On the Current Round of Layoffs
Geoffrey Moore
Author, speaker, advisor, best known for Crossing the Chasm, Zone to Win and The Infinite Staircase. Board Member of nLight, WorkFusion, and Phaidra. Chairman Emeritus Chasm Group & Chasm Institute.
When layoffs hit one or two companies, you might blame it on management, but when they hit market leader after market leader, you know something structural is afoot.?The important thing then is to extract the signal from all the noise.?Here is my cut at it.
First of all, it is the digital consumer sector that is under fire—not all of tech.?But note that when you click on the Tech Section of any major publication, all you get is consumer tech news.?B2C has eclipsed B2B in the public perception of what tech is all about.?The downturn may not change this for consumers, but it sure will for investors.?B2B tech actually has the opportunity to thrive in a downturn if it focuses on solving urgent problems that have short time to payback.?
Second, the digital consumer model has such attractive economics when it is operating at scale that it led to a massive overvaluation of the sector per se.?As with prior bubbles in tech, overvaluing is primarily due to extrapolating present growth as perpetual and ignoring global economic and geopolitical downside risks.?Downturns simply call this out and demand a recalibration of valuation based on a more balanced mix of positive and negative factors.
Third, when enterprises have hypervalued market caps, management does everything it can to sustain them, eventually to the point of counterproductive actions driven more by inertia than any sensible investment strategy.?Given the peer pressures of investor relations, this is almost impossible to stop, so ultimately we end up where we are, in need of a correction that everyone saw coming, but no one acted upon.?And to be fair, guessing when the correction will come is not a winning play.?Better to accept the dynamics you have in front of you and then adapt as fast as you can once they change.
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Net net, it is time to own the correction, put our houses in order, accept the deflation in stock price, refocus on our core mission, reset our performance metrics, and get back out on the field. ?
That’s what I think.?What do you think?
Dad, driving digital transformation and modernization across all domains of enterprise businesses. Talks about #DataPrivacy, #TrustedAI, #EthicalAI, #SharedService, #Modernization and #Transformation
1 年I was wondering whether these round of layoffs across companies and emergence of ChatGPT are merely unrelated co-incidences. Puneet Mehrotra and I were discussing this exactly last week.
Editor in Chief - Content - OCX Cognition
1 年While that does indeed make sense, perhaps another simple factor has even more weight. I base what I am about to say on listening to a number of economics podcasts, notably my favorite David McWilliams podcast. Loads of companies, notably in high-tech, have set market expectations about their future profits. Higher interest rates on money they have borrowed mean they cannot meet these expectations. Layoffs are the easiest way to adjust costs in the short term, so that is what is happening, possibly at the expense of medium-term results for which they have not set any market expectations. Bear in mind that there are only 3.5 ways of reducing costs: fewer people, less capital (notably buildings), and paying suppliers less are the three main ways. The 0.5 is one-time accounting changes. Of the three main methods, fewer people is the one you can implement most quickly. Of course, multinationals that have not done this before will quickly learn that there are many countries, mainly in Europe, where this can not be done quickly. The only way they can deal with this surprise is to greatly increase layoffs in the USA. More experienced companies don't make this mistake. They still make others, but that's a different subject.
Freelance Consultant (Independent)
1 年Spot on. Thanks
Senior Vice President Infrastructure, Board Member, Advisor, Ex-Meta, Ex-Cisco - Innovation in Infrastructure through transformational thinking.
1 年Well said!
Cloud, Data Management and Security Consultant
2 年History does not repeat itself, it rhymes.. Mark Twain. Do you remember 2001 and companies like VERITAS Software (gen 1) going from $172/share to $11? And in 2004, what’s a Twitter? LinkedIn? It’s time to regroup and enjoy the Holidays. Tech never dies, it will be reborn.