Winning now winning later
Short-term triumphs, long-term investments
Description
Balancing short-term and long-term goals is crucial for organizations to excel. These goals are more interconnected than they may first appear. Improving current operations validates you are on the right strategic path. There are three main principles to achieve both short-term performance and long-term investment: define your purpose and vision, set specific measurable goals, and allocate resources to match objectives.
Regularly monitor progress through key metrics and make adjustments when needed. Communicate goals across the organization and get stakeholder buy-in. With dedicated leadership and belief you can achieve two seemingly conflicting aims, through persistent small steps forward. As David Cote says, leadership matters - success lies in the day-to-day doing, not genius formulas. Pushing people beyond what they assume is possible leads to remarkable results.
Table of contents
01Principle #1 – assess business honestly
To achieve strong short- and long-term results simultaneously, organizations must adopt a more rigorous, intellectual mindset. Though feasible, balancing both timeframes is challenging and requires asking difficult questions to uncover satisfying answers, even when that means acknowledging inconvenient truths.
Decide now to become an engaged, honest student of your business rather than a passive overseer. You can accomplish short- and long-term goals concurrently, but only by continually analyzing and improving processes across quarters and years. Challenge your team to think harder about customers, markets, and operations than before. Cultivate rigorous analysis and attention to detail.
For example, when David Cote was CFO of a major appliance company owned by GE, he was tasked with reducing their $1 billion inventory. Cote's team studied the overall process and learned it took 18 weeks for the manufacturing plants to receive orders to replace shipped products. After optimizing information flows and supplier coordination, the replacement cycle time dropped to two weeks. Over four years, inventory was halved while on-time delivery rose from the low 80s to above 90 percent.
To achieve such win-wins, intellectual laziness and inertia must end. People must make smarter decisions by enhancing individual and group thinking. Ask the hard questions that lead to breakthroughs. Treat people respectfully but make unreasonable demands. Dig into details and insist on more than incremental progress. Fuzzy thinking will not suffice. Define specific changes needed and take an informed, rigorous approach to implementation. As a leader, know enough to actively coach performance.
The idea leaders can focus solely on strategy while delegating execution is false. With urgent priorities, even talented people let longer-term projects slide. Leaders must verify critical projects are happening and ensure employees have the tools, processes, and focus to execute decisions and improve them.
02Principle #2 – invest in leaders judiciously.
To grow and succeed, it is crucial to attract and retain talented leaders. However, it is important to avoid having an excessive number of leaders. In order to ensure future expansion, it is necessary to make wise investment choices. The most effective way to fund growth is by keeping fixed expenses steady as revenue increases. This approach significantly strengthens both short-term and long-term performance. It is essential to prioritize vigorous growth and cultivate a robust culture where individuals are motivated to excel, rather than simply following policies. Such a culture is indispensable for organizations seeking immediate returns and sustained growth. Without a pervasive commitment to execution, companies may achieve one goal or the other, but not both concurrently.
Building a strong culture begins with defining the desired culture. Honeywell, for example, identified five key strategic focus areas for everyone: Winning Now, Winning Later. These areas included focusing on procedures, investing in the future in moderation, setting financial objectives for each division, and demanding cost control alongside improved service. Additional priorities included establishing metrics and surveys, creating annual strategic plans, optimizing processes for end users, improving efficiency, documenting workarounds, and mapping end-to-end procedures. Further priorities encompassed growth in customer service and technology, increasing productivity to enable growth, attracting top talent, managing working capital and earnings, and supporting all of this with organizational infrastructure and process excellence.
Honeywell also outlined twelve behaviors that characterize its culture: leading impactfully, developing people, delivering results and meeting commitments, driving change, communicating effectively, taking intelligent risks, being self-aware, adopting a global mindset, fostering teamwork and diversity, thinking integratively, developing technical excellence, and focusing on customers and growth. These behaviors were extensively explained and branded as "One Honeywell." They were also integrated into all training programs, performance reviews, compensation discussions, management reviews, hiring decisions, key corporate events, and more.
03Principle #3 – retain dual horizon focus.
It is vital to retain both a short-term and long-term approach when facing inevitable challenges in the years ahead. Thinking differently and continuing to invest for the future can lead to explosive performance once conditions improve.
The goal should be helping your team and organization outperform across all timeframes. Strategic mergers, acquisitions, and divestments should complement organic growth initiatives like globalization and R&D to generate impressive short- and long-term results. When done well, these deals start improving earnings and cash flow a couple years later. The resulting profits and cash can fund more deals, creating a virtuous cycle where short-term results and long-term growth reinforce each other.
To enhance deal-making, apply this M&A process: First, build a strong pipeline by identifying companies that would be good additions to existing businesses or are in closely related industries. Actively scout the market rather than waiting for bankers. If a good target emerges, develop relationships with owners so they see you as a fit when ready to sell.
Second, conduct thorough due diligence to quickly discard bad deals. Use a consistent methodology to validate or invalidate assumptions. Get functional experts to spot potential issues before negotiating.
Third, value acquisitions intelligently to avoid overpaying in the moment. Standardize the valuation model to improve over time. Develop independent sales and margin estimates rather than relying on the vendor’s numbers. Value conservatively and walk away if the price gets too high. Ignore supposed synergies that rarely materialize.
Fourth, have a realistic integration plan covering management, metrics, responsibilities, communications, and more before finalizing the deal. Refine integration practices and ensure the plan makes sense.
In addition to disciplined acquisitions, regularly review current holdings and divest poor performers. Ask if businesses are in good industries with strong market positions and returns on investment. If the answer is no, divest them on the best possible terms. Train managers to apply M&A logic to product portfolios. Regard products as standalone businesses held in a portfolio. Identify high-growth, high-profit offerings versus low-profit ones. Keep strong products and discard those customers have abandoned. Doing this annually will improve long-term performance.
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