I was recently in Milan visiting a friend and to spend a couple of days revisiting this city. One of Milan’s most impressive sites is the Duomo, located in the heart of the city, surrounded by upscale shops of many of today’s most famous fashion designers. The Duomo is impressive for many reasons, but what struck me the most is that it took nearly 600 years to complete. Other structures in Europe also took a long time to complete—for example, the Cologne Cathedral also took over 600 years to finish. Talk about a commitment to long-term planning!
The reason that I was struck by these long-term projects is how different their planning was from much of today’s business thinking. What would business be like if we had the same type of commitment to a lasting impact—no matter how long it took?
As a consultant, I see a lot of organizations in many different sectors—business-to-business, business-to-consumer, not-for-profits, retail. Many of these organizations are facing disruptions to their core businesses. And the disruptions come from a variety of sources—technological (e.g., digital photography) or a new way to do business (e.g., cheaper, faster, more available). There’s nothing new about marketplace disruption: it is the history of modern business. As products improve, new distribution methods emerge, and someone figures out how to better serve a segment of the market. The challenges are how to anticipate disruption and minimize its effects on existing, non-disrupter organizations. This is where the negative effects of short-termism become clear. When companies are committed to long-term planning, they are better able to cope with disruptions because they see what’s coming and are better able to respond.
Short-termism believes it’s more profitable to replace existing customers with new customers than it is to invest in keeping the existing customers. Indeed, this will maximize next quarter’s profits. But that strategy fails as soon as any type of disruptor enters the marketplace. Despite the barrage of customer satisfaction surveys and customer experience scores, customers defect to competitors, go to the disruptor organizations, or find different ways to spend their discretionary income.
Short-term thinking in much of modern business surrounds us. Look at professional sports. Gone are the days when players remain on the same teams for most of their careers. Of the current 750 players on major league base-ball rosters, only nine have been with the same team for 10 or more years. The loyalties of player and franchise are gone. A sports franchise hires players for short-term results: win now. The result is that players are paid hundreds of millions of dollars and franchises are worth record amounts, particularly if they win championships. If a player doesn’t perform to expectations, he/she is traded to another franchise or is removed from the roster.
What are the effects of this short-term orientation? Does it create a loyal fan base? Is it a better experience for sports fans to see a host of new players on their team every year?
Recent data show that fan loyalty in professional sports is decreasing and the number of “die-hard” fans is shrinking while the number of “fair-weather” fans is increasing. If you are in this business for the long term, how can this be a good situation?
In medieval Europe, major projects took decades, if not centuries, to complete because of a variety of reasons: power shifts between church and state, wars, massive loss of labor due to famine and plagues, etc. Still, even in the presence of enduring and difficult challenges, major projects continued on.
Someone felt that the mission and vision of the large-scale projects were important enough to pick up where others left off. Dedication to a vision and mission was paramount. A contributing factor was a belief that the existence of these structures—no matter how long they took to complete—were important contributions to the social-psychological fabric of society. Society would be better off—for the long term—if the cathedrals were built.
Back to Milan. Would the long -term planning used to build the Duomo, the Cologne Cathedral, and hundreds of other medieval structures throughout Europe help solve the challenges facing many of today’s organizations? My observation is yes. In company after company, I see short-term thinking dominate. Everyone pushes to maximize profits for the next quarter and many management decisions are based on an efficiency business model—attract customers through promotional incentives and provide minimal service to keep costs down. If customers drop out the bottom of the sales funnel, so be it. But, if more companies would adopt the long-term planning of Milan’s Duomo, we’d see less customer turnover, greater sustained profits and more benefits for society, customers and companies.
Charles is the James M. Cox Professor of Customer Experience Management and Senior Fellow at The Cable Center (Denver, Colorado, U.S.A.) and Professor Emeritus at the Daniels College of Business at the University of Denver and Queensland University of Technology (Australia).