Create a 7-Year Vision Before the Quarterly Plan
Originally published as part of, “The Day Before Digital Transformation” by Phil Perkins and Cheryl Smith
Amazon is a great example of repeatedly delivering on an exponential growth approach. Because the company took an exponential approach and continued to invest heavily in its use of early technologies, retailers ignored the disruptive impact of Amazon for years. In Figure 7 you can see that the retailers did not really need to pay attention until around 2010.[i]
But by 2015 it was too late. By then Amazon and other eCommerce businesses were putting brick and mortar retailers out of business.
Jeff Bezos is quoted as saying “Friends congratulate me after a quarterly-earnings announcement and say, ‘Good job, great quarter… And I’ll say, ‘Thank you, but that quarter was baked three years ago.’ If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few organizations are willing to do that.”[ii]
How can organizations like Amazon do this successfully while other organizations fail?
The initial Amazon team understood the value and the rapidly maturing trends of the new technologies. When they started, consumers were using dial-up modems. Every time the modem took too long or had a blip, the user lost his or her entire order. Frustration did not begin to describe the early Amazon experience. But hey, we were just ordering books. Amazon knew that communications technologies would mature exponentially, and they just needed to make sure their business model was designed to capture where it would be in the future.
The Amazon team also understood its customer base. It knew that as more and more women were entering the workforce full time, they would want convenience shopping. Amazon practiced getting its software right on books, then on inventing an online shopping cart to save items as soon as the items are placed in it so that you did not lose them if you lost your connection. Soon Amazon added more products to be loaded into your shopping cart. By Christmas 2002 you could order almost all the gifts on your Christmas list, including batteries, on the Amazon site and have everything delivered wherever you wanted.
Amazon knew that data would be the backbone of their success. (After all, the age was originally called the Information Age.) The amount and types of shopping data, geographic data, and preference data they collected every time someone signed on to their site practically created their short-term plans for them. They were not measuring that a customer had come into their store and bought something three times that year. They had data about how many times a day their customers came into their store and simply touched a product. Learning what their customers wanted and did not want within weeks gave them a massive advantage over both other online as well as brick-and-mortar competitors.
They understood their competition. They knew what other start-ups who were attempting to offer online ordering were doing. They knew what attempts their brick and mortar competitors were making online. They knew that to beat the current retail stores they had to deliver their goods faster and cheaper. (A Bed, Bath & Beyond order often took months to be delivered.) They knew which parts of their competitor’s value chain they were going to attack, and they executed quickly. They learned lessons, failed fast, and re-executed new plans rapidly.
They were not out to please investors with quarterly ROI increases and standard P&L statements. Look at their long-term growth chart. If traditional financial requirements had been placed on it, they would likely have been out of business just about the time that a complete Christmas order was happily and successfully placed in 2002. After all, they had been in business for five years by then and still were barely breaking even. But their vision was long-term even as they learned more and more about the details of the plan every day. Their leaders perfectly positioned them to be one of the leading organizations in the world and to be one of the fastest-growing companies even during a worldwide pandemic.
Amazon knew exactly which digital technologies it was most interested in and the timelines of their maturity trends, how consumers were thinking, which data to collect or buy to help them predict, and what their competition was doing.
Develop your foresight to see the future
Amazon and other digital disruptors had great foresight. Foresight is defined as a set of practices or capabilities within an organization that enables it to detect critical but intermittent change early, interpret its consequences, and use that information to inform future courses of action to ensure the long-term survival and success of the enterprise.[i] The Amazon example sets the stage for knowing what information to collect to help establish a digital vision and strategy with foresight.
More specifically, today’s strategy increasingly must be couched in an understanding of irreversible trends affecting applicable and adjacent industries. Trends help create a story of predictability that permits investments that might otherwise seem speculative. Trends add context that enables executives to see a little bit further than their organizational strategy will typically take them. Organizational investments must align with positioning the enterprise to be a key player when those industry trends become not only unignorable but irreversible. Yet many executives cannot cite the current trends that affect their business.
A strategy team must increasingly research the current state of disruption by benchmarking user and societal changes, the investments made by competitors, inventorying emerging start-ups that are aligned with key trends, developing connections with academic research, and evaluating innovations in adjacent industries. It is important that these insights are communicated broadly, so the trends and emerging innovations are generally understood throughout the organization.
These insights can be used to determine your place in the future. The bigger the trend, the bigger the opportunity. Amazon is leading the irreversible trend toward same-day delivery. Uber is leading on the irreversible trend toward consumption-based driving. Tesla Energy is leading on the irreversible trend of storing energy in new ways.
The pace of change and digital technology adoption is accelerating. Whatever your vision, time is running out to analyze and weigh options. This is the time to set your vision, get in the right mindset, and take the right first steps to build traction in the market to be among the winners.
Successful digital leaders know that taking time to think about the future is an invaluable use of their time. They evaluate irreversible market trends, and they stay on top of technology trends, they create an aspirational vision that can be achieved with incremental milestones that create success along the way. They understand that creating not just one product or service strategy, but a portfolio of strategic digital initiatives to drive the organization in the right direction is what will make the difference between success and failure, even as the organization takes on only one major digital effort at a time. And they will very likely change those initiatives or their priorities (the details, as Jeff Bezos would say) over time.
[ii] “How Many Photos Have Ever Been Taken?,” Amy Hobbs, fstoppers, March 10, 2012.
[i] “Corporate Foresight: An Emerging Field with a Rich Tradition,” R. Rohrbeck, C. Battistella, and E. Huizingh, Technological Forecasting and Social Change, 2015.
[i] “Amazon’s Impressive Long-Term Growth, Amazon’s revenue and net income from 1997 through 2019,” Statistica.
[ii] “Jeff Bezos says he complains to his staff if he goes a week without a brainstorming session, and is always working ‘two or three years into the future,’ “ Sean Wolfe, Business Insider, September 5, 2018.