Budget season is upon us. As companies start mapping out plans and projections for 2013 and beyond, it's time to step back and ask: Can we really, seriously, engineer a five-year path of linear growth?
We shouldn't even have to ask. Cycles don't move in 10 years, five years, or even one year anymore. Some cycles are shorter than a quarter! As leaders, we need to open ourselves up to another message entirely. Say a strategy or planning lead came to you with the following report: "We're confident we're going to create real value and generate great impact in our marketplaces in the next decade. That said, how exactly we will achieve this is not fully clear right now, but one thing is clear: there will be plenty of ups and downs." Instead of firing or punishing her, we should celebrate her, because the age of planning -- as we came to know in the late 20th century business model -- is finished.
What business needs now is to journey, to embark on a curvilinear path that eschews quarterly reports and gives room to explore new initiatives. To embrace the up-and-down nature of markets by journeying, understanding that while the ultimate goals are higher and further, the path will rise and fall, zig and zag.
To show you what I mean, let me take you back to 1962. President John F. Kennedy led the United States on a journey when he kicked the space race between the U.S. and the Soviet Union into high gear with a speech in Houston. "We choose to go to the moon in this decade and do the other things," he proclaimed, "not because they are easy, but because they are hard, because that goal will serve to organize and measure the best of our energies and skills..."
President Kennedy's announcement did more than lay down the gauntlet to our country's most formidable adversary. Our country did not possess the know-how or technology to put a human on the moon at the time, yet Kennedy staked his reputation, his presidency and the United States' reputation on pursuing this grand commitment. He also accepted the significant ups and downs that the country would experience along the way.
And there were ups and downs. Kennedy delivered the speech just after several failed unmanned missions to the moon. He chose the goal of a manned moon mission because with any lesser target, advisers told him, the Russians would likely win the race, given their technological capabilities. Before Neil Armstrong took "one giant leap for mankind," the U.S. overcame initial public resistance to the moonshot, tragically lost JFK to assassination, and witnessed a failed Soviet manned moon mission that resulted in astronaut death. But NASA stayed the course with the Apollo missions, and met Kennedy's challenge by 1969.
The president had inspired the country to journey into a new era that leveraged modern technologies and changed the course of history, resulting in one of humanity's most ambitious achievements. The effort produced numerous innovations -- solar energy, infrared ear thermometers, de-icing systems for planes, safer tires, more nutritious baby food, among dozens of others - that have improved millions of lives in the past five decades.
In the world of business, these sweeping journeys do not exist. Why? Because business remains trapped in a linear mindset that does not compute with the up-and-down, interconnected, extremely volatile way the world now operates. And that's both a shame and fundamental flaw.
The business world is messy and complex yet chief executives continue to lead, structure and manage companies as if business is neat and tidy... and somehow separate from life. Markets are prone to unpredictable human behavior, violent economic swings, powerful natural disasters, sudden commodity shortages and crippling cyber outages. The need for a new lens to view (and lead and structure and operate and work in) business is evident in almost every corner of the company and in all of its relationships with employees, customers, investors, and communities in which it operates. Profits feel increasingly difficult to eke out despite access to new markets. Risk management has proven inadequate. Unemployment in many developed countries remains high despite the hundreds of thousands of high-skilled open positions that companies struggle to fill. Employees who should feel grateful for their jobs in this economy instead feel increasingly disengaged and bereft of meaningful careers.
Yet we continue to operate as if we can magically superimpose control, accurate long-range forecasts, accurate budget projections, ever-increasing performance arrows and other products of strictly linear thinking on those complex and interwoven conditions beyond our four walls and that, somehow, it will all work out just as planned. Since this short-term-ism is no longer possible, we must set long-range goals. We must create the environment that nurtures -- and inspires -- moonshots by freeing everyone up from so much of how things are scrutinized, planned, controlled, and compensated.
If it sounds as if I am ranting or campaigning, it should. My campaign platform would be concise: "It's the Journey, people." If brought to life in tangible ways, it would resonate with the masses of disengaged employees, frustrated managers and executives, and confounded stakeholders.
The connected nature of our world absolutely requires this shift to journeys. Technology has connected business and life in a morally interdependent compact. The global financial crisis exposed the real nature and profound implications of the world's interconnectedness. Companies need to compete against former partners, partner with former competitors and thrive amid rapidly changing conditions and intense uncertainty. Moral interdependence can bring positive or negative global impacts; it is our responsibility -- and business opportunity-- to build healthy interdependencies that ensure a thriving private sector and globe. If we do not, we could get into unhealthy co-dependencies that will damage our companies and societies.
Business leaders must actively care for a broader set of priorities, understanding that we are creating our own ecosystems of suppliers, consumers, employees, and so many other stakeholders. In order to build sustainable ecosystems, we accept the reality that success requires struggles, setbacks, and -- yes -- even periods of downward-pointing arrows.
Think of how we journey in our personal lives. Think of training to trek through Patagonia or to the summit of Mt. Kilimanjaro. We boldly begin these journeys with physical training and by planning our route to overcome fear of unfamiliar terrain. Once we embark, we have chosen a destination, but recognize that we likely will need to adjust our routes and tactics to get there (and we may discover a new, even better destination along the way). We accept that we will confront unexpected obstacles. Perhaps most vital, we feel inspired by the unexpected beauty of a new climate, by the knowledge that we can test our physical limits, survive the trek, and reap the rewards of a breathtaking summit.
How much inspiration does the annual budgeting process, the latest internal control or your most recent performance review invoke? The act and process of journeying should no longer be compartmentalized as an endeavor we pursue outside of the office.
