TechinAsia reported that Shopee had kickstarted a process for mass layoffs. A town hall was held yesterday (Mon 13 June) and emails were to be sent out to the employees affected.

Pay, food delivery and operations in Spain, as well as a number of Latin American countries, would be impacted in this process.

This happens after a string of layoffs were reported in China, India and Southeast Asia. In Southeast Asia, robo advisor Stashaway, MSME bookkeeping tool Lummo, education tech company Zenius etc. have all made cuts.

Our thoughts on this

  1.  Tech companies in Southeast Asia had been focused on growth – and it is natural to have lots of inefficiencies when growth was the priority;
  2. It is also because tech companies often have to trial and error, in a compressed timeline – many of the internal initiatives are bound to fail (they just did not know which ones at the onset);
  3. In fact, focusing on addressing inefficiencies in a high growth phase almost certainly would not go down with investors;
  4. It seems that Shopee’s strategy was to achieve scale first, and only solve the inefficiencies when they become a problem;
  5. It was a deliberate choice by the management to hire more product managers rather than more experienced product managers, for instance;
  6. Shopee was winning over its competitors not because it had better product (in fact in many areas Lazada was, and still is, better), but because it had a clear and consistent leadership, and an organisation that expedited communications, decision making and execution;
  7. Now as inflation is driving the US to highly likely induce a recession by rate hikes, the growth agenda has to give way to the free cashflow agenda; inefficiencies indeed become a problem;
  8. Large, more established, corporates execute restructuring, cost cutting and layoffs once every few years – in tech companies, like everything else, the cycle is compressed; but essentially they serve similar objectives – to make organisations leaner and more efficient (and hopefully more profitable);
  9. For tech companies which are supposed to be high growth, layoffs send bad signals in the media and to current/prospective employees if not handled well; Chinese tech companies have been using ‘winter is coming’ and ‘everyone is doing it’ to execute layoffs almost every year (although Winter is really coming now); in fact, Jack Ma, who is quiet now, has a way to make these layoffs meaningful for the ecosystem;
  10. Management of large consumer tech companies which are yet to be profitable would be foolish not to switch gears to adapt to the changing capital market environment;
  11. Switching gears fast when you are large is NOT easy – it requires leadership, people, organisation to work in sync, and a culture that stays true to its essence;

We cover these in our Academy talks, case studies, simulations – and now, also in our upcoming book “Seeing the unseen: Behind Chinese Tech Giants’ Global Venturing“. In the book we analysed the notable Chinese companies in their journey both domestic and global – and synthesised many of the lessons learnt, which are really universal for any business. You can pre-order on Amazon now.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.

 

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Jianggan Li is the Founder & CEO of Momentum Works. Prior to founding Momentum Works, he co-founded Easy Taxi in Asia, and served as Managing Director of Foodpanda. The two years running Rocket Internet companies has given him a lifetime experience on supersonic implementation, and good camaraderie with entrepreneurs across the developing world. He holds a MBA from INSEAD (GMAT 770) and a degree in Computer Engineering from Nanyang Technological University. Unfortunately he never wrote a single line of code professionally - but in his first job he was in media, travelling extensively across Asia & Europe, speaking with Ministers & (occasionally) Prime Ministers. Apart from English and his native Mandarin, he is also fluent in French and conversational in Cantonese & Spanish. He tried to learn Latin (for three years) and Sanskrit (for six months) as well. In his (scarce) free time, he reads, travels, hikes and dives. Pyongyang, Tehran & Chisinau are among the interesting cities he has been to.

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