Competing Today While Preparing for Tomorrow

Maximizing present capabilities and developing new ones in anticipation of the future characterize the high performer in all fields of endeavor. Athletes train, compete, and train further to build skills for future events. Armies fight battles deploying whatever materiel and personnel they have at their disposal and, in more peaceful times, develop new military strengths to prepare for battles still unfought.

Management differs from these examples in one important respect: running a business and changing it are not sequential but parallel activities.1 Even armies are seldom on full alert all the time, at least not for limitless periods. War and peace are punctuated, providing the breathing space to build and regroup. Managers enjoy no such luxury, competing today and preparing for tomorrow with no let-up on either front.

Until recently, most organizations have successfully managed to run and change their businesses under the umbrella of a single strategy. As long as competition was stable and change moderate, this approach proved adequate. Indeed, it characterized most business activity in the long period of expansion following World War II and lasting until the early 1970s. Despite a few nasty jolts and outbursts of intense competitive activity, a “business as usual” philosophy prevailed. Not so today. As competition for markets has heated up and change has become pervasive, a single strategy encompassing present and future provides the basis neither for running the existing business effectively nor for managing change.

The idea of dual strategies is not new. In 1968, a farsighted publication of the Boston Consulting Group revealed that the planning practices of a sample of their large client companies were of two distinct types: “Action planning” was used to plan the necessary present and future actions to ensure “operational” success; “planning for strategic change” was used to improve the organization’s capability to have current major decisions “properly weighted by in-depth study of long-term environmental changes.”2 In many cases, the latter approach meant changing traditional assumptions and policies to enable the organization to adapt to future conditions. Curiously, the distinction, articulated nearly thirty years ago, received little attention until recently. One reason may be that times were less turbulent than today, and the need to distinguish between present and future strategies less evident. Another may be that it was an insight ahead of its time; strategic planning was then in an experimental stage, and innovative approaches and insights — good and bad — were used and discarded with some rapidity.

Most companies have continued to develop strategic planning practices without discriminating clearly between present and future. Indeed, they often adopt ineffectual approaches that serve as “halfway houses” between the two, failing to meet either short-term needs for excellence or long-term needs for change. The ubiquitous three-year plan notoriously falls into this trap.

The ability of companies to perform effectively today depends on decisions made in the past; today’s decisions to pursue this or that future direction shape future options. As an old saying reminds us, “In the present lies the past, and in what is now is hidden what will be.” The executive who brought this to my attention expressed the same idea in managerial terms: “Short-term success is mainly a feature of long-term moves made earlier.”3

Two Agendas

The distinction between a present (“today for today”) and future (“today for tomorrow”) orientation is not the usual short-term, long-term distinction — in which the short-term plan is simply a detailed operations and budgeting exercise made in the context of a hoped-for long-term market position. Present planning also requires strategy — a vision of how the firm has to operate now (given its competencies and target markets) and what the role of each key function will be. The long-term plan, by contrast, is built on a vision of the future — even more important, on a strategy for getting there. In these respects, business parallels the military. A good general, surveying the battlefield, knows that strategies, not just operational tactics, are needed to win today’s battle; knowing how to combine available resources into a deployment against the enemy is essential. But the general also recognizes that for future engagements, reconfiguring resources is key; today-for-tomorrow may mean preparing to substitute tanks for horses or nuclear-tipped missiles for conventional artillery.

• Planning for today requires a clear, precise definition of the business — a delineation of target customer segments, customer functions, and the business approach to be taken; planning for tomorrow is concerned with how the business should be redefined for the future.
• Planning for today focuses on shaping up the business to meet the needs of today’s customers with excellence. It involves identifying factors that are critical to success and smothering them with attention; planning for tomorrow can entail reshaping the business to compete more effectively in the future.
• Planning for today seeks to achieve compliance in the firm’s functional activities with whatever definition of the business has been chosen; planning for tomorrow often involves bold moves away from existing ways of conducting the business.
• Planning for today requires an organization that mirrors current business opportunities; planning for tomorrow may require reorganization for future challenges.

