A business that is constantly focused on the short term is highly unlikely to be successful over the long term. This is a key premise that comes out of Simon Sinek’s book “The infinite game.” We live in a world where the focus of nearly all businesses has shifted from long term sustainability to short term metrics. This has resulted in many businesses prioritising this quarter’s results and the share price today over its long-term viability. It is no surprise that with this short-term mindset 50% of the Fortune 500 has disappeared in the last decade. After all, the decisions required to ensure long term viability often come at the expense of this quarters profit margin. So, what can we learn from this book?
You cannot “win” at business
There is a big difference between finite and infinite games. When we play a sport, this is a finite game. There are clear rules agreed by both sides, a defined way to keep score and a clear end at which point someone is declared the winner. Within business, no such rules apply. You do not sell mobile phones and then at a certain point everyone agrees the game is over, Apple won, and everyone now stops playing. Just ask Nokia or Blackberry. Despite this, many business leaders have a finite mindset. They will speak about winning and being number 1, but who decides what number 1 is and who wins? There is no fixed timeframe or agreed upon way of keeping score. Is it most revenue, is it most sales, is it most users, or is it the highest customer satisfaction score or something else? Business is an infinite game that never ends, and as such requires an infinite mindset. Business is not a game you can win, and the only true success is to still be playing the game of business in years to come.
Employees before earnings
The purpose of a business changed dramatically in the 1970s and 1980s as Milton Friedman’s shareholder-centric ideas about capitalism became mainstream. His view that the only purpose of the business is to make more and more money for its shareholders above all else changed the game. All of a sudden, if your business could make an extra few million by laying off an entire department this quarter to boost earnings, then it should be done. It doesn’t matter if the company had made a record profit the year before and made $1bn for its shareholders, it could make even more money this quarter if it makes the short term decision to close an extra department. This was not the case before the change in shareholder relationship. This meant employees were better paid, there was no large wealth inequality and employees had better job security. By focusing on long term success, a business understood that it needed to treat its employees well over the long term. Its no surprise that employee retention was sky high prior to this change in relationship, but not only that, business longevity was also much higher before this change too. Businesses existed for a much longer period of time than they do today because they were built to be sustainable. A business must of course be sustainable and profitable, but profit should not come at a cost of long-term viability.
It takes visionary leadership not operational know how
It takes courage to stand out and do something differently to everyone else. After all, everyone is focused on best practice and doing what everyone else is doing, often without questioning it. But by being courageous and leading rather than following often reaps the benefits. Part of the reason this rarely happens is because the CEO is often hired from within the organisation and was typically COO or CFO. The individuals in these roles are often great operational people, but very rarely strategic visionaries who can lead the organisation in a new direction. Instead they are focused on keeping the organisation ticking over operationally and maximising its existing efficiency. This is why so many large incumbents have struggled to adapt to the digital era, they know how to do what they do, but creating something new or adjusting the business model radically is often beyond them.