Layoffs and Linearity

Sonos, who produces one of my very favorite hardware/software products, announced some layoffs yesterday after a solid decade of impressive growth. I bought the first Sonos v1.0 around 2005 back when there was no integrated search functionality and the product mostly allowed people like me with big music libraries to seamlessly index and play their collections over a home hifi stereo system. Navigating roughly 10,000 tracks with a scroll wheel was an interesting experience, but I wrote to their product team (like others) and the software evolved with streaming services - Rhapsody, then Spotify, Soundcloud and others. Today, I use Sonos entirely through its integration with streaming services and my digital music collection sits on a home server, rarely accessed. It’s one of my most frequently used apps and has been a mainstay on my phone’s home screen for several years. It’s actually the only app that lives on the home screens of my phones and iPads and we’ve been loyal Sonos customers through a few apartments and homes since v1.0 in 2005. As a sidebar, Sonos is also part of the history of Outbrain. Fred blogged about Sonos many times here, here and then talking about content sponsorship here and this is part of the inspiration that led Yaron to build what is now Outbrain and trigger the content marketing revolution. So my connections to Sonos run deep.

Sonos CEO John Macfarlane announced in a blog post yesterday that they are refocusing their efforts and letting go of some employees as part of that shift. The sensation-seeking doomsday tech press corps were quick to write of “layoffs” implying trouble for the company, some taking to Twitter writing in a tone that implies it's the beginning of the end. As quick as these writers are to crown a company the next “unicorn”, these same people will pre-maturely schedule a company’s funeral. On the contrary, I believe Sonos is alive and well and still wish I would have invested back when I first experienced the uniqueness of the product. Almost no businesses grow linearly up and to the right from day one. Building a business requires tests and experiments, some of which succeed, resulting in growth, and some of which fail, resulting in retrenching, but all hopefully result in learnings. As companies grow larger, the impact of these moves is more profound. As CEO of GE, Jack Welch was famous for his 10% rule regardless of overall company performance. Lucky for him, the press didn’t predict the end of GE every year back then when these tactical annual adjustments were made. Over the past year, a few of our companies have made decisions to reduce headcount as strategies have evolved or, in some cases, they over-hired. These changes, while not always pleasant, are a normal part of business-building and frankly, we commend the founders who make these tough decisions. It's a lot easier and more pleasant to stay the course, but that's often not the best decision for the business. The sooner we can have an honest discussion about this without the sensationalized overlay, the better and more authentic our industry will become.