• In short, planning for today is about managing current activities with excellence; planning for tomorrow is about managing change.

Today-for-Today Strategies

Strategies for today provide the basis for fine-tuning the alignment of each of the firm’s key functional activities and for ensuring that suppliers and distributors understand, and perform against, the success factors that support customer satisfaction.

Sometimes today’s strategy is poorly defined and articulated. These failures cause confusion over how the various functions and supply-chain partners contribute to the success of the enterprise as a whole. Imagine an orchestra trying to play without a conductor or, even worse, without a score; it is likely to create cacophony for the listener (the luckless customer). In one instance, a small but worldwide leader of plastic extruding machinery saw market share and profit slide (eventually the family lost control in a fire-sale takeover) as R&D pursued new product innovations completely at odds with pricing, sales, and distribution strategies. Confusion over which customer segments to target and which to bypass caused the downturn. R&D was aiming for extrusion machine improvements to better target the volume end of the business; marketing had developed price and distribution policies geared toward value segments. None of the strategies underlying these functional policies made much sense, since the company’s traditional competence was at the upper specialty end of the business. The company needed to make strategic choices that combined value positioning with better cost performance.

Today’s strategy does not focus on defining or redefining business scope and diversity (which are often driven by yesterday’s today-for-tomorrow decisions). It clarifies segment, positioning, and resource deployment choices. The strategy-making process requires first, a definition of the segmentation scheme (a map of the market), and second, a choice about which segment or segments to target.

This process is familiar to strategists — looking out at segment-by-segment opportunities and gaps in the competitive landscape and looking in at existing competencies and resources to identify the best “fit.” The analysis of fit usually includes the “could do” (opportunity) and “can do” (competence) elements of the equation as well as the “want to do” and “should do” perspectives.

Today-for-today management is about change, not just about running the business. But it’s about the “tuning up” kind of change that needs to take place to ensure that functional and supply-chain partner activities are well aligned with strategy. These activities have to be harmonized, along with organizational structures, processes, culture, incentives, and people. Most managers, when they take an honest look at current activities, conclude that there is room for improvement in how they choose and articulate segment-by-segment strategies and align supporting activities.

Today-for-Tomorrow Strategies

Strategies for tomorrow have a different focus, require a different vocabulary to describe, and have different operating implications. Choices of how to define and position the future business are inevitably wider in scope since markets will evolve, competitors will place their own best bets, and the company’s own base of competencies can be expanded or modified. Determining the best fit and the most effective deployment of resources is no longer the key strategic choice. A today-for-tomorrow strategy puts the spotlight on possibilities or necessities for redefining the vertical and horizontal scope of business participation; reconceiving perceived value or delivered cost choices; reorienting goal structures and portfolio roles; and reprioritizing key competitive drivers. Redefinition, reconception, reorientation, and repriori-tization lead to the definition of new competencies and resources that will be needed. Companies usually follow one of four distinctly different strategic paths to the future (see Figure 1).

Companies at the top left are like surfboard riders who have neither the vision to see the new waves coming nor the ability to ride them. They are typically forced into crisis-driven “turnaround” situations — usually downsizings to avoid further red ink or bankruptcy. These turnarounds usually reflect the company’s earlier disregard for today-for-tomorrow strategy. While some firms, as Tom Peters says, may “thrive on chaos,”4 many others fall apart. A comparative glance at the Fortune 500 list in the 1960s and today tells the story.

Companies at the bottom left see the waves late and have to scramble to catch them. They are usually responding to competitors’ initiatives and to events that they perceive as being beyond their control. They try to keep their heads above water by making a series of “catch-up” adjustments, usually too little and too late. It can be argued, for example, that Caterpillar found itself in this situation with its large, over-engineered earth-moving machines, when the industry was shifting to the smaller, lighter, and cheaper models pioneered by Komatsu in Japan.

