Masters of Scale

Key idea 1

When investors say “no,” take it as a chance to learn something.

When Kathryn Minshew was trying to get investors interested in her online career platform, she was told “no” 148 times before giving up.

But with that one affirmative response, Minshew was able to get $28 million for The Muse, which has grown to employ 200 people and provide content to 100 million people every month.

Implications for the future? You shouldn’t allow a “no” to stop you 99 times out of 100.

The takeaway here is to view each investor’s rejection as a learning experience.

It’s possible that a “no” will point you in the direction of viable solutions. Suppose you want to open a series of kickboxing academies in Florida and you need money to do it. The first possible investor you go to says, “No, there are too many retirees for this to work.”

What this reveal depends on the context. Perhaps you need to work on your sales pitch and incorporate data showing rising gym membership rates among the over-60 set in your next presentation. Alternatively, you could think about going somewhere else. It’s also possible that this investor’s ageism causes you to reject them as a potential partner. The rejection is an opportunity to learn and improve.

If someone tells you no, listen to them. Is it a protective parent that fears for your safety? Or a partner who doesn’t want to make waves in the family budget? Your personal connections are more to blame than your idea itself for those rejections.

Also, don’t pay any attention to the “lazy no” that is often thrown around by investors who are unwilling to put in any effort whatsoever. But think long and hard about the “honest no” from someone whose judgment you value.

The “squirmy nay” is the ideal form of rejection because it causes a room to be divided into two camps: those who think the concept is brilliant and those who think it’s ludicrous. people who think “That’s so insane it just could work!”

If this is the case, it means you’ve come up with something so novel that others are divided in their opinions. Although it may be difficult to gain support for an out-of-the-box idea, you will likely be the first to test it. And there’s nothing better than being the first person to reach the summit of a mountain no one has ever seen before!

Key idea 2

The success of your startup depends on your ability to cultivate a positive company culture.

Now that you have the capital, you can begin expanding, right?

To be more precise, not quite. Instead, capitalize on the early stages when you have a dedicated but relatively small user base. Seek out your most ardent supporters and harshest critics early on, and use their criticism to improve your work. Establish your limits, decide what you can live with, and learn who to befriend in the sector and in government. This deep of a hole will be difficult to dig out of or reverse course from after you’ve reached a larger scale.

Sincere, in-depth criticism can help you get to the heart of what makes your company tick. Also, being in touch with that essence will aid you in your next responsibility, which is shaping the culture of your organization.

The takeaway is that if you want your firm to succeed, you need to put effort into cultivating the correct company culture.

A job at Netflix looks like a dream come true. Netflix considers the individuals they hire don’t need a strict nine-to-five schedule, therefore they don’t have established working hours and don’t offer paid vacation. The rationale behind encouraging time off for creatives is the belief that they’ll return from their trips feeling even more fired up. The organization emphasizes that they operate as a team, albeit a competitive and goal-oriented one.

The streaming giant’s success is evidently not coincidental with its current mindset. The environment and its creative benefits are the end result of a methodical procedure for generating culture (described in detail across more than a hundred slides). Check out Netflix’s Culture Deck for yourself, it’s available online!

Having this clarity from the start is essential. If a culture has already taken root, it is difficult to alter or eradicate it. Determine your company’s guiding principles and the manner in which you will handle your staff and consumers. If you feel the need, compose a manifesto. Then, hire people that share your vision for the company’s culture; doing so will have a domino effect, as each new employee brings their own set of contacts with them.

However, this does not give license to hire an insular team; rather, it highlights the need for a serious dedication to diversity. Similarly, your initial backers can come together around a shared set of ideals. Select your investors in the same way you would your co-founders. This is the magnitude of their influence.

When implemented properly, a company’s culture can foster collaboration in a fast-paced startup setting. It has the potential to boost morale, which in turn can lead to a positive feedback loop in which staff work more, improving the company’s performance and bringing in new clients.

Key idea 3

Too rapid expansion brings its own set of challenges, but stagnation may be fatal to a business.

Tory Burch, the designer, planned to open a store in New York during Fashion Week. She was surrounded by clients, friends, family, and the press, and she also had a line of fabulous new garments to show off. Only one thing stood in the way. There were no keys in the locks, so she couldn’t enter anywhere. She still hadn’t received the orange door she’d ordered.

A decision was required of her. Should she wait until everything was perfect to open, or let the masses flood in through the door?

The second was Burch’s pick. The day was a smashing success that boded well for her brand’s future recognition.

The takeaway is that there is a fine line between moving too slowly and starving your business of resources and that moving too rapidly can be harmful.

One of the most difficult choices a business owner must make is when to launch. If you rush things and release a subpar product before it’s ready, you risk disappointing potential buyers. However, if you procrastinate too much, your forward momentum may stagnate, and your clients may look elsewhere, giving your rivals a leg up.

