In an earlier life I designed a leadership development program which gave a group of leaders the opportunity to drive high performance vehicles at speed through a mini slalom course (see below). The challenge was to drive the circuit as fast as possible.
On the first pass, everyone came out of the bend at A and deliberately steered the vehicle past each obstacle before heading for the re-entry point at B. On the next round, the driving coach’s advice was: “as you head out of A immediately focus your sights on B”. What happened? Most people drove from A to B in a quicker time on this second run: none of the witches’ hats were damaged. How did this happen? The leaders lifted their eyes from the near field obstacles and focused on the end game: driving from A to B. Their peripheral vision allowed them to navigate the near field obstacles.
So what? Too many executives are focused on the near field obstacles ahead of the end game. They collapse the timelines in their strategic thinking based on ‘felt’ competitive pressures. Gary Hamel observed nearly 30 years ago[i], “most strategic plans tell us more about today’s problems than tomorrow’s opportunities”.
We saw evidence of this recently with the release of the 3rd biennial Innovation: State of Play report by my former colleagues at VCI. In a survey of more than 800 mining professionals (70% executives) they found that while 98% of the Australian respondents indicated innovation was either ‘important’ or ‘critical’, only 26% said it was on a horizon of 3 years or more. Lest you dismiss this as another self-serving consultant report, Rio Tinto’s iron ore Chief Executive agreed: ‘Australia does not have enough of a long-term vision on how to harness the technological disruption the industry faces’
Jeff Bezos (CEO Amazon) argues that a short time horizon confines organisations to a crowded competitive space[ii]:
“If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that … at Amazon we like things to work in five to seven years”
Executives often push back against a longer term view. Many tend toward the view that in an age where ‘agile is the new black’ you can’t strategise over such long periods[iii]. This issue is being debated in mainstream journals such as Harvard Business Review. Professor Roger Martin[iv] argues ‘adaptive strategy is a cop out’. Greg Satell pushed back: ‘the only viable strategy is adaptation’.
What are we to make of this argument?
Strategy demands a coherence and consistency over time. It is through this coherence and consistency that firms accumulate ‘strategic capital’ which is the foundation of competitive advantage. Within these bounds, there is plenty of room for agility and innovation. But don’t imagine you can duck the hard work of envisioning the 5-7 year future of your organisation. Put it another way. Absent this longer term strategic coherence and consistency, what is left? What guides the choices your leadership group make along the way? If you just try ‘stuff’, see how it works, and adjust, how will that convert that into strategic advantage?
Amazon’s recent buy out of Whole Foods led to a splash of articles foretelling the transformation of the grocery retail sector. Any major retailer thinking out the next 5-7 years must surely have expected this. Players overly focused on the near term competitive battles might have missed this threat.
What now? Well, here are three ideas to help stretch the time frame of the organisation:
- Specifically recruit for strategic capability (SQ). Strategic capability[v] includes the capacity to deal with both detail and dynamic complexity; to think across time horizons. An unwillingness to look across longer time horizons may reflect lack of bandwidth at the executive level.
- Change up the nature of the strategic conversations. These should engage participants not just analytically, but creatively and emotionally[vi]. Participants must be able to create real insights. You have to tap into the pattern recognition parts of their brains.
- Map your strategic initiatives across three time horizons based on the expected timing of their contribution to earnings: contribution to current; mature in 1-2 years; mature in >2 years. There will be a bias toward near term contribution, but if you can’t identify material contributions beyond the year 2 horizon you have a problem.
Thinking about the longer-term future does not guarantee success, but the converse pretty much guarantees failure in today’s competitive landscape.
DDB ... a strategist's view
[i] Written nearly 30 years ago, this remains a classic strategy paper for any executive: Hamel & Prahalad (1989) HBR (1989). Strategic Intent. Harvard Business Review
[iii] In practice, any major asset investment is usually based on a long-term investment horizon. The challenge is to lengthen the horizons beyond the specific investment decision.
[iv] Roger Martin is a former Partner at Monitor Group and Dean Rotman School of Management, now best known as co-author of ‘Playing to Win’. Satell is a writer and entrepreneur.
[v] There are tools which can be used to evaluate this capability. There are also other elements in recruitment: knowledge/skills; values; wisdom
[vi] Some conversations actually improve our individual mental functioning