Product in Times of Uncertainty & Layoffs

Welcome everyone to the Product Bakery. I'm here as usual with my co-host Christian. Hello Alex. And of course we want to thank everyone listening to this podcast on a regular basis and for everyone who's new. Make sure to listen until the end and if you like us, leave a follow and check back on us or maybe even recommend it to someone. Yes, don't miss out on that one. Well, I mean at the end it's always refer a friend, that's what works best. That's the best advertisement. And we're not giving you any money for that. Yeah, but we're also not asking anyone any money. I mean, okay, at the end, why would we? It's actually nice to know there's a lot of people that randomly want to listen to our brain dumps or vomiting some ideas on a regular basis. Speaking about vomiting, today with a topic that's probably in many people's minds, at least a lot of the people that I know in the Berlin market or in the European markets. And of course, there have been a lot of news in the recent days. There have been a lot of companies laying off people. I've just googled a list of some of the recent layoffs, right? You have Klorna, they pretty much laid off 10% of the global workforce, considering that they are quite a massive company, that's a lot. You have companies like Gorillaz, 300 people only in the Berlin office, that from one day to the other, end up without a job. You have their competitor, Gattier, who laid off like 4,500 people. You have some other smaller companies. Well, I mean, I don't want to spend too long on just talking about this. But it's definitely a time where a lot of people in the product world fear about their job or have some insecurities, like what happens to my company, what happens to my job, my role, will I find something else? I mean, Christian, you're not in those shoes at the moment. How have you perceived this whole situation? Well, the list is long and at least in Berlin, thousands of people lost their job. So that's sad. But also, it's a good opportunity for a new start. Yes, and I think the good thing is markets are crazy, right? The first thing that we did in our company is like, okay, wow, new talent on the markets. Let's get the lists, right? And I think the lists are probably the most open page in the last couple of weeks. And I'm pretty sure that there will be great opportunities for all the people. But I think what is probably more interesting to talk about, and it also came up in some conversations that I just had recently, is why is this happening at the moment? Yeah, I mean, I think there is room for many point of views we can look at, because I was also thinking about what it will make with the psychology of the people and what companies can expect after they have had these layoffs, because there is usually a follow-up. But yeah, let's first of all talk about what's going on, right? Yeah, and I think it's extremely hard. There are so many different opinions on the current markets and, well, the recession. And is it actually a recession? Can we talk about recession? How long will it stay? There are some pessimists who talk about like, three, five, or even the next 10 years, where we will have to kind of live with a recession. Others are a little bit more optimistic. So I think that's also not something that we can answer now, but definitely a trend. And one of the reasons why we're seeing a lot of layoffs is how companies prioritize stability over growth. And we've had this massive focus on all the companies, raising a lot of money, throwing the money at acquisition channels, and growing at all costs. And of course, with markets being a little bit more unstable at the moment, and with a lot of question marks in the rooms, the first thing that happens is that investors look for stability. Investors try to look for revenue suddenly, and not only new acquisition numbers, right? And I think this is where currently companies have to rethink their business model, have to rethink their structure, have to prioritize differently. And where a lot of like the R&D projects, special projects, growth acquisition, and so on, is now being down-prioritized, to go a little bit more into a cash conservation mode of how long can we, or how far can we make it with the current fundings that we have. And of course, that's something that you, like that runway, you can only extend it if you cut your costs. Absolutely. And unfortunately, oftentimes, that's on the people. Yeah, I agree. I mean, I think it's important to take a closer look at the markets, because it has an implication on almost everything. So first of all, we need to take a look on the current situation. We had Corona, right? We are having war right now, and war is always bad for the economy. Well, I guess not only for the economy. Yeah, not only for the economy, exactly. As long as you're not producing weapons. But overall, it's a tough time. And I'm not talking about war that is going on right now physically, but it's wartime. I mean, if you have read a couple of books, I think you will understand what I'm talking about. And therefore, it's important to look at the markets, because the amount of money that has been printed over the last years is tremendous. And the fact that we are now facing inflation is not only related to war or to Corona. It was just a matter of time until inflation will hit us sooner or later. And what does inflation mean? Inflation means we, as the end consumers, are going to pay for that, right? So we are losing money. And if we lose money, we cannot consume as much as we would like to. And with