Comment by marktangotango | Hacker News Reader

Comment by marktangotango | Hacker News Reader

One thing I've noticed is that the perception of reality varies by scope of the viewer. An example I've lived a few years ago; from a high level (c-suite) an acquisition can have subsidiarys that aren't aligned with the main business and will never meet the profit margin required. Thus if the low margin subsidiary loses customers and whithers away, it's not really a big deal. In fact it's probably favorable to the bottom line for the subsidiary to do the bare minimum to keep the lights on. Ideally the subsidiary can be sold or spun off. Sometimes that's not possible.

I lived the smaller scope as a software development manager in the subsidiary. Merit increases were minimal or non existent, annual layoffs were normal. My peers were passionate about the customers and continuing to support them even though it was clear from the C-level actions they cared nothing for the business. At my level there was a lot of anguish and consternation about the customers and business. As expected, the subsidiary started seeing a lot resignation as the most experienced people left, accelerating the decline. My team saw 75% attrition in 6 months. Customers started leaving.

The old saying "perception is reality" has some bearing here. I still ask myself, is this not the outcome the executive sought in this situation? I personally believe it was, no one could be that incompetent, could they?

This could very well be a calculated decision. It's well known in financial management how product lines develop in general and how you manage their lifecycle profitably; most product lines aren't forever, some of your products will be at a investment stage (expenses with a calculation of future profit extraction), for many there's a growth stage where you reinvest profits to gain revenue, there's a stable running stage where you get some sustainable margins, and there's often an extraction/"milking" stage with intentional unsustainably high margins - one well-known way to shut down a product is to milk it until death while starving it of any resources. In quite a few (though not nearly all) cases that is the most profitable way of closing down a product line for which you don't think a long-term future is profitable; you cut expenses so that you extract at least some profits out of the inertia as opposed to running at near-zero profits until it eventually dies anyway.

It would certainly be incompetent to just keep investing in all declining product lines; it's a valid business strategy to buy (or build) a product with no long-term future and extract as much as you can before it collapses - the point of the business is not to sustain/operate products as long as possible, but to extract as much profit as possible from those products. Extra investment in a declining product might make the product last, say, two years longer - but will those last two years be profitable enough (as opposed to just self-sustaining) to repay that investment? Business always has to take care to not fall for the sunk cost fallacy.

Xerox has/had a record of walking away from technologies not very many years after bragging about customer adaptations.

It has been slowly shrinking over the decades. Customers need a viable migration path forward. The last thing customers want is a product that can do longer be used when it's a long standing part of their business process.

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