Sunday, August 3, 2014

Short Term Versus Long Term, and Other Distinctions: The ‘One Horizon - One Domain’ Concept

From the 1950s till now, long range planning, also called strategic planning, has been serving as a prescription for growth. The concept has become so ingrained in organizational psyche that potential managers and leaders are expected to acquire, develop and demonstrate skills for crafting and executing strategy over a long career span. Superimposed on this is the ability to visualize a future and channel the strategies towards realizing this future. This has percolated to individual domains too with the responsibilities and competencies for operational management and strategic management becoming differentiated. In terms of understanding managerial and leadership processes, the distinction has become, over the years, rather sharp. The long term is seen to require strategic and planning approach while the short term only tactical and execution approach. Extending the philosophy a bit, it is believed that if one has a good long term plan and executes as per that in the short term, the job is done.

This approach, good for most parts, has a few unanticipated consequences. Firstly, the separation of execution in the short term and planning for the long term weakens the feedback and course correction loop. Secondly, the differentiation of long range planning as an annual, fixed period exercise and short range execution as a daily routine actually disconnects the perspectives. Thirdly, the differential approach makes the young professionals, scientists, technicians, who constitute the young talent base with fresh thinking and new knowledge, mechanical and controlled in thinking. As a result of these deficiencies, the intellectual and leadership wealth of the organization tends to get sub-optimized. Merging the paradigm of planning, long range and strategic, with the paradigm of execution, short term and tactical, is a challenge; the differences of approaches and skill sets between the two paradigms would still need to be maintained for orderly planning and execution. This blog post tries to separate the fiction from facts between the two paradigms and explores ways to optimize the wealth of talent through three optimized organizational processes.
Definitional optimization
The differences between what constitutes the long term versus the short term or the strategic versus tactical, or even planning versus execution are relative. Even in a steady state industrial and economic environment, technology shrinks or extends these definitions significantly. With regulatory changes and environmental volatility superimposed, the irrelevance of the long term plan to the short term and the relevance of the short term to the long term become highly pronounced. Let us take the example of the Indian airlines industry. The top national carriers (except possibly IndiGo) have posted a combined loss of USD 1.7 billion (Rs 10,201 crore) in 2013-14 and are expected to post another huge loss of USD 1.4 billion (Rs 8,408 crore) in 2014-15. In fact, the cumulative losses of the industry over the last seven years have hit a staggering USD 10.6 billion (Rs 63,633 crore)! It is estimated that the ailing firms require an immediate capital infusion of USD 1.6 billion (Rs 9,610 crore) just to stabilize operations.  No wonder that the long range plans of all the ailing (and possibly non-ailing) firms are anchored under external capital infusion on one hand and cost reduction with operational efficiency on the other.
Even before the ink could dry on the plans, news is out that AirAsia has launched its operations and Tata-Singapore Airlines would launch its operations in October 2014. Tougher still, six new airlines have also been given approval to fly by the new Government. Stable oil prices become volatile with every geo-political crisis. Rupee value becomes unpredictable every equity cycle. On the positive side, a resurgent India could see the development of at least 25 new international airports and 75 new domestic airports, and a helpful Government may just provide a relief in terms of tax burden.  Clearly, the airlines industry cannot rest on long range planning of conventional mode; it would need to make a long range plan possibly once in a quarter or each time there is a material change. This is a perfect example of the short term being more relevant than the long term and the long term getting secured with the short term. Many other industries are witnessing the need to merge short term and long range approaches rather than separate them.
Talent optimization
Today’s talent is commonly judged on a variety of skills; technical skills and communication skills, hard skills and soft skills, conceptual skills and analytical skills, to name a few. More important than all of these, which will be present in one measure or the other, are two sets of skills or competencies which are hard to get. The first is the ability to see a firm’s value chain on an end to end basis, and appreciate the impact of the value chain on one’s role, and vice versa. The second is the ability to understand the relationship between short run performance and long run plans of a firm. Typically, it is felt that these two skills of critical thinking get developed with experience in an individual. If this were to be true, the tendency to separate short term delivery and long term planning under two sets of talent pools (for example, front level executives and senior level managers, respectively) would only deny further the opportunity for frontline executives to acquire the two critical skills. In addition, the separation of (only) doing as the (sole) responsibility of front line executives and (only) planning as the (sole) responsibility of senior managers serves to delay the development of such critical skill in young professionals.

At the firm level, opportunity to promote the ability to perceive end to end thinking and think of short term and long term simultaneously helps organizations develop the intellectual capital of a firm better and make the firm more competitive. A marketing executive who is trained to understand the design connectivity will be able to relate customer feedback to potential for product improvement. In fact, without end to end thinking approach, the executive may even fail to observe a whole sweep of market triggers. Similarly, the executive who understands how easy or difficult it is to remove costs of a component would understand if a particular product design has reached the end of life, or there is potential to extend the product life cycle with a next generation of product. In addition to the above tangible benefits, the nurturing of creativity that takes place results in an overall creative organization. This requires that senior managers and leaders make it a point to integrate the short run execution and long run planning processes, and to promote value chain thinking.
Technological optimization
Technological change is profound but essentially continues to be incremental. Optimizing rather than accelerating technology holds the key to ensuring that short run product plans stay on for a longer term in a company’s life horizon. When the progress of product design in an industry, be it automobile or computer, is reviewed over a long period, say over two decades, one would be puzzled that the changes that looked major improvements each time look merely incremental over a longer time span. As an example, minimization of bezels in a phone or tablet to  provide greater display size within the same form factor is not a rocket science discovery but it took close to ten years and an LG G3 to take it to perfection (and Apple is yet to get that)! With the rapidly growing popularity of ‘selfies’ it again is not breakthrough thinking to incorporate high performance front cameras (equal in capability to rear cameras) in smart phones, yet only one or two phone models go beyond 2 MP front cameras!
Like with the other two thought processes discussed earlier, technological optimization is a matter of mindset. It requires a mindset to think of all technological features in a totalistic manner and get the best of the technology package. This requires that every member of design school understands the limits to which each sub-technology can be pushed and how such frontier-testing technologies can synergize themselves in combination. A light weight gearbox and a fuel-efficient engine, cannot, for example, be effective on a chassis with high tare weight. A light weight suitcase need not skimp on multiple sub-folders just to drive down total carried weight. Managers and leaders must go all out to give out the best technology package each time rather than hold back available knowledge for future use. Delayed deployment of technologies could, in fact, be counter-productive. ‘Develop now - deploy later’ has never been, and will never be, a winning proposition in techno-commercial thinking; in fact, it has proved to be counterproductive as being ‘too little - too late’.
One horizon, one domain
A review of the above three thought processes which correspond to certain organizational processes reveals that the various differentiations we have, namely short term versus long term, strategic versus tactical, planning versus execution, firm-level versus unit-level, executive versus leader – are all certain convenient methodologies to manage division of responsibilities and accountabilities as well as hierarchical differences in an organization and not necessarily the most optimizing processes. Given the range of external and internal factors (“factors”), and their unpredictability, firms need to have one horizon for planning whose time span is limited by the first material change in any of the factors, and one domain whose relevance is defined by firm level competitiveness accruing through individualization and collectivization of all the organizational functions or units. Young executives and mature leaders must embrace the ‘one horizon - one domain’ concept so that intellectual capital in the firm is built up for competitiveness and growth.
Posted by Dr CB Rao on August 3, 2014


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