that, that will have implications on the companies. So the growth plans that you just mentioned, they will go back. So companies cannot grow as much as they used to in the past. And therefore, they have to start optimizing. And this is something that you usually do with layoffs, first of all, and then also becoming more efficient in what you're doing. So the layoff part is the negative part. And obviously, I wish everyone who got hit by it to find a new job and hopefully even a better job, better paid. But nevertheless, in case you are one of the people who stay in the company, or even if you're a leader or CEO, now it's time to think about how you can optimize internally in terms of processes, quality, customer engagement, customer retention, reducing churn. So these things, and we've talked about it a lot in our podcast, are getting more exciting right now. So from a product perspective, I have to say, it's a way to think different right now. And you mentioned a few points that honestly haven't been like my first thoughts in the last couple of days. But they make a lot of sense, right? If you reduce growth, you're still sitting on a pool of users, customers, clients, and making sure to give them what they need to improve their overall experience and satisfaction. To actually get more out of a smaller user base, that is where a lot of people should focus their priorities on, right? Researching, understanding what are the key pain points, why are people leaving the product? Yeah. Right? Because I think that one of the downsides of a massive focus on growth is that you forget exactly about these topics. Exactly, yes. And you have so many customers that you lose. Simply because you don't pay attention. Simply because you don't listen. Because, well, guess what? I optimized my onboarding and my registration flow so that it's only one click and I can get more and more people. Yeah, if you now do the calculation, I mean, I believe there will be many companies who realize that all the money they spent on growth was a waste of money because what they have to pay now, eventually, to become stable again or to invest into not losing customers, etc. might not be well. So this whole question, don't go... Yeah, I mean, I wouldn't say a waste of time, right? I mean, a waste of money. Sorry, a waste of money. True. Because, of course, I mean, with the focus that a lot of companies have, like you want to grow fast to get to a high evaluation. I mean, this is also a little bit the issue or kind of where the bubble is currently a little bit bursting. I'm not sure if you can burst a little bit or if it's always bursting. It's like being half pregnant. That won't work. Either it bursts or it bursts not. But, of course, I mean, you need to constantly scale your customer base in order to be worth a lot of money, in order to be able to raise more money. You raise more money, what for? Because you want to constantly grow. The investors that give you the money want to actually see growth. Ideally, hyper growth, exponential growth. Growth? Growth, growth. It needs to be big, right? Everything, like even the employees. Big is better or used to be, right? But I think you generally need to have also the right balance between only growing, growing healthy, and making the best out of the growth. And I think the making the best out of the growth, the retention part, the churn reduction part, that's something that's definitely often neglected. And maybe this is a really good opportunity actually to put the focus on that. There's another point we haven't looked at right now, which is the business model itself. Because there are many investors, or let's say like that, maybe some of the people who are listening to this podcast, and even ourselves, Alex, have experienced companies where you were maybe questioning leadership decisions or leadership skills in general. So why is that getting more and more often? Or why did that get more and more often in the past? One of the reasons is because money is cheap, or used to be very cheap. So it was easy to get money because investors were throwing money everywhere almost, right? Oh, man. Yeah, exactly. And you can do a first seed race and get out with like multiple millions. Yeah, without any problem, right? Without a product, without a team, without a man. And a shitty business model, for example. And the best example, I think we both watched the series recently, We Crashed, so WeWork. Look at the WeWork story. And the business model was shit, in my opinion. Yeah, yeah, yeah. The idea was great, but it was not executed well, and they burned a lot of money. Especially in times that we're living in right now, it's super, super important to start rethinking your business model. I mean... Even though it used to be good for a growing market, sorry, I need to finish that. Now the time has changed drastically within the last two years. Yeah. No, I think it's funny that you bring up We Crashed, right? Or We Crashed, WeWork. By the way, I definitely recommend watching that movie. Yes, definitely. It's amazing. It's really good. So shout out to Apple or whoever produced it. And I mean, there you have even this mad founder, CEO involved, right? That tops this whole thing. I mean, probably, and I haven't spent enough time with it, but probably the WeWork model itself. I mean, co-working spaces, there's a business model. You can make money out of it. Yeah, you can. If you grow, or if you spend the amount of money that WeWork spent on, and some of their investments have been quite questionable. Life is a very expensive jet. So