Why do leaders NOT pursue long term strategies? Pr. Thomas Malnight, from IMD Business School in Lausanne answered a few questions which will give you a taste of his upcoming keynote speech at the Luxembourg Green Business Summit. The 5th edition of this major event will take place in just more than 3 weeks. This year, responsible investments, sustainability strategies, leadership and strategic management will be addressed. Register now!
What are the most common reasons CEOs give you when refusing to switch to the long term strategy?
Today, there is so much focus among leaders on the short term. We’re leaving in a world that is very much geared towards consistency and predictability of results on a quarterly basis. Companies and leaders then become victims of the need to have results right away and feel the pressure of the financial markets.
One reason the CEOs cannot switch to the long term strategy is because they haven’t been able to make the case on why they should invest on the long term!
Another reason would be the comfort zone of executives. “Do yesterday’s formulas work to pursue tomorrow’s opportunities?” And obviously, the old answers are not where the opportunities for the future are.
Green is one of the many areas that companies are pursuing to break the patterns of the past. Developing innovative strategies usually means re-defining what you do, even sometimes what your business does.
How to convince leaders and CEOs to adopt a Green Business strategy? What are your Top three arguments in favor of such Green strategies?
Leaders and CEOS love data and are actually overloaded with it. They don’t know how to translate data into insights. Employers, employees and stakeholders are changing: leaders have to know where the changes are and how to stay ahead of them. It is what it is going to take to be successful in the future.
The way to convince leaders is to have them focus on what the trends that are reshaping their industry are. If they don’t participate in the innovation, they are going to be left behind.
What is the role of the business leaders who are creating this society and will later hand it over? The second argument would then be: you will have a bigger impact on the world. The chairman of DSM once told me: “What good is it to succeed in a world that fails?”
A third one would be: “It is where you can engage your employees”. Leaders will therefore create an organization where people would want to work for.
You interviewed more than 150 CEOs from leading companies around the world, what are the economic leverages that are not used or taken into account by these CEOs?
The job of a CEO is not an easy job, and in many cases it is actually a very lonely job. Moreover, they are expected to have answers to questions we don’t have answers to. They loved answering our questions because they do not have the opportunity to talk about these topics.
Right now economic leverage is being redefined on many levels. In the past we used to focus very much on traditional competition based on “how do I better penetrate my market? How do I grow market share in my existing products or services?” It was based on just getting better and better at what I’m doing. It is now moving towards market developing around what I usually do. Now CEOs want to create new markets, and that is the biggest opportunity of growth for the future. It actually means going back and changing what economic leverage is: today we are working towards co-creation rather than big scales.
CEOs are now creating options; they are exploring and innovating about where this economic leverage is going to be in the future. This is the biggest issues CEOs are facing nowadays.
When doing our research, we identified two different and very clear types of leaders:
- Those holding on to the past, who focus on efficiency, on consolidating their industry
- And those who were much more interested in shaping a new future. They try to anticipate the opportunities. They focus on the innovation which will make the difference, but also on the new relationship they will have with their customers, and even with the society they are living in. The key is to re-ask these questions and therefore redefine what you do.
What are your advice for local leaders, which they will be able follow the day after your conference and which will help them develop their business by using a green strategy?
Leaders have a tendency to look in their business and then backwards, in terms of what needs to be done in the future. When my team and I work with leadership teams, we start with a different notion called “Outside-in, future-back thinking”.
Leadership teams need to develop a point-of-view on how the future will be. Of course, no one can predict the future, but it is the responsibility of the leadership team to have a point of view on the future direction of the company. You simply cannot develop a new business model or change the culture in a quarter. The changes require fundamental change to the organization and you have to start working on it today. If you don’t, you may always be left behind.
To sum-up, my advice would be: spend time with the different teams, to develop such an outside-in, future-back thinking, and go behind data to forge your own point-of-view. And then, think about what you need to do in order to achieve and reach this goal. This is the journey of today’s leadership teams. It should actually be implemented in the company’s agenda; all the employees should be engaged in such discussions, and maybe even some customers.
The worst thing to do is to have one single meeting to think about the future.