News media, and Twitter, have been reporting on Elon Musk’s purchase of Twitter, the firing and exodus of executives and of thousands of staff. And then the report that Musk tells the rest to commit to build Twitter with long hours of hard work or to get out with a 3-month severance.
Wow! Musk is laying out case study material for how not do change management, how not to take over a company, and how to destroy a company.
Here an article from Fortune mag that pokes at the “but why, Musk, but why?!” question.
Here’s my sense of what Musk is actually doing, inhumane though it may be.
- Musk sees Twitter behaving like a successful company, yet Musk knows Twitter isn’t a successful company.
- Twitter is only 16 years old.
- Twitter has grown dramatically in both users and staff (7,500 employees before Musk’s acquisition)
- Twitter is not profitable. It continues to operate at a notable loss.
- “Net loss was $221.4 million in 2021, compared to net loss of $1.14 billion in 2020…” cite 2021 annual report.
- Twitter is on the hook to investors for returns on investments, but operating losses pose a real problem.
- Musk is reforming Twitter into a shape to match its actual level of business maturity: it needs to reach coherency between product-market fit and profitable business model.
- He thinks Twitter should be lighter weight in both overhead and staff costs and he’ll sacrifice stability and security in order to gain adaptability to try out changes to the operations, the business model, and feature set to achieve a better product-market fit.
- I predict that once Twitter reaches product-market fit and proves out a profitable and scalable business model, Musk will be more willing to give back reins for the kind of expansion in operations.
- But on the other hand, a good business model should have scaling built in without requiring costs, staff, etc. to go up in proportion.
Musk bought a really expensive asset that is losing horrible amounts of money (making it a net liability, actually).
He has to renovate Twitter to be dramatically positive in operating income in order to handle the debt burden—the alternatives of letting it continue on its broken path or actually ending it as a company are both far too expensive to be real options.
So, for Musk there is only one option: fix Twitter’s business as quickly as possible without destroying it.