A VISION FOR TWENTY-FIRST-CENTURY MANAGEMENT
At its most basic level, stewardship is acting upon the understanding that leadership is a temporary role which is outlasted by the lifespan of an organization.
Founder/leaders of startups enjoy the unique advantage of being able to concentrate all of their own, their teams’, and their organizations’ capabilities and efforts toward one great goal, which is to bring a singular vision into the world and then scale it. Google, Amazon, Netflix, and Facebook are young enough that their founders are still on the scene, so they are less wedded to their current ways of doing things, more willing to embrace new ideas, and focused on a much more distant time horizon than most leaders of long-established companies. Jeff Bezos, a future-back thinker if there ever was one, envisioned Amazon as an engine of continuous growth and transformation from its inception. The headline on his first shareholder letter was “It’s All About the Long Term.”1 “As a company,” he told Wired in 2011, “we are culturally pioneers, and we like to disrupt even our own business. If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that. Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon … we’re willing to plant seeds, let them grow—and we’re very stubborn. We say we’re stubborn on vision and flexible on details.”2
Reed Hastings had such a clear vision of what Netflix could become, and such a well-developed strategy to get there, that he anticipated its shift from DVD rentals to streaming from the outset, before the technology had been fully developed. It’s all laid out in the S-1 (the SEC filing that companies that are about to go public must make) that Netflix released in 2002: “VOD [Video on Demand] is now widely deployed in most major hotels, and has early deployments in many major cable systems.… We believe that our strategy of developing a large and growing subscriber base and our ability to personalize our library to each subscriber by leveraging our extensive database of user preferences positions us favorably to provide digital distribution of filmed entertainment as that market develops.”3
Google’s S-1, released two years after Netflix’s, opened with a letter to investors from its cofounder Larry Page, in which he declared, “As a private company, we have concentrated on the long term, and this has served us well. As a public company,” he asserted, “we will do the same.”
In our opinion, outside pressures too often tempt companies to sacrifice long-term opportunities to meet quarterly market expectations.… If opportunities arise that might cause us to sacrifice short-term results but are in the best long-term interest of our shareholders, we will take those opportunities. We will have the fortitude to do this.… We will not shy away from high-risk, high-reward projects because of short-term earnings pressure. Some of our past bets have gone extraordinarily well, and others have not. Because we recognize the pursuit of such projects as the key to our long-term success, we will continue to seek them out. For example, we would fund projects that have a 10% chance of earning a billion dollars over the long term. Do not be surprised if we place smaller bets in areas that seem very speculative or even strange.4
Leaders of long-established organizations of scale face a different challenge, which is to both optimize the products and business models that make up their cores while simultaneously ensuring that pipelines of new products and business models are in development to supplement or replace them over time. This requires them to constantly toggle back and forth between present-forward and future-back thinking. Because of the tyranny of the urgent, their innate cognitive biases, the financial metrics and incentives that put a premium on short-term results, and budgeting and strategic development processes that formalize the present-forward fallacy, it’s not surprising so many of them do much less toggling than they should.
Wouldn’t it be something if the same kinds of aspirations that are written into future-facing S-1s also became the stuff of the annual reports of established enterprises? Having a ten-year horizon and a future-back perspective would make so much possible.
When all is said and done, this has been a book about how to manage time. Not time management in the sense most people think of it, optimizing your daily calendar to ensure that you are squeezing as much productivity as you can out of every hour, but how you orient yourself and your business to the past, present, and future.
Having a clear vision of your intended future allows you to anticipate and grasp opportunities for breakthrough growth—and to stop doing the things that are becoming irrelevant.
No, you don’t have a crystal ball; nobody does. But you know a lot more than you think you do about the ways things are trending, and if you work as a team with your peers, combining and recombining your insights, you can learn much more. As the futurist Bob Johansen puts it, the idea is to hone in on what you know will be different while reducing your overconfidence in business-as-usual. “The future will reward clarity,” he says, “but punish certainty.”5
It is difficult, but not impossible, for big, incumbent organizations to initiate and sustain the efforts that are required to drive growth within the core while simultaneously generating breakthrough growth outside it. Moreover, that is something any good leader can do; you don’t have to be a larger-than-life superhero like Steve Jobs or Jeff Bezos to be a practical visionary.
Without vision, there is only the push of the short term and no pull of the future. With it, you can not only anticipate the future but help to create it. For all the far-seeing books that futurists write, the white papers about coming trends that think tanks and academic institutions churn out, and the hard work that strategists and long-term investors do to crack the code of the future, none that we know of provide what we have in these pages: a theoretical foundation for a different way of thinking and a step-by-step process that applies it to build and maintain the bridges that connect your organization’s tomorrow to its today.
Evolve or Die
“Evolve or die” is a cliché, and not a particularly pretty one, but it reflects a stark truth. Around the time we started writing this book, the business press was buzzing about a meeting at Amazon’s Seattle headquarters. An employee had asked Jeff Bezos what he thought about the recent bankruptcy of Sears, which has been dubbed the original Amazon (“to understand Amazon,” Derek Thompson wrote in The Atlantic a few years ago, “its evolution, its strategy, and perhaps its future—look to Sears”).6 Bezos didn’t miss a beat. “Amazon is not too big to fail,” he reportedly replied. “In fact, I predict one day Amazon will fail. Amazon will go bankrupt.”7
He is right, of course. No matter how far-seeing you may be, no matter how enterprising, death comes for everyone; it’s just a matter of time. And big organizations are shorter-lived than they have ever been. In 1958, the average tenure of a company on the S&P 500 was thirty-three years. It dropped to twenty-four years as of 2016 and it is projected to shrink to twelve by 2027. At that churn rate, half of the companies on the S&P 500 will be replaced in the next decade.8 Some of them will be acquired or merged, some might be taken private, but many of them will have ceased to grow and shrunk below the minimum level of capitalization required to be listed on the benchmark index. Some will disappear altogether. That’s a hard pill to swallow if you’re a leader of one of these giants, not just because it’s painful to contemplate but because it seems so unreal.
