In his famous letter to Amazon shareholders in 19976 (when the company was only two years old), founder Jeff Bezos outlined his belief that a funda-mental measure of success for Amazon would be the shareholder value that they could create over the long term, and how as a result this may mean that they would make decisions differently from other companies:
We will continue to make investment decisions in light of long-term market leadership considerations rather than short-term profitability considerations or short-term Wall Street reactions.
It is a philosophy that in itself proved to have longevity for the company. In a 2011 interview with Steven Levy in Wired, Bezos said that when every-thing you are working on is to a three-year horizon, then you are inevitably competing against a lot of people. But since few companies are willing to invest on a longer time horizon, doing this dramatically reduces the competition:
Just by lengthening the time horizon, you can engage in endeavors that you could never otherwise pursue. At Amazon we like things to work in five to seven years. 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.
(Bezos, 2011)7 And in his 2013 letter to shareholders8 he said:
I think long-term thinking squares the circle. Proactively delighting customers earns trust, which earns more business from those customers, even in new business arenas. Take a long-term view, and the interests of customers and shareholders align.
Consequently, Amazon’s revenues have grown exponentially over the long term, but consistent investment in forward-thinking innovation and infra-structure to continually develop the company’s capability and scope has meant that earnings have been minimal. While not every company has the luxury of ignoring short-term shareholder value, the point is that Amazon is buying itself the time and space to invest in not only continual, data-driven, shorter-term marginal improvement, but also large-scale invention.
For that, as Bezos has said, you need to be willing to think long term, to start with the customer and work backwards, and even to be misunder-stood for lengthy periods of time (as they were when they moved into hardware with the Kindle). For CEOs with quarterly targets and multi-ple pressing priorities this is not easy. And yet, it is more essential than ever to build the new while optimizing the old. Google CEO Larry Page believes that the main reason behind many company failures is that they
‘miss the future’:
When I talk to most companies, I do think their leaders are pretty short-term focused… It’s pretty difficult to solve big problems in four years. I think it’s probably pretty easy to do it in 20 years. I think our whole system is setup in a way that makes it difficult for leaders of really big companies.9
Difficult but now critical. The dangers of too much short-termism are akin to that Clay Christensen idea of planting saplings when you need shade – it
takes time for the saplings to grow big enough. Prioritizing investment into new sources of revenues only when you need them is too late.
Businesses that work to a long-term horizon have a huge potential advantage, meaning that companies need to have a point of view on the future and their part in it, and that the emphasis of corporate strategy itself is shifting. Author and consultant (and co-founder of the Deloitte Centre for the Edge Innovation) John Hagel has described this shift in empha-sis from strategies ‘shaped by terrain’ to strategies ‘shaped by trajectory’.
Traditional approaches to strategy are profoundly shaped by the current landscape. While there are still dynamic components to the strategy (such as responses to shifts generated by your own or competitor activities), the starting point is always your current position and the environment that surrounds it.
While strategies of position still matter, in an environment of accelerat-ing change and increasaccelerat-ing uncertainty we need, says John, more than ever to have a point of view on the trajectory of change and ‘what degrees of freedom we might have in shaping these outcomes through our actions’. In other words to position in the context of the future, not the present. That point of view needs to look from the future towards the present rather than the other way round.
Working back from the future in this way enables us to think far more laterally about our near-term direction and the steps that we need to take now to achieve the future that we envisage. As an example, Netflix is quite open about its long-term view on the future of internet TV and what it sees as its future-facing guideposts, publishing them openly on the web.10 Businesses are increasingly defined by their futures, not by their pasts. Effective strate-gies of trajectory take account of fundamental needs and things that are stable over time. Back to Jeff Bezos again who believes that if you want to build a successful, sustainable business, you don’t only ask yourself what could change in the next 10 years that could affect your company, but more importantly ask yourself what won’t change, and then put all your energy and effort into those things.11
To be an agile business, you need to have a point of view on the future.
To not make oversimplified presumptions about what that future could look like. Strategies of trajectory are not only about what is possible but also about what could be possible. In order to take a view on that we need to be paying close attention to underlying shifts in consumer behaviour but also core customer needs that don’t change, and not simply the latest shiny new technology.
notes
1 NOBL (2016) How to Define Your Purpose, Vision, Mission, Values, and Key Measures, NOBL, [Online] http://futureofwork.nobl.io/future-of-work/how-to-define-your-purpose-vision-mission-values-and-key-measures [accessed 25 October 2016]
2 Jim Collins and Jerry Porras (1 September 2005) Built To Last: Successful habits of visionary companies, Random House Business, ISBN-10 1844135845 ISBN-13 978-1844135844
3 EY (2015) The Business Case for Purpose, EY.com, [Online] http://www.
ey.com/Publication/vwLUAssets/ey-the-business-case-for-purpose/$FILE/ey-the-business-case-for-purpose.pdf [accessed 25 October 2016]
4 Ben Horowitz (4 March 2014) The Hard Thing About Hard Things: Building a business when there are no easy answers, HarperBusiness, ASIN B00DQ845EA 5 Al Ramadan, Dave Peterson, Christopher Lochhead and Kevin Maney (14 June
2016) Play Bigger: How rebels and innovators create new categories and dominate markets, Piatkus, ASIN B010PIF952
6 Jeff Bezos (1999, 1997) Letter to Shareholders, US Securities and Exchange Commission, [Online] https://www.sec.gov/Archives/edgar/
data/1018724/000119312513151836/d511111dex991.htm [accessed 25 October 2016]
7 Steven Levy (13 November 2011) Jeff Bezos Owns the Web in More Ways Than You Think, Wired.com, [Online] https://www.wired.com/2011/11/
ff_bezos/all/1 [accessed 25 October 2016]
8 Henry Blodget (14 April 2013) Amazon’s Letter To Shareholders Should Inspire Every Company In America, Business Insider.com, [Online] http://www.
businessinsider.com/amazons-letter-to-shareholders-2013-4?IR=T [accessed 25 October 2016]
9 Vinod Khosla (3 July 2014) Fireside Chat with Google Co-founders, Larry Page and Sergey Brin, Khosla Ventures.com, [Online] http://www.khoslaventures.
com/fireside-chat-with-google-co-founders-larry-page-and-sergey-brin [accessed 25 October 2016]
10 Netflix (18 April 2016) Netflix’s View: Internet TV is replacing linear TV, Netflix, [Online] https://ir.netflix.com/long-term-view.cfm [accessed 25 October 2016]
11 Jillian D’Onfro (31 January 2015) Jeff Bezos’ Brilliant Advice for Anyone Running a Business, Business Insider.com, [Online] http://uk.businessinsider.
com/jeff-bezos-brilliant-advice-for-anyone-running-a-business-2015-1 [accessed 25 October 2016]