Companies at the bottom right do better. They practice today-for-tomorrow strategies that, while not revolutionary, allow them to see new waves as they form and ride them to advantage. Nestlé is just such a company, innovating on many fronts and investing ahead of others in new product and market areas.

Companies at the top right are the true innovators, redefining their businesses and industry practices in revolutionary new ways. These are the Polaroids, Swatches, Benettons, and IKEAs of yesteryear and the FirstDirects5 and Amazon.coms of today.

Good today-for-tomorrow strategies start with visions of the future. It is difficult to avoid getting swamped by the waves of change if you don’t see them coming until it’s too late to take action. I have used the plural form — visions of the future — to indicate that vision has multiple dimensions, including, for example, the future market territory and the forces that might reshape that territory; future competitive moves; future strategy options and choices; needed competencies and resources; and knowledge of how to get “there” from “here.” The plural form can also indicate that companies are considering several alternative scenarios.

Problems in Practice

How do managers know in advance how important future change is likely to be, when to start preparing for it, what competencies to build, and, vitally, how to convince others in the organization to act? Certainly, being in touch with events in their own industry, as well as with events far and wide, plays an important role. So does historical perspective: those who see present events as part of an unfolding narrative that relates past to present to future have an advantage over those who see events only as snapshots in time.

Few firms have 20/20 vision. Myopia can extend well beyond the “marketing myopia” that Levitt identified almost four decades ago.6 Companies can be so consumed with the present that they fail to prepare themselves for the future; IBM was on the verge of this condition a few years back. When change comes, it is unexpected and unsettling. These companies are left high and dry, the victims of their current strategic focus. But just as dangerous is to devote most of the attention to the future, overlooking the needs for excellent performance today. Apple Computer could have fallen into this trap, consumed as it was by constant change and upgrading. Change should be a management preoccupation — in addition to, not instead of, present performance.

The appropriate balance between a present and a future orientation is related to the situation at hand. In circumstances characterized by rapid or extreme change, the future component must be given the lion’s share of attention; in more stable circumstances, the present component predominates. But whatever the situation, both components must always be attended to in parallel.

Underlying the failure of companies to achieve a proper balance is usually the inability of individual managers to wear two hats simultaneously. Some managers, especially at lower levels, do, of course, spend most of their time on current operations. And sometimes the reverse is true at the top. But as organizations increasingly push responsibility downward, every manager has to have a sharp eye on present and future. Companies must develop 20/20 vision in their managers up and down the organization.

Many executives, when first confronted with the concept of dual strategies, “buy in” to the basic idea of two separate planning horizons but balk at the idea of two separate plans. They have difficulty seeing the difference between operational changes of the today-for-today variety and those that are first steps today on the journey toward tomorrow. Our plastic extrusion machinery company provides a revealing example. The company needed, today-for-today, to refocus its R&D on upper-end products and to give more attention to cost-reducing process innovations. Today-for-tomorrow, it was essential to transform the company culture from an engineering and research-driven orientation to a market orientation. This requirement also meant recognizing the longer-term shift across all the company’s product lines toward better price/performance ratios. From an R&D standpoint, the first step required for tomorrow was to turn the spotlight on the failure to articulate segment strategies and to use this failure as a learning opportunity for the company as it embarked on a process of far-reaching organizational change.

Institutionalizing Duality

My research with multinationals, all of which were implementing dual strategies, suggests that companies can deal with the problems highlighted in the previous section only when they attend to four key requirements: a clear definition of leadership responsibilities, especially at the top; appropriate balance in organizational structures and processes; recognition of duality in planning systems; and redesigned control mechanisms.7

Defining Leadership Responsibilities

The need to work on present and future agendas simultaneously has consequences for corporate leadership, business-unit general management, mid-level program managers, and corporate and business-unit functional managers. At the very top, some organizations, recognizing the dual nature of the top-management challenge, have split the job in two — one part being managed by the chief executive officer (CEO) and the other part by the chief operating officer (COO). Bennis has observed these arrangements closely:

“On paper, the differences are very clear. The CEO is the leader; the COO the manager. The CEO is charged with doing the right thing; the COO with doing things right. The CEO takes the long view, the COO the short view. The CEO concentrates on the what and the why, while the COO focuses on how. The CEO has the vision, the COO hands-on control. The CEO thinks in terms of innovation, development, the future, while the COO is busy with administration, maintenance, and the present. The CEO sets the tone and direction, both inside and outside the company, while the COO sets the pace.”8

But Bennis remains skeptical of this solution for several reasons, a principal one being succession:

“While the CEO has to take tough positions on long-range issues, must plan ahead and articulate a vision, the COO has been working on short-run, ad hoc, and often simply expedient decision making. The COO has been trained to act like a mechanic, a problem solver, basically maintaining an efficient status quo. Is it any wonder then that boards discover, almost always too late, that the ‘natural’ successor to the CEO is inadequately prepared for the top job?”

Bennis’s solution is to combine the responsibilities of CEO and COO in a single “CEO-in-chief” — a leader and manager of managers. This CEO-in-chief would “be responsible for seeing that the short view was compatible with the long view, that things done today would lead to tomorrow’s goals.” He or she would define the “whats” and “whys” and assign the “hows” to associates; have the vision and primary hands-on control, thus ensuring that the vision was always realistic; think in terms of innovation, development, and the future while associates took care of administration, maintenance, and the present; and set “tone, direction, and pace for the company.”

Bennis’s solution is not the only one, of course. An-other is to look for the split in a single individual; yet another is to have a chief executive who coordinates two top managers — one responsible for planning and delivering excellence today, the other responsible for getting ready for tomorrow.

R.F. Domeniconi, former executive vice president for finance at Nestlé, said of the dual nature of the top-management challenge: “People are overworked and do not think much about tomorrow; many managers are not visionary by nature. But in a general management group of ten, maybe you only need one or two visionaries. You need at least four or five with hard noses!”9

Even with these insights from a leading academic and a leading practitioner, respectively, many questions on leadership remain. The challenge, while not new, is a growing one, and company experiences are not yet well documented. Two conclusions, however, stand out.

• First, the chief executive must be prepared to pursue both excellence today and change for tomorrow. This readiness should be one of the distinguishing criteria for selecting candidates for the company’s highest office.
• Second, just below the top, there may be room for more specialization, with the accent being applied either to today’s management or to preparations for tomorrow. Nevertheless, in the top-management team, all managers must be able to wear both hats.

Solutions at the very top, however, are only a part of the story. Duality is also needed further down the line. It is imperative to imbue the leadership task of all those with profit-and-loss responsibility lower down in the organization with the dual focus of today-for-today and today-for-tomorrow. Companies must beware of the trap of believing that today-for-today is primarily the task of middle management, while today-for-tomorrow is the preserve of top management. The decentralization and empowerment characteristic of today’s “flattened” organizations apply to these parallel agendas. Many companies pay lip service to these changes but fail to follow through in practice. The result: businesses that should be led from positions that are close to technological and market reality fail to make the necessary strategic adjustments. The failure usually occurs either because top corporate management cannot possibly see the new waves forming at the business-unit level or because “empowered management” further down does not take initiatives or does not gain the ear of top management to endorse fundamental change.

At functional vantage points, we must distinguish between those functional executives who contribute significantly to the overall business-unit leadership (for example, as members of a management board) and those whose responsibilities are predominantly functional. All need to be aware of duality; those who are actively involved in general management will need to clarify priorities concerning today-for-today or today-for-tomorrow agendas.

One role of leadership at all levels is to promote the need for dual thinking and communicate the two agendas and their significance for all levels of the enterprise. Many employees, lower down and closer to customers and supply-chain partners, are confused by what they interpret as contradictory signals about today and tomorrow. The two agendas can be integrated only if those who need to implement today and change for tomorrow understand the reasons behind each. Well-led project teams and cross-functional or cross-level task forces aimed at rethinking strategies or reengineering processes can be important mechanisms for communicating these reasons.

