Big tech layoffs: Why big tech needs to adopt scenario planning for strategy, not just thought leadership
Alphabet announced the elimination of 12,000 positions this morning. Microsoft 10,000 a few days ago. Salesforce more than 7,000. Meta is already down 11,000. An Amazon memo suggests the elimination of 18,000 roles. Every morning seems to bring another big tech layoff.
It is easy enough for the executives at these companies to point to the poor post-pandemic economic performance. PC shipments crashed by 28% in the fourth quarter of 2022. Inflation is near record highs for the U.S. and other leading economies. Interest rates are high. It feels like a downturn is just ahead. So, let’s do the hard work and let a lot of people go.
A mismatch between people and skills now isn’t the problem. Poor planning yesterday, and the day before, and the week before, and the year…Technology companies have no excuse for poor planning, yet they continue to react rather than anticipate. Most dabble in scenario planning, primarily for thought leadership rather than strategy. They all have the money to navigate the future better than they have in the past. And they all claim and celebrate the virtues of being data-driven.
Unfortunately, they are less data-driven than they claim. And more importantly, they may be so data-driven that they think their forecasts about the future, extrapolated from the past and enhanced with AI, will guide them to a more certain future.
The future, however, is full of uncertainties. As I tell my students, there is no data from the future. No system based on past models can predict a future where the underlying assumptions change. No matter how much data gets pumped into an AI training set, if the world experiences a discontinuity, then the model becomes invalid.
We have seen several discontinuities over the past several years, and they will continue. It’s time for organizations to plan differently and more deeply.
The Covid-19 Pandemic and work-from-home
The Covid-19 Pandemic and the work-from-home (WFH) phenomenon offer a compelling case for discontinuity. For years, companies like Microsoft, IBM and Cisco extolled distributed work. Their collaboration systems would allow teams working anywhere and anytime to stay connected and productive. But, because people worked in offices, the edges of those claims were rarely tested.
The pandemic tested those boundaries. And while most of the technology worked okay, it wasn’t robust enough to support constant remote work as the primary model for most businesses. Upstarts, particularly Zoom, were dominating the discussion and the new revenue. So, the technology leaders seized the opportunity to embellish their infrastructure, beef up their portfolios, and add dozens, even hundreds, of new features.
There was a hiring craze around remote work. One of the biggest deals of the WFH work era was Salesforce’s $27.7B acquisition of Slack. Think how many of those 7,000 lost jobs might have been funded by even a portion of that overpriced acquisition. The answer is all of them.
Because public companies are so public and judged as harshly as a Hollywood star not keeping up with the current trends, when something like the Covid-19 Pandemic occurs, tech companies feel compelled to do something, even if that something wasn’t a strategy option weeks or months before. But, as I learned from a manager many years ago, action is not the same as impact.
Salesforce had a chat tool, Chatter, before acquiring Slack. That Chatter wasn’t competitive was known before the Slack announcement. Bringing in a new chat tool didn’t change the behavior of most Salesforce customers. If they used Slack, they likely continued to use Slack. If not, they continued to use whatever they already used, including competitor tools like Microsoft Teams.
If the technology companies stepped back from their bias toward technology as the solution, they would have seen that most companies needed to use the tools they already owned better. The work-in-the-office norm kept them from learning how to work in an always remote setting. The bigger answer to coping with the Pandemic was not more technology or more features but better practices and better management (see our early pandemic WFH advisory here).
But for the most part, technology companies don’t sell work experience consulting; they sell work experience technology. They rely on partners and buyers to deploy, implement, and drive adoption.
The bottom line is that the Pandemic created a demand for better collaboration. Better tools, sure, but better practices just as much. Most companies had already placed their bets with one of the primary vendors, so the rush to new features to move people from established platforms only yielded small wins.
The discontinuity could have been anticipated, and the choices of action considered as contingencies, but that would have required a deep seeding of scenario thinking throughout the organization—scenario thinking tends to encourage the challenging of assumptions, which is not a desired behavior in hierarchical organizations, those with charismatic leaders or not.
And now, as the layoff announcements demonstrate, the rush to global collaboration has given way to a rush toward AI, including the emergence of generative AI. The cycle will repeat when these companies face, in a year or two or ten, the waning AI as a strategic imperative either through failure from multiple vectors, including legislation, social pushback, or overly exuberant technological expectations—or its displacement by something even cooler.
Being data-driven did not help big tech anticipate the WFH phenomenon, and it did not help them gracefully back away from it.
Imagination, though, does not cease where the data ends. A pandemic that continued for decades would have created very different contingencies from one that gets under control relatively quickly. The Covid-19 pandemic, which continues to rage as I write this, did become less threatening pretty quickly against the measures of economics and biology. A couple of years can’t be discerned on the iconic images that illustrate Earth’s history against a clock face.
In terms of human scale, of individual people, years matter. For those who died from Covid-19, days, even minutes mattered.
To Big Tech executives, thinking about the future is well and good when it helps sell products. The future is a keen weapon when differentiating from the competition. Roadmaps get shared in secret meetings preceded by the signing of non-disclosure agreements.
