Eric Schmidt on how he uses 5-year plans to predict if a startup can become a $100 billion company

“If you went to business school, you would’ve been taught: build a great product, organize a sales force, charge a fair price, make the customer happy.”

But, as the former CEO of Google explains, that strategy is insufficiently scalable in the Internet era:

“It’ll produce a reasonable business, but it’s not going to produce a huge business. It’s just too hard to hire all of those salespeople, work with every customer, and so forth. You have to have a more clever strategy.”

Eric continues:

“All of the really big companies have invented a new way to access information or a new way to do something [and didn’t require a large salesforce].”

Eric argues that lots of the startup ideas he hears are good, but not good enough. He tells these founders to do a plan over the next five years and map your growth rate. Then try to figure out what a more scalable strategy might be.

For example, if you’re building an app that you want to charge $10 for, Eric would ask:

“Why can’t you give the app away for free and then upsell the users?”

Another way to use a five-year plan to determine if your company can be a $100 billion company is to ask yourself what the big platforms will be five years from now and make sure your company is aligned with those platforms.

In this interview from 2016, he predicts Android, iOS, and machine learning are the platforms he’d want to be aligned with over the next five years.

Full video: Startup Grind “ERIC SCHMIDT | GOOGLE | STARTUP GRIND EUROPE” (Jun 2016)

P.S. We’ve put together a YouTube playlist with every Eric Schmidt insight we’ve ever shared. You can watch it here: "Best startup advice from former Google CEO Eric Schmidt"