Let's take a look on companies like Facebook, Amazon, Google and whatever. How did they actually act in the beginning? Quite often when the ecosystems change, we find a new kind of company entering into the system and messing things up. Some call them start-ups, but it could actually be an old actor that is trying to change the system, or it could be an established big company and we don't necessarily need to call them start-ups, we could call them entrepreneurs, somebody who's trying to change the system and create new roles. In the music industry for instance, it was quite a lot of these new streaming services like for instance the Swedish Spotify that i did mentioned. It could be worse to think about, how do actually these startups think compared to the established players, and why do they think the way they do? Why do they act the way they act? Because in some cases, they seem to be acting really strange. For instance, Spotify was a free service for quite a lot of years. But nobody could survive on giving away your service for free. So how did they? Well, if we look on these startups, of course, they are like every kind of company, they are different. Not all of them are necessarily strategically smart, they might just by accident happen to manage to create a new ecosystem. But some of them have a tendency of being extremely strategically clever, but the trick is try to understand in what way are they strategically clever? I think a book that the founder of LinkedIn, Reid Hoffman published, not that long ago, could give us some kind of clue on how they are thinking. The book is actually called Blitz Scaling, and it's a rather radical title for a book because it copy-cuts what Hitler did during the Second World War. Because Hitler was extremely clever in taking country after country after country and utilize what he called blitz-scaling, and what it meant was that actually you need to be extremely quick, everything is about being quick, and you don't leave anything behind. The metaphor Hoffman is using here is trying to say that when it comes to creating these new kinds of actors in these new ecosystems evolving, is only about being the fastest, getting to the position before the other ones because when the new ecosystem is set and a new role has been established, there is a limited amount of actors that can have that role. So what he says is roughly speaking, if you're a startup and trying to mess up a system because actually that's is what you're deliberately is trying to do is skip everything except speed. Skip management, skip cost, skip actually cost in some sense. You just have to be fast and move extremely fast. Now, assume we wanted to do that to a system, one of the best ways will actually be to cherry pick one of the really profitable products in an established system and dump it on the market for free. Because if we give it away for free, we will get quite a lot of customers. So there is a reason why we find quite a lot of these startups starting for free and moving extremely quick and costing quite a lot of money. Having that said, it's nearly like grow or die. Because if you're unlucky in the end, you only waste money, you give away things for free and you never get to the position. But the idea is roughly speaking that the new ecosystem is evolving, and there is an interesting position to take, and when we have it, when we have that strong position, we will start earning money. In some cases, we can see that in quite a lot of industries where a new actor have established a really strong position and when they now have it, they can charge quite heavily. Now let's take a look on companies like Facebook, Amazon, Google and whatever, how did they actually act in the beginning? Well, extremely quick in order to get to the position, and what do they do now when they have the position? Well, they have an extremely profitable position and gradually, they can charge us quite a lot. So looking back on the music industry and for instance, an actor like Spotify who started off as a small actor giving things away for free, nowadays they have a fairly strong position. Well, they still don't earn quite a lot of money, except for instance in my country where they do fairly well, but they're still working on getting to that position. During the road, you're actually cannibalizing on the old existing system, and to the old actors, that becomes a problem even if the ecosystem doesn't change. Simply because just imagine we have a stable position in an old ecosystem and somebody new is popping up and cherry picking the best product we have towards the best customers we have and they gave it away for free. How should we handle that? Well, that becomes a problem enough even though the ecosystem doesn't change fundamentally. So actually, startups have a tendency of having a picture of a future industrial landscape, and that's most likely the reason why when we hear the CEOs of these kind of startups talking about something, they quite often nearly only talk about the problem with the old system and their wish, their dream, their vision for a new kind of system that they are heading for, and then they're actually trying to cut right into the established system, making things unstable. So it starts shaking around, so a new system can be established. If we see it in that way, Reid Hoffman has a big point in his book. Even though, he's been extremely criticized by business academics. Of course, there is a reason why he has been criticized because it's not a normal message to tell young graduates that if you want to start a business, skip cost, skip customers, skip management, just go for the position. But in the specific kind of situation where an ecosystem is about to change and we are the actor who wants it to become, it sounds reasonable. Risky, but that's the risk quite a lot of them are willing to take.