Evidence that companies want, and need, to journey is mounting. As I've written about in more detail, thriving companies like Steelcase and National Instruments invest serious time and effort to devise and execute 100-year-long strategic plans based on principles and missions. Other companies' journeys represent daring visions of innovation and connections to society. Unilever is one such company.
"I don't think our fiduciary duty is to put shareholders first. I say the opposite," Unilever CEO Paul Polman told the Guardian earlier this year. "What we firmly believe is that if we focus our company on improving the lives of the world's citizens and come up with genuine sustainable solutions, we are more in synch with consumers and society and ultimately this will result in good shareholder returns."
In a recent conversation, Polman told me how he is bringing those beliefs to life with Unilever's Sustainable Living Plan. It's a 10-year moonshot to align his company's work with the interests of society and to elevate humanity. What a journey of significance. He's using specific targets -- e.g., to cut Unilever's environmental impact in half while doubling revenues in the next decade -- as leading indicators of progress against that journey. Polman has admitted that some targets are easier to hit than others. Inspiring the company's two billion consumers to cut down on shower and hand-washing times, for example, would go a long way towards shrinking Unilever's footprint -- but new habits are very hard to instill. On the other hand, Unilever is far ahead of its own schedule in sourcing sustainable ingredients for its products.
Polman shared with me his vision for Unilever's journey: that it's about passion, purpose and positive attitude. That certain things are worth journeying for: inspiring vistas, lofty goals, tackling broad societal problems. That for Unilever, part of the journey is to resist becoming a bystander to climate change and other societal challenges. Polman knows Unilever cannot achieve its goals alone, and has expanded his company's ecosystem to include partners and collaborators with the expertise and acumen to help Unilever achieve its moonshot.
Business leaders would be wise to consider Ralph Waldo Emerson's maxim that "To find the journey's end in every step of the road... is wisdom." Every part of that journey can provide insight, as a growing Beyond Budgeting movement afoot in Europe and North America has recognized. Beyond Budget companies ditch the traditional annual budgeting exercise -- a lengthy, contentious activity that becomes moot at the moment something unexpected occurs -- with rolling forecasts and continuous planning that map to marketplace ups and downs. These emerging planning approaches acknowledge that companies are on journeys that can, and should, be altered in response to changing conditions.
Leading an organization on a journey requires awareness of your starting point and the new capabilities you need to develop. This struck me when I recently sat down in the conference room of a multinational company and listened as the organization's top executives took turns explaining what they wanted from their people. The responses were nearly uniform: everyone wanted more creativity, innovation, discretionary effort, pride or similar qualities from their teams. All of these business leaders wanted elevated behavior from their employees, the type of contribution that we cannot motivate or coerce from our people. These executives recognized that they want to inspire this behavior in their people, even if they do not yet know exactly how they will do so.
As President Kennedy understood, journeying requires the marshaling of our best energies and skills. It also requires business leaders to think and behave in new ways -- ways that fit our new interdependent world. As we progress, we must keep in mind that "journey" is not just a noun. All of the plans in the world are insufficient to get us to the summit, and adaptations are necessary. We must "journey": respond to unexpected or unforeseen challenges and obstacles, delighting in the process, building and relying on ecosystems of stakeholders and partners to reach our very own moonshot.
A journey takes two directions. It's a deep internal examination of our values, and an external demonstration of those values. Both require new thinking, and here are some ways to start:
- A goal that inspires your people about how they will make a significant impact on the world. Today we need to define our own "moonshots" that express how a company intends to engage in an interdependent society, to improve human life, human enjoyment and human progress.
- A mindset that embraces the world's curvilinear nature. Tsunamis, sudden regime changes, natural resource discoveries, breakthrough technologies, highly volatile commodity costs and a range of other variables constantly present new dynamics and challenges to companies, yet we continue to manage companies in a way that suggests that the right rules and controls and business processes will deliver never-ending growth. We need to think bigger and move beyond this linear mindset.
- Leadership that elevates, rather than shifts, behavior. Today, we want our employees to go beyond merely serving customers to create unique, delightful, experiences; to honorably represent their company and nurture its brand, not only when they are on the job, but whenever they publicly express themselves in tweets, blog posts, emails, or any other interaction; and to be creative with fewer resources and resilient in the face of unimaginable uncertainty. These are big asks! These contributions will not come as the result of motivating employees to shift their behavior with throwaway bonuses and threats of punishment; instead, leaders must ask their people to elevate their behavior - a response that must be inspired through shared values and a purpose-driven mission.
- A strategy for resiliency and growth, simultaneously. Here's another big ask of organizations and their people: Given the volatile and uncertain nature of the world, organizations need to create and protect value simultaneously. It is no longer possible to batten down the hatches when "bad" market conditions appear and then make hay when "good" economic cycles arise. Up and down swings happen with increasing frequency and often overlap in complex ways, and companies must develop strategies that look beyond volatility.
- Measures that go beyond "how much" to track progress. Metrics that focus on quarterly revenue growth, market share or profits no longer capture true progress. We need to more effectively track the quality of our leadership, organizational cultures and external relationships -- all of which are much more reliable indicators of long-term success than traditional "how much" measures.
- An ecosystem that includes partners and stakeholders. In a morally interdependent world, we do not sink or swim alone. We need to carefully select partners who can collaborate with us as challenges arise. We must create an ecosystem of colleagues, partners and customers around the world who come from different cultural contexts.
- Take an internal journey. For many of us, completing any of the big asks above means a journey deep inside ourselves. Each of us must identify our deepest purpose, reconnect with our values. Because if business is no longer separate from society or our personal lives, if it's all a journey, then our own values matter more than ever before. This internal journey will provide a touchstone for every other decision we make, whether it is to build a strategy for resilience and growth, develop better measures to track progress, or to identify those moonshots for ourselves and our companies.