Hi there, sorry to bother you.
I am studying International Business and Modern Languages at Bath
University, and I am currently doing a study on Futures. I was wondering if I could ask you the following question...?
Firms are faced with the short and long term when looking at the future. It could be argued that the short term is more important, as the firm will rarely arrive at its original long term objectives (these will evolve and change with the short term objectives). How should firms go about their policy making with regard to those things they see in clearly, and those things they cannot predict??
Thank you very much for your time, I appreciate it.
University of Bath
The conflict between near-term and far-term decision-criteria is one of the timeless issues, along with the other great ANTINOMIES of human existence, such as "Young" vs. "Old," "Innovation" vs. "Tradition," "Individual" vs. "Institutional," "Local" vs. "National," etc. Unlike the timeless ANTITHESES of human existence, the opposite sides of which are universally recognized to be either good or bad — e.g. "War" vs. "Peace," "Education" vs. "Ignorance," "Health" vs. "Disease" — the opposing forces in the ANTINOMIES of life each represent equally legitimate claims upon society.
Since both sides of an antimony merit consideration, the just resolution of an antinomial issue typically involves some sort of compromise or accommodation, which often fails to satisfy partisans of the issue. Political philosophers since Aristotle have concluded that balancing the legitimate claims posed by these honest conflicts of life is the ultimate test of any system of governance. It is exactly this balance that effective corporate "governance" must make in addressing the opposing legitimate claims of the near-term and the long-term upon the resources of the enterprise.
"NOW" vs. "LATER"
The most common mistake people make in addressing the Now vs. Later issue is that they tend to think of the near-term and the long-term as 2 mutually-exclusive, competing arenas of action, rather than as 2 points on the unbroken continuum of an organization’s future. Among other things, this suggests that long-term future realities, where relevant, should be applied to short-term decisions that have long-term consequences.
A CASE IN POINT
In 1945, steam locomotives held 85% of the U.S. railway market, while diesel and electric locomotives held 15%. The two U.S. manufacturers of steam locomotives commissioned a market study to assess whether they should diversify into other motive power technology, or stick to steam. The research showed that the purchase price of steam locomotives and their cost-per-mile to run were both essentially the same as those for diesel and electric, and that the newer technologies therefore offered no competitive advantage over steam. Moreover, since the adoption of new engine technologies would require railroads to install new infrastructure and retrain their personnel, the study concluded that the steam locomotive would only be replaced slowly, over several decades. On the strength of this report, both the Baldwin and American Locomotive Companies made substantial investments in new production capacity. But, by 1953, both companies were bankrupt, and the last U.S. steam engine had been built.
The market study had failed to consider the long-term demographics of the U.S. workforce. While the overall cost-per-mile of steam and diesel/electric engines were the same, steam engines are more labor-intensive. The number of employees required to operate and support a steam railroad is roughly twice what is required by either diesel or electric railway systems. America’s post-WWII boom economy quickly absorbed 8 million de-mobbed GI’s and by the early 1950’s, the U.S. entry-level labor pool began to shrink, reflecting the plunging birthrates of the 1930’s Depression Years. Unemployment ran at 3% for a decade, the cost of labor rose, and with factories full of middle-income workers, the low-pay, grunge-work of steam railroads held little appeal … or romance. Railroads could not field full crews; service deteriorated, union leverage increased. Orders for new steam engines simply dried up by 1953.
The 2 locomotive companies had demonstrated foresight when they chose to study the long-term prospects for their product. But because they only looked at their immediate circumstances, and did not consider the implications of readily available, reliable long-term forecasts of a 35% drop in the entry-level labor pool, they did not attempt to diversify their technological base. (They didn’t even make any efforts to reduce the labor-intensiveness of the steam engine.) Together, these failures proved fatal.
THE MORAL OF THE STORY IS …
The short-term and the long-term make equally legitimate claims upon the planner/decision maker. These are competing claims only to the degree that the decision-maker chooses to make them so. If we think strategically, long-term realities should inform our short-term decisions, since our significant short-term decisions invariably have long-term consequences. Surely, as leaders of ongoing enterprises, professional decision-makers should choose to solve short-term problems — whenever possible — in ways that would complement rather than contravene long-term realities.
Of course, some important components of the long-term future cannot be reliably forecast — e.g. in particular, stock markets, political developments, and economic performance. Certainly, planner/decision-makers would be well advised to substantially discount these unpredictable classes of future events in comparison to any and all short-term factors. But, competent leadership has a fundamental responsibility to be sure that they do not make short-term decisions that predictably compromise the long-term success of the enterprise by ignoring the very substantial future realities that can be reliably forecast, including demographics, economic structure and commonplace technologies.
The underlying principle of strategy practiced by the ancient Samurai warriors of Japan was:
"Exploit the inevitable!"
In counseling his nephew on how to play chess, Ben Franklin advised:
"Whatever you decide to do, make use of that which will be true."
There is a natural, symbiotic and powerfully synergistic relationship between the short and long term dynamics of most choices. Those of us who think/plan strategically for a living identify — or seek to identify — those relationships, in any decision situation. While some people are more inclined to think in this fashion than others as a matter of intellectual style, strategic thinking is largely a learned aptitude, and there is a significant body of literature in the field.
My colleague, Dr. Gregg Edwards, has written an excellent paper summarizing the scholarly research in this field, which I would be pleased to send you via post if you will e-mail me a brick and mortar address. In addition, I am currently writing a major paper on this topic for delivery at an international conference on thinking in New Zealand in January. If you would be interested in receiving a copy of the MS., just let me know. It should be available before Christmas. (Knock wood!)
With kind regards;
David Pearce Snyder
P.S. Please visit our Website atwww.davidpearcesnyder.com.
Many thanks for your kind response to my question. I found your information very useful and interesting. It certainly is a very interesting topic, and highly relevant in business today.
I would very much like a copy of the paper(s) you suggested if it is not too much trouble.
Many thanks again. I find it immensely worthwhile and encouraging to my studies when professionals such as yourself take the time to respond. It is very much appreciated;
University of Bath
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