In 1997, Amazon founder and CEO Jeff Bezos penned a letter to his shareholders outlining his vision for the company. The letter was entitled, ‘It’s all about the long term.’ Fast-forward to 2015 and the one-time Seattle-based bookseller has risen to be worth $175.1bn (£112bn), while Bezos himself has amassed a net worth of $38.9bn according to Forbes.
We’re all familiar with Amazon’s story, and now it is helping to fuel a rising rhetoric among CEOs, managers and commentators across the business landscape, who increasingly believe, ‘long-termism is good, short-termism is bad’.
This is no surprise when you think about the things in our society that we find the most frightening. The state of the economy, the looming environmental crisis, political instability - all of these issues are caused in some part by our inability to engage with distant threats. As Ralph L Keeney of North Carolina’s Duke University puts it, 'America’s top killer isn’t cancer or heart disease or smoking or obesity. It’s our inability to overcome our own short-term behaviour.'
Short-termism is, of course, endemic. In business, many argue that forging long-term plans is made more difficult by the rapid turnover of company leaders. In the UK, 23% of FTSE 100 companies experienced a change in CEO in the year to November 2014, up from 14% the previous year, according to KPMG. For other executives, the rate of change, known as the ‘churn rate’, was above 50%.
'I think there’s too much of a short-term view,' WPP CEO Sir Martin Sorrell said earlier this year. 'The rise of financial procurement has made people focus too much on costs, lack of pricing power, slower global growth. The average tenure of a CEO is five years, the CMO in America is two years, and the CFO in America is three years.'
Now the tide is starting to turn, and rhetoric is turning to action as business leaders change their strategy to fit with long-term thinking. A high profile example of a brand doing this well is Tesla Motors.
In June 2014, the car company announced that it would no longer sue anyone using its patented technology in good faith. The company stated that, given the small size of the electric car market relative to the total automotive market and the urgency of the carbon crisis, there would be an overall benefit to humanity in making its technology available - even to potential competitors. In the current climate, this kind of altruism is something that resonates with consumers.
This is in line with the kind of big thinking that Tesla and its CEO Elon Musk have become famous for. Across other industries, in businesses of all sizes, it has become clear there are a number of techniques stemming from behavioural economics that can help us overcome the pitfalls of short termism, without sacrificing the ability to be nimble and attain the quick win (we call this approach the 'Long Near strategy').
One useful technique is to benchmark against the best. That doesn’t mean benchmarking to rivals, or even the best in your industry. For example, a Four Seasons hotel could benefit from asking itself whether it is delivering the levels of convenience that Apple does in its stores. Conversely, Apple retail could benefit from asking itself whether it is delivering the same hospitable atmosphere you would expect to find in a luxury hotel chain.
This technique enables brands to learn from the best in any industry, and make sure what they are offering is flexible and future-proof. As Doug Stephens, founder of Retail Prophet puts it: 'The instinct is to say: "We need to be better than our competitors". But consumers aren’t thinking like that. Consumers are horizontally benchmarking your business against other categories.'
With examples such as Tesla and Amazon, it’s clear that long-term thinking yields huge advantages for those who are willing to invest in it, and that ignoring tomorrow’s threats or opportunities could place us in the ranks of Kodak, Sears and all the other casualties of innovation. But success takes a merging of long and short-term thinking. On this, no one puts it better than Bezos: we should be ‘stubborn on vision, flexible on details’.
Martin Raymond is co-founder of trend-forecasting consultancy The Future Laboratory.