Big Tech is deploying an industry – wide harmful policy of implementing layoffs. It is understandable on one level. Investors are panicking with the daily news reports of a coming recession. The blind invocation of the Rule of 40 metric which is an arbitrary, if not capricious ratio of profitability is a major factor in driving Tech layouts. The profitability ratio is derived by subtracting the cost of goods/services from revenue. That figure is divided by revenue and multiplied by 100. If the percentage is close too or below 40%, investors run.
As such, Tech is driving down the cost of goods/services by laying off staff and intimidating the surviving staff into assuming more task to maintain productivity.
In a recent Tweet, MGSN identified an alternative to Tech’s layoffs.
EVENING BUSINESS NEWS— MGSN (@MGSNHQ) September 22, 2022
TECH PANIC MAY COME A PRICE.#Techlayoffs are a mistake. #CNBC's analysis to hospitality sector worth noting,https://t.co/B7xso1YBi0
Invest in #Techsales and #Businessdevelopment in the large consumer bases that can be developed in #digitaldeserts & #AfCTA
Tech will need to drive Engineer/Tech Sales through dedicated and sustained Business Development in the large deprived and informal economic sectors. “The informal economy comprises more than half of the global labor force and more than 90 per cent of micro and small enterprises (MSEs) worldwide. Informality is an important characteristic of labor markets in the world with millions of economic units operating and hundreds of millions of workers pursuing their livelihoods in conditions of informality.”
“No matter how you measure it, the global informal economy is huge — with a value of more than US$10.7 trillion, representing 23 percent of all economic activity in 2016.”
Tech knows that some of its star players were launched as Startups under distressed conditions. Airbnb was launched during the Great Recession.
Tech needs to identify the investors that will understand the future sales base in the investment of the transformational growth from the informal to the formal economic sector. MGSN’s Tweet identified the failure of several market players in the hospitality sector to invest in employee retention during the covid crisis. As the restrictions abated and the sector rebounded, many of the sector participants experienced an inability to meet market demand. Shortsighted airlines had to cancel flights due to the labor shortages. The loss of sales due to shortsighted layoffs was not experienced by Singapore Airlines. Confronted by the same covid restrictions and additional market barriers of having zero-base in the domestic base, Singapore Air drafted a plan on sales recoupment by investing in its topflight employees through the shutdown. The investors understood the market strength that Singapore Air would have if it could quickly place its workforce into operation once the covid restrictions ebb. Based upon its Market Plan, Singapore Air raised S$19 billion ($13 billion USD). The investment into its workforce, products and service lines has led Singapore to capture growth and profits margins, as its competitors have loss sales opportunities and struggled to build a solid employee base.
Tech is in a much better position to develop a Business Development Finance Plan in distressed market conditions than Singapore Air was during the Covid Crisis. Big Tech has strong balance sheets, and low debt services. They have the assets to invest in its workforce. The Investment Plan should address long term business development plan.
If Tech continues the blind policy of layoffs to satisfy shortsighted Rule of 40 policies, it will drive competing business development by the very employees Tech abandoned. Tech knows that some of its star players were launched during distressed economic times.
Another factor Big Tech will need to reevaluate is the loss of Intrapreneurial development as a result of the layoff model. Intrapreneurialism is a corporate model that supports the innovative employees to develop new products and service lines within the corporate structure. Intrapreneurs, like entrepreneurs, engage in Concept Generation around preliminary market research that identifies a need in the marketplace. The Intrapreneur’s development team explores the corporate offering as it relates to the market need and drafts ideas on product/service enhancement and or development of new products/service lines to meet the market need. Once the Intrapreneur team generates the ideas for development, it will conduct another round of market research that will identify which idea will move into tech, tech/engineer sales, engineering, and business development departments with the goal of modeling a concept into a product/service line. In this stage, the Intrapreneur enjoys the benefits of the corporate support that the entrepreneur can only dream to have at this stage of the build out. However, the control over the intellectual property and development of the business concept into a new product/service lines are benefits that Intrapreneurs often dream to have as their ideas and developed IP melts into corporate assets.
The Tech layoffs threatens the sense of loyalty that Intrapreneurs need to justify the loss of their creations. The value of corporate Intrapreneurship is not lost on Amazon.
Unlike to analogy to the Hospitality Structure, Tech employees are more likely to jump from Intrapreneurship to Entrepreneurship. Admonition to Tech, today’s layoff is tomorrow competitor.
Like the Entrepreneurs in the MGSN community, we will not sit out a pending recession, assuming it will materialize or any contraction. Our followers know there are opportunities to be developed. In the Part 2 of this series, MGSN will float an idea our Concept Generation group has developed. It is offered to those who are ready to disrupt.