that's one thing. But I think when you said business model, the first thing that came to my mind, and guess what? There have been a lot of layoffs in the company. It's things like Gorillaz. Yeah. And since day one, Gorillaz, Flink, I have a friend of mine who was actually working for the fundraising of Flink. They raised so much money in the first year, right? First year after founding. And they've been already like almost a billion in fundraisers, right? So it's like crazy numbers. And since day one, and I'm still trying to understand it, and maybe someone can explain it to me, but I can't see where this business model ever brings you a lot of money, right? I can't imagine long-term strategy that there is something. But if you only look at the current ways of working, prices, and I mean, maybe for everyone in the US, to not exclude you here, even though I think Gorillaz is actually also live in the US, they're like a grocery service that delivers groceries to your house in less than 10 minutes. So think about the massive infrastructure that you need for it. The prices on the platform are more or less supermarket prices. So it's not that you have to pay a ton more. And the delivery fee is somewhere around €1, €1.50. You need to pay people for the delivery, 10 minutes. So guess how many people you will need to actually deliver on that promise. You need to have shops in pretty much every corner of the city, central areas most of the time. They're extremely expensive. If you burn through hundreds of millions in acquisition costs to have a big customer base, that I would assume without knowing the numbers, is also not the most consistent base in terms of like, I'm pretty sure you have a lot of like, you have a lot of churns. That was the word I was looking for. You have a lot of people churning, or a lot of people who tried once, twice, who maybe used a referral bonus that's also subsidized. So if you're just burning through that money, when is this business ever going to return all of those investments? It's almost… Unprofitable, yeah. Yeah, it sounds almost impossible, right? So no surprise that these businesses that purely went for high evaluations, lots of growth investments, that they struggle with the current… Exactly. And that's actually something we need to talk about, right? Because what we're covering right now was the past. So when you're growing as fuck, you don't give a shit about profitability, you start, you focus on growing. Which is, by the way, fine in a working economy and in the growing market, but this time is changing right now. So the question is what to focus on next. And I think here it's super important, as you mentioned, to make a close connection to your customer base, understand churn much better, try to improve internal processes, make optimized costs, and not only in terms of layoffs, but also making sure that, I don't know, there are many products we could take right now, but make sure that you buy cheaper, but still keeping up the quality, easier said than made. But there are many things that can be done, and I think right now product management is so important. And I include product design, user research, and everything that is related to the whole development process. And also the product leads to make sure that you are focusing on strategy, you are focusing especially on short-term vision to make sure you are able to survive. So therefore, I believe this whole working mode needs to change and also focus much more on sustainability rather than growth. Yeah, yeah, absolutely. Sustainability, stability, that is important. And I think that's also what probably a lot of the employees will be looking for now, right? Like I wouldn't join a company where I am questioning their business model or where I don't understand the actual plan to become profitable and to have like a solid revenue stream because I think that's also what investors will prioritize. And if you are interviewing with a company, whether you talk to a person from HR or a product lead or the CEO, ask them about the numbers. It's fair to ask if they're profitable and if not, how they plan to become profitable. And you need also, as someone who wants to change jobs now, also change your own working mode. You need to be much more critical. You need to ask more questions. You need to challenge more status quo of where you want to start working. I mean, I think it was always true, right? But I think it's a good time to remind everyone to do it. Yeah, exactly. Don't just go for the highest salary or for the best salesperson or for the fanciest job title or company name on the CV, right? Because of course, a lot of also those hyper growth companies have been nice in CVs, but at what cost? And I think that's also a good timing to wrap the session. Any final words, Christian? Well, it's tough times. And I'm feeling with everyone who got hit by it, but the only thing I can say is in every bad thing is also something good. Yeah, and maybe with that, right? For all the ones of you that listen to us, that follow us, feel free to reach out. I mean, we've spent a lot of time working with people in the industry. We are connected. We all have some connections. So please write us. Like if it's about just checking a CV or forwarding a CV or any other information or questions that you might have around the current market, around the current needs, around roles, feel free to drop us a message and we're happy to get back. And this also counts for companies, by the way. And with that said. Have a good one, Alex. You too. Take care and see you soon. Bye-bye. Ciao.