The stark certainty of our eventual extinction and, at the same time, our inability to imagine a world without us, is much more than a business problem—it is the essence of the human condition. Still, it’s ironic that Bezos would have sounded as fatalistic about Amazon’s ultimate fate as he did, because Amazon is not a person but an organization, and Bezos has done as much as any business leader ever has to ensure that the company he founded retains the questing mentality of an entrepreneurial startup, even as it has scaled into one of the biggest and most successful enterprises in the world. “Day 2 is stasis,” he declared in one of his most quoted annual shareholder letters. “Followed by irrelevance. Followed by excruciating, painful decline. Followed by death. And that is why it is always Day 1.”9
Unlike human beings, whose lifespans have fairly set ceilings, well-run, adaptable organizations can and do regenerate themselves. Waning business units can be replaced with newer and more vital ones; new technologies can be embraced and leveraged for renewed growth. Even a fallen giant like GE may turn itself around; for the sake of its many stakeholders, we hope it does.
To stave off day 2 for as long as possible, an enterprise can never be content to be; only to become. Its leaders must have the resilience and the willingness to take risks and learn from them—and to do so continually, forever managing for the present while learning and leading toward a better future.
As Charles Handy wrote all the way back in 1989, in his then much-talked about book The Age of Unreason, it is no use “delegating the [big] questions … to some groups of scenario planners, corporate planners, or even outside consultants. If the key executives feel no ownership of the questions and the theories, they will not want to take the risk of testing them.… Top executives themselves have to be the ones who ask the questions, seek out the ideas … test the best of them and then, deliberately, take time out to reflect on the results.”10 If it’s now widely understood that the teams that are entrusted with strategy-making, design, and new product development must take a longer view and think more creatively, the biggest lesson that should have come out of the vogue for the learning organization has somehow been lost—that leaders and leadership teams themselves must clear time from their schedules and make room in their mental bandwidth for questioning and exploring, visioning and discovering.
In the future, the organizations that lead and succeed will be the ones that never stop learning.
We hope this book will reignite a passion for questioning and learning among the leaders of organizations of all kinds. We have a higher hope too, which is that in thinking hard about what they could be, leaders will also converge on an idea of what they should be. We have more than a professional interest in the future. We are also parents, and as such, we have skin in the game.
Short-term thinking can be selfish and dangerous, and in real ways an abdication of a profound responsibility. In December of 2018, Seth Klarman, the CEO and portfolio manager of the Baupost Group, a hedge fund with $27 billion in assets, delivered a speech at Harvard Business School in which he underlined its corrosive effects.
“One of society’s most vexing problems,” he declared, “is the relentlessly short-term orientation that manifests itself in investing, in business decision making, and in our politics.… A big part of leadership is deciding, and good decision-making benefits from intelligence, thoughtful deliberation, and experience, but also as I hope you agree, from sound values. Choosing what to maximize, how, and over what time frame, is an expression of those values.”11
So much of the literature about business leadership frames it in a military context. Leaders are cast as generals whose role is to enable a team or an organization to carry out a mission with victory as its ultimate goal—defeating the enemy (the competition) and seizing the spoils (profits). We are not starry-eyed idealists; we are capitalists, of course. We appreciate the importance of winning in the marketplace and we work hard to help our clients do so. But we also believe that sound leadership, even of a competitive, for-profit organization, can be constructive and generative.
You must be something of a visionary to lead a great organization—but you must also be a steward of its legacy, of the people who depend on you for their livelihoods, and of society and the whole planet, all of whom need you to make the right choices. Future-back thinking and processes don’t reveal a future that has always been predestined—they give you the opportunity and the means to shape it and own it.
“Good stewardship,” notes Bekele Geleta, the former director general of the Red Cross, “allows any organization to continually develop and adjust to an ever-changing world. At its most basic level, stewardship is acting upon the understanding that leadership is a temporary role which is outlasted by the lifespan of an organization. A leader is performing the act of stewardship whenever he or she is actively preparing for an organization’s future vitality.”12
Most of the management doctrine we live by today was created more than a century ago to ensure efficiency and repeatability. The organization was seen as a great bureaucratic machine that melded people’s individual efforts into vast, impersonal processes. Top executives were expected to be dispassionate numbers crunchers who rendered decisions based solely on financial metrics. Productivity matters as much as it ever has, but as we look out into the twenty-first century, when, ironically, more of the work of production and even routine administration really will be carried out by robots, the greatest challenge big organizations face will not be solved by algorithms but (as they have always been) by the wise men and women who look ahead and make the best choices.
As we see it, future-back thinking is not just a tool to help leaders gain the knowledge, the foresight, and the actionable ideas that enable breakthrough growth but a way of seeing and being in the world.
In the fifth century BCE, the philosopher Heraclitus wrote that “there is nothing permanent except change.” As the world spins faster and faster and the pace of disruption accelerates, we believe that future-back thinking, leadership, and management will become—that they must become—the basis for a continuous strategic management system, and as such, the new normal. With what you’ve learned in this book, we hope that you will help pioneer and advance this new discipline, leading not just your organizations but all of us to a more prosperous, equitable, and sustainable way of life.