It’s a perennial debate among strategy observers: how far out should a leader be thinking about the strategic direction of a firm? And how flexible must the implementation of that strategy be—should it be a process of careful planning and analysis, or should it be more emergent and adaptive as new information comes in? The debate surfaces every now and again in hand-wringing about short-termism and excessive focus on quarterly results contrasted with criticism of CEOs who pursue a long-term vision without generating near term-market results.
Remember all those conversations we used to have about how great Japanese management techniques were, because their leaders took a long-term approach to capability development? Matsushita (parent company of Panasonic) took the thing to extremes—their founder talked about a 700-year-plan for the company, which would unfold in the “seven ages” of Matsushita. Today, the same firms that used to terrify leaders faced with brisk global competition are now described as sclerotic, slow, uncompetitive and rigid,rather than being seen as long-term oriented and visionary companies. Nimble competitors from other countries such as Korea and India have beaten them to key markets and technologies and forced the longer-term thinkers into reactive mode.
The case for long-term strategies, even as long as 100 years, was recently discussed in an BBC article that suggested that leaders in many Chinese firms do, indeed, take a very long view, citing Lenovo’s ambition to become the world’s largest computer maker 30 years before, an ambition it has nearly realized today, as an example. It sounds eerily like what people were saying about Japanese companies in the ’80s.
In a way, the “100 year” strategy question is a misleading one. My research suggests that the most effective companies select certain elements of their organizational systems to remain extremely stable, with the goal of preserving this stability over very long periods of time, while at the same time investing in practices which can facilitate speed and responsiveness. Culture, values, a common perspective on the organization’s core purpose and sometimes a significant overarching goal can be forces for stability and can endure for very long periods of time. There are also businesses that require decades of deep-pocketed investments—major energy plants, new aircrafts, significant new technology deployments such as biofuels and things like Google’s investment in driverless cars come to mind. In these areas one can certainly make the case that introducing a long term perspective and stability has a lot to offer.
That being said, my own observations suggest that the clock speed of companies from just about every sector of the economy are getting faster. Just a few months ago, I had a conversation with executives from a leading global energy company. Their business had been pretty simple up until the last 18 months—build a plant which you can depreciate over some 60 years, and send energy out to customers through the grid. Today, they’re dealing with distributed energy, energy that comes back into the grid from solar and wind resources and totally different business models in which their plants no longer play the only role in large-scale energy production. One might well have had a long-term strategy based on past experience, but that strategy today would lie in tatters.
Among the factors underlying the need for faster strategy processes is that in today’s transient advantage economy, access to assets rather than ownership of assets is possible. A firm doesn’t have to buy expensive computing time—it can be rented from Amazon Web Services. Programmers can come from oDesk. Your marketing leaders can come from companies such as “Chief Outsiders” who provide such talent on demand, and so on. So, how long should a CEO plan for? I think it makes sense to have a broad vision for how an organization can remain relevant and add value that could look out for decades. But that should never blind a leader to the fast pace of the here-and-now.