What did Tech Companies Get so Wrong? Forecasting for Subscription-Based Businesses

There has been a raft of news reports regarding layoffs at major tech companies. Stock prices of these companies had, over the last decade, grown rapidly on the basis of revenue growth, with little regard to profitability and efficiencies. For example, many profited from the COVID-19 lockdowns and remote working but as the pandemic waned, they experienced an unanticipated revenue slowdown, especially in their Cloud divisions. Apparently, they were late in forecasting this slowdown. This column introduces JBF readers to the ‘Pot-of-Water’ forecasting and planning model that the tech companies might have used to forecast critical ‘inflection points’ sooner.