Readers of my BLOGs might think I am always opposed to layoffs. It is true that the majority of layoffs are efforts to Defend & Extend outdated Success Formulas with short-term cost reductins that do not effectively address Challenges. Those layoffs (such as across the board reductions) do nothing to improve a business and are difficult to support. They simply push the business closer to the Whirlpool. But, layoffs can also be important Disruptions tied to turning a troubled company around.
Troubled Success Formulas are turned around by White Space projects. And White Space requires both permission and resources. But where is a troubled company supposed to get the resources? In many cases, it requires making tough decisions to STOP doing some things in order to refocus the business on developing a new Success Formula. Layoffs targeted at redirection and resource generation for new projects are very effective Disruptions that can unleash new innovation and move toward renewed success.
HP and Time Warner have both stalled. They must undertake serious redirection. And both are taking Disruptive actions intended to generate Pattern Interrupts plus unleash resources to be invested in White Space.
According to BusinessWeek, HP is going to redirect what it sells and how it sells it. An action intended to get much closer to customer needs – something HP desperately needs to do. And in order to finance this action it will likely layoff 15,000+ workers.
TimeWarner is selling its cable business in order to invest in AOL. A risky move – but one to applaud. Cable franchises are not high growth businesses. Capitalizing the future value of cable into current cash creates a treasure chest for developing new growth opportunities — which likely lie in AOL as it moves aggressively to reposition and compete with Yahoo!
Both companies are far from out of the Swamp and back into the Rapids. But both are doing exactly what they need to do to prepare themselves for the transition. Investors may applaud these moves simply because these changes raise cash that will improve the balance sheets of both firms. What investors should cheer is raising cash to invest in transitional White Space projects that could return both companies to higher growth.
