In a book excerpt released by McKinsey , they provide a perspective about what it will take to shift markets away from a short-term way of thinking. They pulled together a range of heavy weights to talk about their opinions on this topic.
Nitin Nohria – focused on the CEO and their “crush of immediate concerns”. This seems to based on a supply side view that the executive controls the value. As a business school dean, this is probably an area where he feels some influence and control.
Nick Carr – focuses on the people and the structures in the businesses that encourage a short term approach and even blames the technology as enabling distraction (he has almost made a career out of blaming the poor use of technology). He makes a valid point though that deep thought is not valued – it just takes too long for some. His concerns are more of a supply side perspective, as well.
Lim Chow Kiat – here is a person who looks at how companies are valued and the longer-term concept of fundamental value – a demand side set of concerns, coming from an investment leader. Unfortunately, he then goes on to talk about how the ‘wrong words’ from a company can undermine its value – regardless of its fundamentals. I was hoping for something more about what needs to shift in the market’s evaluation approach for these longer term issues to be valued.
Ronald O’Hanley – looks at the company’s board, stating:
“Unless we can make long-term thinking the driving force behind the mission and governance activities of boards, no amount of change to management incentives or investor behavior or the like will be sufficient to ensure a focus on the long term.”
Once again going back to a supply side view: if boards do the right things, companies will be less of a victim and the market will recognize it.
Charles Tilley – focuses on the accountants and the issue that “More than 80 percent of the market value of companies now lies in intangible assets”, and accountants don’t do well with intangibles. Long term thinking (almost by definition) is intangible. Based on some of the strange market valuations seen in recent years – the market’s really don’t handle intangibles rationally either.
Unless the market starts demanding long-term vision and justification, there is no hope that the company’s leadership (at any level) will be truly strategic. The middle management will do many short-term actions, that are clearly not in the best interest of the corporation and everyone up and down the line will salute in justified agreement.
I was surprised that in this interesting article with such a diverse set of thought leaders there was so little expectation-of-change in short-term thinking being placed on the demand side and no real controls (or knobs) shared to make adjustments or influence assessments.
After all, it is the buyer who defines what something is worth. The seller just tries to influence it.
What am I missing?