LinkedIn with relatively little work experience; Ankit and Akshay had just finished their graduate degrees at Stanford, while Axel and Jonah were Harvard dropouts. Eduardo had jumped right into the start-up world after high school, and sold another company before building, but had never worked at a business of our scale. Working at LinkedIn gives these entrepreneurs the opportunity to manage a far larger team, with a far greater user base — experiences that will help them advance to executive roles or to start new businesses, whether inside or outside LinkedIn (preferably inside).

Executed properly, bringing in entrepreneurial talent via acquisition can be a major win-win. Your business gets a much needed infusion of innovation, while the entrepreneurs you ally with benefit both economically and by gaining valuable experiences that advance their careers.

This post originally appeared on Financial Times.