But those meetings live in a deterministic world that the technology company thinks it controls. And at the level of roadmaps, it does control every deal. What it doesn’t control is the context in which the company and its roadmaps exist. That context is always uncertain.
Scenarios force organizations to put a name on uncertainty and to think about alternative futures, not just the one they want or the one they believe they control. Even though they are the product of analysis and experience, roadmaps are as much about hope as any human speculation about a positive future outcome.
The reality of an unfolding future disrupts technology roadmaps like any other plan or strategy. The Chatter team at Salesforce was chugging along with their plans, a secondary support feature of the leading global Customer Relationship Management system. Then the pandemic hit, and the roadmap proved inadequate, both in the features it described and the runway it expected. They could not make themselves the leading chat feature fast enough, if ever. So the company decided to buy that feature from the market.
If Salesforce, which has one of the top scenario planning teams in the world, actually listened to their scenarios, they probably would have seen the need for immediate improvements in work-from-home technology as a minor blip over a ten or twenty-year horizon. Continuous improvement was probably good enough, given their business.
Their data about Chatter probably told them two things: most customers didn’t love Chatter, and they used Slack or another tool. That insight was probably not uncertain. They likely had numbers showing exactly which tools coexisted with Salesforce within major customer accounts.
The scenarios, combined with data about Chatter, would have suggested that Salesforce become more strategic about its relationship with collaboration vendors. It would not indicate that they buy one. The acquisition was an act of strategic hubris.
Embracing uncertainty and longer planning horizons would have saved Microsoft, Cisco, Salesforce, and others considerable money during the pandemic. Scenarios would have positioned them better because a significant shift to WFH would have lived in one of the scenarios and driven frameworks for more fluid work if not implemented features. They could have anticipated a global WFH phenomenon and created contingencies rather than being surprised. Their products would be better equipped and better prepared for a WFH moment. Instead, they invested elsewhere, as the pandemic remained a Black Swan far outside their strategic peripheral vision.
What to do now
So, these sweeping, seemingly panicked moves to realign workforces from WFH to AI demonstrate a need for foresight on behalf of some of the most well-paid people in the world. Although the leadership teams at large tech firms may be data-driven about workforce control, they aren’t held accountable when the data demonstrates their lack of performance. If any individual worker in any of these companies walked in and said, “Hey, I need to take a multi-billion dollar write-down. But it’s on me,” they would not return to their office with a job.
Senior leaders must be more purposeful and inclusive in their planning processes and more transparent about the options.
A few months from now, there will be hiring sprees at some, if not all, of these organizations. Some may struggle going forward, becoming less relevant as their ethics, business models, and assumptions about the world continue to diverge from the market. Others will survive this strategic gaffe, see their stock prices recover, and the layoffs and follow-on impact on the local economies forgotten if not forgiven.
Hopefully, a few will also learn that they need to engage their imaginations more effectively, deliberately, and extensively, not just to create innovation but to anticipate the future. Technology leaders, and other larger organizations, need to imagine multiple futures simultaneously. The uncertainty of everything from climate change to social unrest to AI regulations exists.
Scenario planning is the only tool that facilitates robust thinking about the future. It offers a way to engage staff across the organization in speculative thinking that informs any planning function. Alternative futures challenge assumptions, hint at surprises lurking behind those assumptions, and suggest new ideas unleashed when current assumptions get put aside.
Alternative futures challenge assumptions, hint at surprises lurking behind those assumptions, and suggest new ideas unleashed when current assumptions get put aside.
The large tech layoffs are not a human resources (HR) failure. HR is just as uninformed as the rest of the organization about anything that isn’t in the data-driven plan. HR, informed by scenarios, would better anticipate skill shifts, and slow hiring rather than face layoffs. And despite the data-driven bravado of their company executives, most HR departments don’t have a firm handle on the deep capabilities of the workforce. Scenarios could help them make a case for better data and how to use that data to help avoid layoffs and redeploy people.
But often, layoffs prove a quick way to demonstrate cost-cutting to avoid a decline in profits and, therefore, a perceived decline in value, leading to lower stock prices. There is no reward for a business that anticipates rather than reacts. A slow, methodical redeployment of people over months and years, investments in emerging skills to give people new opportunities, and a more effective way to match need to supply would look out of sync today.
If every other tech firm is shedding jobs to save money, then we should too, or our stock price will go down.
It is too bad that our quarterly review economy generates such poor behavior. Leaders of tech firms, many of whom have written books on management, prove in months like this that most of their conceptual assertions are just that, conceptual and not practical. Thousands of lives will be disrupted because of a failure of imagination by leaders and the large investors that drive their behavior.
Scenarios are not a solution. They are a tool. But it is irresponsible for leaders not to leverage all the tools within reach to align with what they claim are people-first organizations. If organizations embrace scenario planning now at the strategic level, they can start imagining less volatile futures, not because the world is more certain, but because they are better equipped to navigate uncertainty.
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