Sales Trend 2 of the Barrett 12 Sales Trends for 2018 Report is the case for long-term focus and strategy.
It’s no news that most businesses are focused on the short-term, living from quarter to quarter, and that although there’s ongoing argument about whether there’s enough evidence or not to say that long-term businesses perform better, most of the arguments against it (pro short-term) focus only on profits.
However, this sales trend reports that there are increasingly louder calls for businesses to be more long-term focused in their planning and strategies. The power of long term planning can be found in books and articles from decades, if not centuries ago. Sun Tzu’s, Art of War is all about long term planning and strategies. So it should come as no surprise to find that the current regime in China has a 30+ year global and economic strategy for its place in the world. Recently, at La Trobe University’s forum on The Rise of China, Kevin Rudd – former Prime Minister of Australia, China expert and president of the New York-based think tank the Asia Society – said that “at present China has a long term strategy while the USA has none”.
Macroeconomic strategies are led by governments which inform businesses about their strategies and commitments to markets. Countries and governments that have a long term vision, a strategy underpinned by commitment, make it easier for companies to invest in a long term vision and strategy as well. On the contrary countries and governments with short term plans, or no direction and commitment, provide nothing for businesses to make commitments to.
Short-term decisions maximise results for today and are not concerned with the future consequences of those actions. The definition of short-termism, according to the Oxford dictionary is: “concentration on short-term projects or objectives for immediate profit at the expense of long-term security”; and, according to the Financial Times Lexicon: “short-termism refers to an excessive focus on short-term results at the expense of long-term interests”. It is easy to understand why businesses focus on the short-term. Who knows what’s really going to happen next year, let alone next decade? The world and markets are changing fast and there’s an inherent need to act for the now and see instant results. Short-termism creates a false sense of control when making decisions that have an immediate and short term impact on the books, however businesses that run on short-termism risk losing in the long term.
Every decision we make has consequences in the future. It may seem like a harmless decision today: “this will do for now” or “we are ok for the moment”, but these choices will have an impact in the future.
Smart businesses are now realising that profits alone are not the bar to be measured against as they offer no indication of future performance in a 21st century world. What is becoming evident is that maximising resources for short-term gain has harmful consequences for the future. For people – burnt out, for the planet – scarcity of resources, climate change etc. and for profit – short-term gains usually involve a re-distribution of wealth rather than the creation of wealth.
The battle between short-termism and long term business operations is one of the biggest challenges facing humans.
To make decisions about things that will have an impact only in the future, particularly if they involve the investment of money now which could make the present worse, is difficult.
And since it’s humans who run businesses, businesses find it hard to ‘think’ long term. Long term damage to the environment, long term investment in initiatives and resources, long term learning and development and so on. Add to that the pressure of public companies to deliver returns to shareholders and quarterly reports and short-termism becomes the default setting where everyone focusses, leads and manages for the now.
There have been many assumptions made about the difference in performance between companies that focus on the short-term versus those that focus on the long-term.
Research conducted by McKinsey Global Institute[i] has shed some light on these assumptions. This study concluded that long term companies deliver higher levels of economic profit than short term ones, and that they delivered superior financial performance over time. They have also found that short-termism is rising, that it damages corporate performance and that it has costs millions of jobs. The same research revealed that C-suite executives say that the pressure to deliver strong short-term results has increased in the past 5 years. The companies that formed part of this research are public corporations based in the USA, but it makes sense that we would see the same results in the private sector and around the world.
The challenge in the current state is how to lead and manage for the long-term, without missing the signs and changes happening now. Taking a leaf out of China’s long term strategy book is key.
Business leaders need to see the big picture and act for the long-term, without losing sight of where they are standing. It’s like having multifocal lenses. They need to have the courage to make decisions for now and for the future. There’s a balancing act that allows us to run sustainable and profitable businesses without exhausting resources or endangering future growth.
This sales trend is saying that, as business leaders, we need to give our people clarity, vision and purpose, underpinned by long term business strategy and long-term goals for our businesses. We need to make the business strategy practical by giving our team a framework in which they can operate and also be responsive to the changes they need made on the ground. This is why sales strategy exists – its life span is around 18-24 months and gives us the agility to change and adapt on the ground while always being linked to the bigger picture, the overarching long term business strategy of 10-30 years. By being consistent, making sure that the business’ KPIs and other indicators promote long-term thinking and actions, while taking real time feedback from the front line we can win both share of mind and share of wallet with our clients and do good business for all.
So go out on limb … think and act for the long-term. Your business and your community will be thankful for it.
You can download the full 12 Sales Trends Report for 2018 here.
Remember everybody lives by selling something.
[i] http://www.mckinsey.com/global-themes/long-term-capitalism/where-companies-with-a-long-term-view-outperform-their-peers