The business world is never still. Each minute brings new developments. A good leader keeps an eye on these alterations so they know when to wait and when to act. The best players in this genre can attack with such lightning speed that they “escape velocity,” leaving their rivals in the dust.

PayPal founder Peter Thiel’s rapid development method was to offer his initial customers $10 for introducing others. Thiel’s method worked, but that kind of quick expansion may come at a heavy price and with an often unpleasant aftermath.

In the flush of first success, you rarely think about the morning after. You may wake up to some very enormous fires – but let them burn. Being quick to adapt is one of the benefits of being a young, slim business. It’s counterproductive to slow down and risk losing momentum.

However, not every fire is the same. Any issues with the core product or company culture should take precedence over, example, a beautiful office remodel, so you’ll need to set priorities.

If you try to expand and run into a major problem right away, you might want to consider whether or not it is fatal to your company. Stop and take care of it if there’s a good chance it might.

Key idea 4

Pay more attention to what your customers really do than what they say when scaling up.

Remember how your English professor drilled into your head to “show, don’t tell?” Well, if you follow that tried-and-true piece of advice, you’ll be ahead of the game in the challenging area of scaling a startup.

Mark Zuckerberg developed Facebook initially for use only by students at Harvard University. The early customers were disappointed when he said he would expand the service to Yale, Princeton, and other colleges, but that didn’t stop them from continuing to utilize and expand the service.

In spite of their claims that they preferred a closed system, Facebook users were more likely to stick around as the platform grew.

The takeaway here is to focus on consumers’ actions rather than feedback as you expand.

After Michelle Obama was seen in an ensemble by designer Jason Wu, many fashionistas began gushing over him. Jennifer Hyman, founder of the online designer clothing rental service Rent the Runway, found that clients weren’t drawn to Wu’s outfits. As it turns out, Wu’s plans weren’t practical for their everyday use. Hyman shared this insight with Wu, and the two worked together to create the successful and practical “Jason Wu Grey” collection for Rent the Runway.

What Hyman did next was even more impressive. She saw that many of her clientele would rent an outfit for a Saturday night cocktail party and then keep it until Monday morning, when they would pair it with a jacket and wear it to work. Hyman was spending a lot of money on maintenance and cleaning, but this presented an opportunity. Hyman shifted to a subscription model in which clients could rent many items and swap them out at will, and revenue boomed.

In what ways can you learn about the habits of your clientele? Many startup leaders hold their own focus groups, which yields insightful and financially rewarding results. Mariam Naficy, owner of Minted, a firm that specializes in bespoke stationery, saw that males are becoming more involved in the wedding planning process, so she began creating designs with fewer stereotypically feminine elements.

Exciting outcomes can emerge from simply keeping an eye on and responding to your consumers’ actions. But suppose you come across an obstacle that appears to be insurmountable. Next book will delve into that topic.

Key idea 5

If you run into problems expanding, try switching to an even better strategy.

Once upon a time, Ev Williams was developing a platform for producing podcasts called Odeo. Unfortunately for him, he learned that their massive competitor, Apple, had been working on the same thing. Seeing this was the final nail in the coffin for his goods.

Williams realized that his chances of growing his startup to compete with Apple were slim and he went back to the drawing board. He gathered his staff for an all-day “hackathon,” an event where people are challenged to come up with an innovative solution to a problem.

As a result of this meeting, a novel platform for group messaging centered on status updates was developed. Greetings, Twitter!

The takeaway here is that if you encounter problems as you expand, you should try switching to a different strategy.

When faced with an impassable obstacle, the ability to change course quickly and effectively is a valuable asset. To paraphrase an old adage, it can give a startup’s stale products a second chance at success. Organizations of all sizes were spurred to acquire this expertise by the worldwide coronavirus outbreak. It turns out that difficult times might actually help a business become more flexible and adaptable.

When business travel was severely disrupted by the pandemic, Airbnb had to immediately devise countermeasures. In light of the trend toward telecommuting, the company shifted its focus to providing extended stays for those who wanted to migrate for their jobs. Virtual salsa classes and tours of local attractions were also available as part of some Airbnb packages; for example, a stay in New Zealand included the opportunity to take a virtual tour of a sheep farm.

Working on a solution for a company idea might sometimes lead to the development of an entirely new firm. Tobi Lütke, an avid snowboarder, wanted to launch an internet business selling snowboards but struggled to locate suitable software. Lütke, who had been dabbling in code ever since he could remember, eventually developed his own system. This is the origin story of Shopify.

The ability to change course, or “pivot,” can be the catalyst for a company’s success. But leadership is the elixir you need to fully harness that achievement, or any success, and drive it to its full potential.