Achieving Organizational Balance

Duality demands mediating the balance between the program and resource side of organizations. By program management, I mean those positions that bear responsibility for bringing together all elements of strategy to satisfy the needs of customers in a particular segment. Examples include division managers, strategic business unit managers, product managers, and market managers. By resource (or functional) management, I mean those who manage the resources critical to customer satisfaction, such as manufacturing, R&D sales, and other internal services. Program and resource roles, up and down the organization, differ in important ways, depending on the task at hand.

For excellence today, a bottom-up approach appears to be more effective in both formulating and implementing customer-satisfaction strategies. At Nestlé, for example, it is local country managers and their subordinate product and segment managers who regularly make such today-for-today decisions, not corporate headquarters management. This “tuning up” kind of change often originates close to the customer — where middle-and lower-level managements have much greater access and insight. Change, of course, has to be guided by an appropriate degree of “top down” management, mainly to ensure that cross-functional, cross-business, and partner synergies are effectively employed.

Program managers must take the lead in defining what has to be done to achieve excellence, and resource managers must follow. As uncomfortable as this may be for many functional managers used to independence, everyone must understand who is defining the actions needed. In the extrusion machinery company mentioned earlier, for example, many of the problems can be traced to the fact that program management, located as it was inside the engineering function, was too weak. R&D thus pursued its own agenda without any clear strategic guidelines.

Finally, when it comes to today-for-today management, organizational structures clearly follow strategy. Most important is to put in place program structures that mirror market segmentation. That is why food companies, like Nestlé, with many different products going through the same supermarket channels, rely heavily on product management organizational structures. By contrast, synthetic fiber producers, like DuPont, with similar fibers being marketed to very different applications segments, rely more on market segment management structures. Beyond these structural questions, organizational systems — particularly compensation, motivation, and reward systems —must be carefully designed to encourage consistent implementation of chosen strategies.

For excellence tomorrow, the more radical changes involved require a far greater degree of top-down involvement. A corporatewide and even interorganizational perspective is needed. When, for example, SKF launched its new “bearing services” business in the late 1980s, which required not only the tuning up of existing manufacturing-based strategies but also a new market orientation, the initiative for change came from the CEO. It was he who appointed a new division chief to develop the new business; this appointee, in turn, created the new mission (“trouble-free operations”) and new organization. Only then did the emphasis shift to contributions from the bottom up.

Resource managers are likely to be more important than program managers in planning for future change. Only they have the intimate knowledge of what is possible. While program managers provide important input concerning what will be needed, what “can be done” takes on a larger importance than what “might be needed” as we look to the future. Market strategy becomes proactive rather than reactive. Opportunities have to be created as well as fulfilled. Nowhere is this clearer than in the case of those companies that rewrite the rules of the game, like FirstDirect or SKF. General management provides the glue that is needed to join functional managers’ creative visions to program managers’ views about needs.

When organizing for the future, organizational structures should follow strategy. In practice, quite the reverse may occur: existing segmentation schemes often limit the ability of product or market managers to view the future in new ways. Major redefinitions of a business seldom originate, therefore, within existing structures, and general management needs to be aware that structures that are well-designed to implement strategies for the present may hobble the organization’s ability to think flexibly about its future. FirstDirect and SKF managed to avoid this trap by setting up entirely autonomous units within their existing corporate structures. In both cases, top corporate management, recognizing the problem and the opportunity, created the structures and appointed the leadership to take them on. While ideally, attending to today’s and tomorrow’s agendas should happen in parallel within the existing organization, evidently companies find this difficult to accomplish when change is radical. Creating a new organizational unit may be the only expedient alternative.

