Three Tips for Leaders About to Miss Their Forecasts
Harvard Business School Professor (and former IBM and Kodak executive) Willy Shih poses an intriguing question:
“Let’s say your goal is to average 60 miles per hour in a journey across a one-mile bridge,” he said. “Your average speed is 30 miles per hour at the half-mile mark. How fast do you have to go over the remaining half-mile to achieve your goal?”
The most common answer is “90 miles per hour.” But those with backgrounds in engineering and physics immediately recognized the task’s impossibility. After all, to average 60 miles per hour you have to cross the bridge in one minute and you’ve already burned that minute crossing the first half mile.
Willy’s point? If you start a year too slowly, at some point it becomes impossible to hit a forecast.
It’s a scary moment when a company realizes that the goals it has set for a quarter or a year are simply not attainable. And yet in today’s continually choppy environment, leaders are encountering that moment with increased frequency. And it is at this moment that leaders truly earn their pay, because many short-term actions can have devastating long-term consequences, particularly when it comes to innovation.
If you discover that you’re stuck on Willy’s bridge, consider these three tips:
1. Make sure short-term actions to improve profits don’t impair long-term capacity to grow. The first instinct of many leaders it to slash investments that offer no near-term payoff, such as early-stage R&D activities. While those kinds of cuts can boost short-term profits, they can inhibit a company’s ability to hit longer-term growth objectives. Careful leadership can avoid this problem. For example, in the 2007-2008 downturn, Corning executives knew they had no choice but to cut spending. They created a strategy called “rings of defense” and placed R&D spending in the innermost ring to ensure that they did not unintentionally damage long-term potential.
Scott D. Anthony is managing director of Innosight Asia-Pacific.