Back to the past

In the late 90’s General Electric’s then-CEO Jack Welch was considered the world’s best CEO (he retired before the crash of GE during the financial crisis in 2008). A big part of his management philosophy was ‘stack ranking’, where employees annually were put in brackets: A players (20 %), B players (70 %) and C players (10 %). C players were put on performance improvement plans or had their employment terminated.

It now seems like this is back in vogue, as Meta/Facebook has allegedly put 10 % of its employees in their equivalent of C players (“meets most”).

This will help Meta lower costs (if followed by redundancies), but likely only to some extent if the massive investments in metaverse related projects are not curtailed.

Meta’s problem is only to some extent overstaffing. It has at least three bigger issues.

  1. Meta cannot really acquire meaningful companies (like Instagram or WhatsApp) any longer due to FTC and other authorities. If it could acquire Pinterest, Twitter, Snap or TikTok US things would likely be better.
  2. The mobile platform owners (Apple and Google) have or are adding privacy controls that makes Meta’s ad product to work worse (Apple’s ATT for iOS alone has reportedly led to $10 billion in lower revenue for Facebook), and Google are launching something similar for Android.
  3. Given point one and two, Meta needs to focus on developing both products and a new platform internally. The combination is likely driving the extremely high investment in the Reality Labs. I understand that Meta can and possibly should spend a lot on a new platform, but my I think they are going about it the wrong way by build large parts of the platform before there is a killer application. My belief is that a new platform is either built on top of a killer application or by a killer application driving adoption of the platform. The problem with the metaverse (and specifically VR) is that there has been no killer application that is driving adoption at the scale and speed needed to build an alternative to the mobile platforms.

Author: Henrik Torstensson

Partner at Alliance VC. Investing in Nordic early-stage tech startups.

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