KIRSTEN GALLIOTT Tonight, we’re talking about how leaders can best prepare for and navigate uncertain times. Tony, how do you strategise for the future? Do you have a one-year plan, a two-year plan, a five-year plan – or are those timelines really having
TONY JOHNSON The timeframes are definitely shrinking. When interviewing people to join EY, I’ll ask the traditional question: “What would you like to achieve over the next three, five or 10 years?” Ten years ago, people would quite comfortably outline their aspirations for 10 years’ time. Now if you mention 10 years, they start to go pale and fall off the chair. Even at five years, they break out in hives. Three years seems to be the period that people can get their mind around. My planning has actually been every six months for the past 30-odd years.
How quickly do you have to make big decisions about the direction of the company?
TJ More and more. Whether it be technological disruption, geopolitical risks, coronaviruses or bushfires, the volatility and the uncertainty is unseen in previous periods. Every day you’re making the kinds of decisions that 20 years ago you may have made one of in a whole year. There are more and more of those decisions and they’re required to be made faster.
Mehrdad, you work with a lot of CEOs across ASX 200 companies. Is the 10-year strategy dead?
MEHRDAD BAGHAI A lot of things happen in 10 years and if you don’t think about the disruptive changes and act on them, then you have the Kodak-moment risk [the film company failed to capitalise on its own invention of the digital camera and then went bankrupt as digital photography disrupted its core business]. Let’s say you’re an energy company CEO. Interesting things around energy are going to happen in 10 to 20 years. Is there going to be electrification? Is there going to be hydrogen? All of these things will affect the assets you own and the company you want to build. When I was a young consultant, about 30 years old and I’m now in my mid-50s, I worked with a pulp and paper company. They had more newsprint assets than anybody in 1993, which was the beginning of the internet. While you would never have sold those newsprint assets in a year or two years or even three years, if they had held onto them for 10 years, they would have been worth very little. They sold every single one of those assets and instead bought uncoated freesheet, which is the paper you put in the printer. And that grew. Leaders must escape that pressure to stay in the short term and be able to act on things that will happen in a 10-year horizon – and to start acting on it now because if you wait until year nine, it’s too late.
Are many CEOs equipped to be able to do both because they’re different skills, aren’t they?
MB The challenge is if you’ve got 10,000 people, you can’t distract them with what’s going to happen in 10 years because they’ve got to focus on what they’ve got to do today. You need the right part of the organisation thinking about how the world’s going to change in 10 years but not distract everyone else who’s making stuff happen now. We call it the three horizons of growth: the core business; emerging opportunities; and ideas, research projects and pilot programs for future growth. Having a mechanism for thinking about the way you act on the future, while you also deliver the core, is the magic.