PART THREE: THE END OF THE MIDDLE – LET’S GET PRACTICAL
Can we overcome short-term thinking, disruption mania and quarterly earnings hysteria? The an-swer is twofold: yes, but not any time soon. The portents certainly look grim, if you consider the following. As marketers, politicians, app builders and the like gain ever-deeper insights into how the mind works and how to get us hooked, they will exploit our emotions and System 1 thinking in ever more sophisticated ways.
Yet there is cause for hope. According to this year’s results of the highly-regarded Edelman Trust Barometer, two out of three of respondents worldwide indicated that CEOs are too focused on the short term. Furthermore, eight out of ten of respondents said that CEOs should be more visible in discussing and leading to solve societal problems. Such problems cannot of course be solved in a quarter; they are long-term issues. This implies that the majority of people realise the value of long-term thinking initiatives and want them.
When it comes to long-term versus short-term thinking, I believe we will see growth on opposite ends of the spectrum. This is the theory futurist Farid Tabarki dubs The End of the Middle: growth will come from anywhere except the middle. We will see even more focus on disruption and inves-tors vying with each other to find the next unicorn. At the other extremity, we will see the rising power of steady progress: the increasing adoption of a long-term perspective and patiently waiting for slow and incremental – but sustainable – growth. There will of course be mid-term thinking as well, but the starting point will be at the extremes – the rest of the strategy developing from there.
None of which means there will be a perfect equilibrium. Short-term thinking and the focus on dis-ruption will be the norm for quite some time. Long-term thinking will be less in the limelight, but it has the potential to be a wonderful and profitable niche.
What kind of companies are already thriving at the long-term end of the spectrum? There is a whole group of companies which are excellent examples of long-term thinking, and are focused on steady progress. Fortunately, there is also a wealth of research on them: family owned business-es. They might not be as sexy as Tesla or Oculus, but on average they grow steadily, suffer the least in economic downturns and score the highest in trust research. The reason for this is simple: they practice long-term thinking, do what is best for subsequent generations, leaders stay on for decades, and they are often deeply rooted in the communities where they operate.
Investors cannot of course force the average tech start-up to become a family business (although it would be nice to see a VC try). But they might look for companies which embrace the long-term management principles employed by family businesses. There are innumerable handbooks on the lessons to be learnt from family businesses.
So what is the eager executive to do? A good starting point would be to look closely at the secret society on long-termism’s list of great business initiatives once it is published. In addition, here are three practical business tips to help integrate long-term thinking into your business strategy.
1. Practice long-term thinking
There is a difference between talking about long-term thinking and actually doing it. To quote Larry Fink from Black Rock:
One reason for investors’ short-term horizons is that companies have not suffi-ciently educated themselves about the ecosystems they are operating in and how technology and other innovations are impacting their businesses.
I couldn’t agree more. Over the past few months I have discussed this with quite a number of busi-ness leaders. The average response is twofold.
The first response is: ‘We regularly have meetings on our long-term strategy’. When asked to elab-orate, they often refer to the company’s annual strategic offsite meeting. While these offsites may sound great on paper, they are less so in practice. I have a unique insight into them as a speaker who is often invited to kick off such days. There are several problems. One is the prevalence of laptops and smartphones, which are not switched off and are used throughout the sessions. The coffee breaks often resemble some kind of frenetic email-and-phone session, during which execu-tives are sucked back into their daily business. Another problem is that large parts of offsites are dedicated to presenting last year’s results to each other (which tends to be boring), presenting next year’s plans, or creating them on the spot. I have seen countless CEOs open offsites by telling their people at the end of programme they want practical action plans (‘which will disrupt our indus-try!’).
The second response is: ‘Our long-term strategy is firmly anchored in our KPIs’. This is odd, as I have yet to hear the first truly long-term strategic KPI. Long-term strategies are taken apart and then taken apart some more to suit quarterly earnings KPIs. This is not long-term thinking. Even if you did formulate the perfect long-term strategic KPI, it is doubtful it would work in practice. If all the other KPIs are feeding the quarterly earnings hysteria, one long-term KPI will not change the way people work.
2. Post-tenure remuneration
To engender a workforce that is in it for the long-run, some companies make all employees share-holders in the company. This employee-shareholder model is often used by family-owned busi-nesses (like Ricardo Semler’s Semco Partners), but also by start-ups. The latter use this strategy to retain scarce talent for a few years.
A less bold solution, which I have not yet seen put into practice, is for organisations to keep re-warding people after they leave the company. If, for example, a company is successful because of a decision made by people who no longer work for it, they should still be rewarded and get the credit they deserve. If we create a culture of long-term remuneration – regardless of where a per-son is currently working – we will create a culture which fosters long-term thinking.
This is no easy solution, but it is attainable in our data-driven world. Moreover, there is proof it works: professional football has a comparable system, called the ‘solidarity contribution’. If a player is transferred from one club to another, part of the transfer fee goes to the clubs involved in his training and education. In other words, clubs are rewarded for their long-term investments – even if they were made two decades ago.
People like setting goals, devising targets, and seeing results from their work. If we want people to embrace the long term, we have to compensate them for the long-term things they do. This sys-tem will not work overnight, but that will not deter true visionary leaders who take a long-term view.
3. Make it sexy
Instant gratification, disruption, the bestseller Hooked and Stanford’s Habit Summit all have one thing in common: they are cool. It is cool to disrupt things. The University of Southern California even uses the term to market its business programme: ‘The Academy empowers the next genera-tion of disruptors to change the face of society’.
Unfortunately, long-term thinking is far from cool; in fact, it has a rather Victorian feel to it. What is to be done about it? The answer is straightforward: we have to make long-term thinking sexy. I am not a copywriter or marketer, but it must be possible to come up with an attractive name for long-term thinking. Journalists have managed to make long articles sexy by rebranding them ‘long reads’ and replacing the word count with the minutes it takes to read an article.
When progress through long-term thinking is sexy, there will no longer be any need for secret meetings. Business degrees will advertise the benefits of learning about ‘long-termism’. There will be TEDx conferences dedicated to the topic and thousands of management books on Amazon to help aspiring long-term thinkers.
What business long-termism could really do with is its own Alain de Botton. This Anglo-Swiss phi-losopher, writer, and television presenter has made good old-fashioned philosophy sexy with his School of Life. Who would be the Alain de Botton of long-term business strategy thinking? It is un-likely to be Larry Fink or Warren Buffett. Perhaps they could organise a talent show for long-term thinking called The Think (instead of The Voice) to produce some long-thinking stars. Is it such a bad idea? Maybe it just needs a little bit more thought.
The day is still far off that long-term and short-term thinking will reach some kind of equilibrium, and that all executives will consider both disruptive change and progressive, incremental change. Even so, long-termism is a powerful idea, offering solutions to some of the most intractable governance and strategic challenges facing businesses today. So while it may not be the topic of degree courses or regular columns in the FT, as in any Dan Brown novel, it would be a mistake to under-estimate ideas cooked up at secret summits.
About the author
Thimon de Jong runs WHETSTON / strategic foresight, a think tank focused on how societal change and the dynamics of human behaviour influence business strategy. He works as a speaker, trainer and consultant for companies like Morgan Stanley, Vodafone and Ikea. He lives in Amsterdam and is a lecturer at the sociology department of Utrecht University.
If you haven't read the other parts, follow the links below!
Read Part I
Read Part II