Managing Dual Planning

As enterprises have increased in size, complexity, and geographic scope, planning tasks have multiplied and planning systems have become more complex. Pressures for managing today-for-today and today-for-tomorrow in parallel have created still more planning challenges. Firms often manage the dual-planning task by using parallel systems and approaches. It is not uncommon, for example, to find under one roof any combination of the following: a three- to five-year long-term planning process, a capital budgeting process, a series of project-based change activities, a total-quality-management system, and an annual budgeting process. Since all these activities should be closely related, it is no wonder that many firms do not yet fully have their planning act together — for either today or tomorrow. What these firms need is an iterative process (see Figure 2). In this process, today-for-tomorrow changes in any particular period lay the new foundations for today-for-today plans in the subsequent period. This is a fundamentally different and more effective approach than the simple extrapolation of current plans into the future that often characterize coventional three-year or five-year plans.

Managers may then summarize the various types of plan and their likely horizons (see Figure 3): change plans will have a medium- to long-term focus; plans that pinpoint today’s opportunities typically will have a short- to medium-term focus. The annual plan will be dedicated to pinpointing today’s opportunities and will also contain short-term plans to correct weaknesses or reinforce strengths.

My own observations suggest that while few companies are explicitly practicing this kind of dual planning, nearly all companies are implicitly working out variants of this basic scheme. Nestlé, for example, plans today-for-tomorrow largely in the context of plans laid in its increasingly important strategic business units; today-for-today strategies and plans are the prime responsibility of the geographic zones and markets.

One valuable additional planning tool is an early warning system to signal when radical change is likely to be forthcoming. Companies like Novartis and the Daimler Benz unit of DaimlerChrysler, heavily influenced by fundamental scientific and technological “breakpoints”10 respectively, have developed elaborate “technology intelligence” systems. Others, driven more by nontechnological change, have put in place a variety of environmental scanning systems. All these systems have the same intent — to attain the right balance between today-for-today and today-for-tomorrow concerns.

Early warning systems of any kind are, of course, particularly helpful in anticipating threats. Opportunity-driven change, however, is different. Planning is then the institutionalization of pioneering future visions. A company creates the fundamental industry shifts and puts others in the position of reacting to its initiatives. Planning is “discovery-driven” rather than simply anticipative, and managers probe the future by conducting an ongoing series of experiments.

Assessing Performance versus Monitoring Change

Existing practices (and, incidentally, most of the literature on control) tend to gloss over distinctions between operational and strategic measures and the question of whether these are applied to controlling performance or monitoring the change process.

As we have seen, strategies are required to perform with excellence today and to change in preparation for tomorrow. We have also seen that these two different concepts of strategy have to be operationalized. Four broad areas result for measuring performance and/or monitoring progress (see Figure 4).

Companies often give too much attention to financial performance measures related to today-for-today —and far too little attention to the underlying strategic drivers of this performance. To use a medical analogy, we measure temperature, blood pressure, and other vital signs rather than looking below the surface at the root causes of disease or health. Likewise, control mechanisms too often emphasize today-for-today performance measurement at the expense of monitoring progress toward the strategic and operational milestones that have to be met on time if planned change is to become reality. The arrows in Figure 4 indicate the need to reexamine and perhaps change the balance of control attention.

In my experience, this often implies more than just tuning up existing systems. Companies must often tear these systems down and start afresh — putting general management in the design driving seat, supported by information technology and systems and accounting and audit staffs — while not leaving control-system design entirely in their hands. The “balanced score card” approach, which many companies are experimenting with, is often an important step in this direction.11

Conclusion

Managing with dual strategies is a state of mind, not just another management tool. It goes to the very heart of what managers throughout organizations have to spend their time doing. It is, above all, a leadership task. The ideas and the recommendations I have presented here have to be applied first at the top but must filter down and influence people in every organizational nook and cranny. Many organizations, faced with increasing pressures to achieve outstanding performance today and to ensure a healthy tomorrow, are finding their own creative ways to deal with the two agendas simultaneously.

The evidence is overwhelming. Planning and strategy making are evolving anew — this time with far-reaching consequences for almost all management practices. The result should be to combine the benefits of current health with heightened prospects for prosperous longevity.