A decade ago, organisations were all about developing aggressive growth strategies. Within the last few years, technologically-inclined and disruptive businesses have been focused on a strategy known as blitzscaling. Yet it seems that just as quickly as these companies rise, they also fall. Short-term strategies are focused on developing immediate profitability rather than building a long-term foundation, and that’s where they ultimately falter.
Long-term perspectives are targeted towards building long-lasting companies — those that are going to stand the test of time. Sometimes these long-term strategies span decades or even centuries.
Those who are interested in building an empire more than short-term profit can take inspiration from the long-term strategic perspectives of these leaders to grow.
Ingvar Kamprad on IKEA and Long-Term Leadership
Kamprad believed in the long-term strategy — and by long-term, he means up to 200 years into the future. In meetings with managers, Kamprad told them to consider where the business would be in two centuries. And when questioned as to whether that might be too long, he reportedly responded, ‘but then you make the short-term plan: that means the next 100 years.’
Of course, that doesn’t mean that every business needs a strategy that’s going to last centuries… but it helps. An organisation needs to know which direction it’s moving for the long-term in order to make appropriate, informed decisions in the short term. It has to assume that it’s going to stand the test of time, or it may find itself facing the new world unprepared to meet its market challenges.
Kamprad encouraged his management team to ask themselves where the business was going and what it needed to get there. Many businesses rise upon trends and fall when these trends ebb, but IKEA has managed to build a solid empire providing what its customers really need: fashionable, affordable, and simple furnishings.
The future changes. Entire markets and industries rise and fall. A company’s projections for the next three decades may not come to fruition but having that guidance and reacting to that guidance is a critical part of developing a business in a strong, stable, and secure business direction. Without this type of long-term leadership, the company may flounder, failing to develop a true sense of identity.
What you can learn from Kamprad:
- You need to take a long-term perspective when developing your business.
- Think far into the future and consider which changes would need to be made today to reach that future goal.
- Communicate with your leadership regarding your vision for the company’s future so all hands are working towards the same goals.
Yvon Chouinard on Patagonia and Long-Term Purposeful Perspectives
‘The faster a business grows, the faster it dies,’ according to Yvon Chouinard, the founder of Patagonia. Patagonia, like IKEA, is more focused on where it will be 100 years from now than within the next few years. After all, a few years can be tumultuous and may reflect external market forces more than the true fundamentals of a company.
Often, a company cannot just make decisions based on what’s happening short-term because what is happening short-term may have little to do with the strength of the organisation. At Patagonia, decisions are made patiently, with reflection upon the brand’s long-term direction. Modern companies often want to be able to immediately grow their revenue, but this doesn’t always lend itself to long-term stability.
Trees that grow too quickly often topple, as they haven’t grown an adequate root system to support their weight. Trees that appear small externally are often able to grow much faster later on, as they have spent time developing their root system and consequently have greater access to water and nutrients. A long-term business grows in much the same way, taking the time to develop its network and its resources, and widening its scope before significant expansion.
In the case of Patagonia, the company turned down many opportunities that it believed would cause it to grow too fast and instead focused on building healthy roots. The company decided to become patient and responsible, considering whether the decisions that were made today would serve the company in years or decades into the future.
What you can learn from Chouinard:
- Taking a step back to widen your scope and define your purpose can help you make smarter choices.
- Growing a strong, stable business may not lead to visible growth and profit quickly: it’s important to be patient.
- While you shouldn’t abandon your current plans, you should always consider how they will impact your long-term goals for the business.
Ari Wallach on The Long Path and The Perceived Risk of Long-Term Strategies
A long-term strategy often requires a significant amount of perceived risk. A long-term strategy usually won’t provide for short-term results: instead, the C-suite must take it on faith that their direction is correct and that they are on course.
Ari Longpath, the leader of an innovation firm, understands this perceived risk but believes it’s the way towards a more enduring business.
Consider Australia’s on-demand ride-sharing services such as Ola, DiDi, GoCatch, and Taxify. Most ride-sharing services (even the large international ones such as Uber and Lyft) are not profitable and they will not be profitable for years. They’re operating at a loss. Operating at a loss for several years is possible because their long-term strategy is to secure a foothold in the market and begin profiting when autonomous cars become viable.
Yet that strategy requires a lot of faith: ride-sharing services need to believe that autonomous cars will not only become legalised throughout the country but that regulations will allow them to continue to operate. In the meantime, many ride-sharing companies are operating pre-revenue through investor funding. If a company decided not to take this risk, however, they would run the risk of being unable to break into the market later on.
Many companies need to do something similar: they need to operate during times of low revenue, no revenue, or even at a substantial loss, with the idea of ultimately capturing a market and outpacing their competition. Leaders need to be exceptionally confident, forward thinkers who can inspire others, and they must take special care to take care of themselves and their ability to think clearly.
Thus, as Ari Wallach says, ‘Too often, the price for long-term vision is short-term ruin.’ Wallach likens this business philosophy to the architect Abbot John de Sais, who took a risk in building the Peterborough Cathedral but ultimately ushered in five centuries of Gothic architecture. A risk today may yield exponentially greater rewards tomorrow.
What you can learn from Wallach:
- Long-term strategies often lead to substantial risk as they’re predicated upon being able to anticipate the future.
- Nevertheless, the grandest of works often rely upon these long-term strategies, even if they may bring ‘short-term ruin.’
- Managing short-term success with long-term success is critical for many business endeavours, especially disruptive ones.
Building a Business Demands a Long-Term Strategy
Many leaders need to consider whether they’re attempting to build profit or to build a business, as these two concepts are not the same. Building profit for the short-term involves meeting short-term needs, but these may not be the needs of the market tomorrow.
Building a business involves predicting the market and taking action to meet the needs of the market in the future, rather than the needs of the market today.
Long-term strategies can be risky, and they require a strong leader to see them through. It can be challenging to get a C-Suite and investors on board with making costly decisions today for the benefit of tomorrow, especially when there’s a chance that tomorrow may not pan out. Nevertheless, building the greatest enterprises requires some level of risk.
As business owners move towards greater levels of innovation and disruption, it becomes necessary for them to be able to develop complex, complete strategies that will see them into new and emerging markets. Building and sticking to a long-term strategy is frequently more difficult than it sounds: a leader needs to have the support of their C-Suite and have a variety of leadership perspectives from their peers.
TEC can help. Through TEC, CEOs, executives, and entrepreneurs can reach out to colleagues and mentors, developing their long-term perspectives and connecting with a shared vision for future markets. To leverage the power of TEC, sign up today.