Eric Schmidt explains how he uses 5-year plans to predict if a startup can become a $100B+ 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 Eric 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.”

He continues:

“All of the really big companies have invented a new way to access information or a new way to do something that 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 create a 5-year plan and map their 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 asks:

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

This is similar to the advice of Peter Thiel who famously asks founders: “How can you achieve your 10 year plan in the next 6 months?”

Thinking big and optimizing for scalability is one key factor that separates the ultra successful companies from the rest.

Another way to use a five-year plan to determine if your company can be a $100B+ 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 and he predicted that Android, iOS, and machine learning would be the dominant platforms of 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"