Key idea 6

To grow a business, you need capable leadership.

It must have been difficult for Angela Ahrendts to leave her position as CEO of Burberry and start over at Apple. The entire world had changed. From the world of fashion to that of technology, from England to the United States, and now she was in charge of seventy thousand workers.

Ahrendts was conscious of the necessity to share her goals with her new team. However, as the mother of three teenagers, she was aware that the younger generation working at Apple was not inclined to read lengthy communications. For her daughter’s birthday, she decided to make a movie using her iPhone, and she didn’t even cut out a phone call from her daughter.

In other words, it was off to a great beginning. She recorded a new video every week for four years, no matter where she was in the globe, because the first one was so popular.

The takeaway is that strong leadership is crucial for any organization that wants to grow to a larger scale.

Like Ahrendts’ move to Apple, rapid growth can make it feel like you’ve joined a whole different firm. Every little thing shifts. Maintaining a consistent message of direction and inspiration is essential for keeping staff engaged.

You need empathy, sagacity, and sharp eyesight to succeed at this. This requires an attitude of openness to instruction and guidance from those below you in the organizational hierarchy. The ability to take criticism in a positive way is also essential. As a result, it may be necessary to promote competing ideas on occasion. When a company grows large, its culture must change, as MailChimp’s founder Ben Chestnut compares startups to pirate ships. The Navy brings order, responsibility, and proper conduct after the anarchy of piracy.

Marissa Mayer, Google employee number 20, is notable for having avoided employing highly experienced MBAs while staffing the company. She would recruit a bright 23-year-old instead and offer them a massive portfolio, such as all of Gmail. She would transfer them to a new division just when they were getting the hang of the first one, posing a fresh learning obstacle. By taking this risk, Mayer not only built a highly adaptable management team, but also unleashed a tidal wave of fresh ideas that sprang from the minds of many bright people who were suddenly exposed to new perspectives.

As a result of Mayer’s direction, Google and the world at large benefited greatly from the efforts of these former workers, many of whom went on to found their own businesses. In the best of circumstances, doing good comes as a byproduct of scaling well.

Key idea 7

Your company’s potential to improve the world grows in direct proportion to its size.

When Howard Schultz was seven years old, his father came home from the hospital with a cast from his hip to his ankle. The injury at work had rendered the World War II veteran physically and financially helpless; he was uninsured and had no access to benefits.

Years later, when Schultz took over a little coffee shop called Starbucks, he made a conscious decision: he would create an organization that prioritized its people’ well-being over financial gain. Starbucks was the first American corporation to offer full health coverage to all workers, including those with part-time schedules.

Being a Trojan horse is sometimes part of a company’s mission. That is to say, a firm can further an ingrained mission, and that mission need not be limited to financial gain.

Essentially, the larger your company gets, the more of an impact it will have on the world at large.

You can make a bigger difference if your company is large enough. The good you do can have a ripple effect across wider areas, influencing and benefiting even more people. Schultz had staff turnover as he attempted to grow in China. He found out that the low social position of a barista was a contributing factor. In order to show parents from other places how the procedure was helping their children, he flew them in for special weekends. The goodwill it generated was beneficial in reducing employee turnover, and it also made for happy families.

Increasing production volume can be an effective way to meet a pressing social need. Franklin Leonard was hired by Leonardo DiCaprio’s production company, Appian Way, to read scripts. Frustrated that just a small percentage of scripts were chosen for production, he created an anonymous appeal for screenplays that deserved to be produced into movies but weren’t and then released the results. Despite losing his job, Leonard’s “Black List” has been instrumental in ensuring the completion of dozens of indie films.

Successful entrepreneurs can accomplish much more good if they are able to scale up their operations. The current president and CEO of Vista Equity Partners, Robert D. Smith, attributes his early riches to a series of fortunate events. Since desegregation had recently taken place in Denver, he was able to take advantage of the city’s busing system to attend a higher-performing school on the other side of town. Smith has made the decision to repay his good fortune in 2019. During his commencement address at Morehouse, a historically Black university, he promised to forgive the student loans of every graduate. By expanding his company, he was able to improve the lives of hundreds of college grads.

Final Overview

The book’s core argument is that:

Growing from a small business to a larger one is an exciting and often risky moment. A firm can move from promising to well-known if its culture is actively cultivated by leaders of the highest caliber.

Additionally, consider the following suggestions:

Think about it like an eleven-star hotel.

Think about what an eleven-star version of your product or service may be like to help you come up with ideas for the finest possible version. Hotel owners may fantasize of receiving their visitors with a string quartet or vintage automobiles. Now you may work backwards from that to locate the sweet spot between totally unattainable and better than you could have ever imagined.