It’s no secret that businesses today are facing more short-term pressures than ever before, thanks to factors such as the 24-hour news cycle, activist investors, and analysts focused on quarterly reports. And that’s a problem, because a long-term perspective is critical in a fast-moving world. All around us, innovation is creating new jobs and whole new industries, while leaving old ones behind.
To keep up, we all have to separate the long-term signal from the short-term noise — to prepare not just for where the world is today, but where it’s going. So how can we effectively strategize for the long-term? And, just as importantly, how can we gain our stakeholders’ support? In my view, there are three key actions for business leaders to consider.
1. Find allies in investors
While some shareholders are now focused on short-term returns, there are plenty pushing for a long-term perspective, too. In fact, some of the largest global institutional investors, including leaders at Blackrock and State Street Global Advisors, are increasingly voicing concerns about short-termism in the marketplace. Blackrock’s CEO Larry Fink has even urged all companies to communicate “a strategic framework for long-term value creation” for shareholders each year.
There are also encouraging signs that this viewpoint is gaining traction in the investing community. For example, in 2016, S&P Dow Jones Indices launched its Long-Term Value Creation Global Index. CEO Alex Matturi called it a response to “intensifying investor demand for a benchmark” that makes it easier for long-term investors to find and track companies that share their long-term values.
If more investors adopt this mindset, they can vote with their dollars to stand behind a strategy that’s longer term — counteracting those pushing for quick returns. Businesses can seek out these likeminded investors, and work with them as key allies in making the case for a long-term strategy.
2. Communicate a clear long-term plan
In today’s world, strong communication skills are of the utmost importance. If you don’t explain your strategy well, investors — and even your own people — won’t understand why they should trust you. So business leaders need to convince all their stakeholders that their vision of the future is right — and that they have the right plan to get there.
This is why many companies today are seeking new ways to present more insights to investors — particularly information that gives a comprehensive long-term view of their value.
This discussion reflects just how much our world has changed in the last few decades. Back in 1975, a company’s balance sheet reflected about 83% of that company’s value. Today, some people argue that the assets on that balance sheet make up less than 16% of a company’s true value.
Instead, much of a company’s actual value is tied into things like brand, talent, and intellectual capital — the assets that are crucial to creating value in both the short and long term.
This disconnect is why General Electric decided to become one of the first major US companies to supplement traditional disclosures with an integrated report (pdf). The report lays out the company’s long-term strategy in painstaking detail — which should help get stakeholders on board with executing that plan.