For example, in the early 1990s
I was consulting for NCR, which was in the process of being acquired by AT&T. I was told that when the CEO of NCR was asked
how long his company had been in existence he allegedly replied about 424
quarters. Indeed, a company’s stock
price often goes up or down based on nothing more than the most recent
quarterly report.
The focus of American business on short-term performance dates back to the 1620s. Governor William Bradford was outraged when the London investors pressured him for profits when his Plymouth colony was barely surviving, having lost half of its population during its first winter.
The American short-term perspective has been based in part on the gold rush mentality that drove early European colonization of the New World. During the 1500s, the Spanish pulled out enormous amounts of gold from Mexico and Peru, leading many generations of investors and immigrants to believe that in America the streets were lined with gold. The colonists of both Virginia and New England, however, discovered no gold – but with hard work and some luck they produced crops (such as tobacco, corn, and wheat) and products (such as flour, lumber, and rum) that eventually paid off handsomely. The real gold rushes came later in North Carolina (1799), Georgia (1829), California (1848), and Alaska (1896). We still have periodic gold rushes today, but they occur mostly on Wall Street.
There is an old American saying that if you are going to get rich then quick is the best way. Yet, so many successful enterprises have taken years to develop, while most startups fail. The get-rich-quick mentality survives despite common sense and history; many business people manage resources, employees, and processes with an eye to sooner rather than later results. The problem, however, is that short-term thinking can lead to short-sighted decisions. People become too satisfied with the expediency of today and put off potential problems to tomorrow.
American business people in the 21st century will have to learn to think in the long-term because global competition and financial risks have become so great and the periods of return have become so long that they can no longer afford just short-term thinking. They have to stop solving today’s problems when doing so sacrifices new product and service R&D, market positioning, and brand-building. They must remember that all businesses survive on customer loyalty and repeat business, and they have to understand and anticipate how consumer behavior changes over time. You have to satisfy customers both in the present and the future.
© 2017 Stephen M. Millett (All rights reserved)
The focus of American business on short-term performance dates back to the 1620s. Governor William Bradford was outraged when the London investors pressured him for profits when his Plymouth colony was barely surviving, having lost half of its population during its first winter.
The American short-term perspective has been based in part on the gold rush mentality that drove early European colonization of the New World. During the 1500s, the Spanish pulled out enormous amounts of gold from Mexico and Peru, leading many generations of investors and immigrants to believe that in America the streets were lined with gold. The colonists of both Virginia and New England, however, discovered no gold – but with hard work and some luck they produced crops (such as tobacco, corn, and wheat) and products (such as flour, lumber, and rum) that eventually paid off handsomely. The real gold rushes came later in North Carolina (1799), Georgia (1829), California (1848), and Alaska (1896). We still have periodic gold rushes today, but they occur mostly on Wall Street.
There is an old American saying that if you are going to get rich then quick is the best way. Yet, so many successful enterprises have taken years to develop, while most startups fail. The get-rich-quick mentality survives despite common sense and history; many business people manage resources, employees, and processes with an eye to sooner rather than later results. The problem, however, is that short-term thinking can lead to short-sighted decisions. People become too satisfied with the expediency of today and put off potential problems to tomorrow.
American business people in the 21st century will have to learn to think in the long-term because global competition and financial risks have become so great and the periods of return have become so long that they can no longer afford just short-term thinking. They have to stop solving today’s problems when doing so sacrifices new product and service R&D, market positioning, and brand-building. They must remember that all businesses survive on customer loyalty and repeat business, and they have to understand and anticipate how consumer behavior changes over time. You have to satisfy customers both in the present and the future.
© 2017 Stephen M. Millett (All rights reserved)
Sears was the largest retailer in the world when I started with them in 1972, a small percentage of their catalog sales were sent directly to customer homes. Sears had the logistics to do what Amazon eventually did, what Sears lacked was the foresite to expand their national brand offerings and utilize the internet, rather than a printed catalog, to generate sales.
ReplyDeleteYou make an excellent point here. I call it the opportunity cost of success. When a company experiences business success, like Sears had, it wants to continue doing what it did for as long as possible. A company can get locked into a certain corporate culture and business model that resist change, including innovations. This is why so often new technologies get commercialized by new rather than old companies. It was easier for Amazon to push e-commerce as a new company with new ideas than it was for Sears to learn new ways of doing business.
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