Introductory
Your company runs its operations mainly through its calendar system instead of its strategic plans.
Businesses need to determine their pricing strategies at the end of every quarter. The system begins its resource requests by using projected data for its operations. Board decks rewrite priorities. The result? Short-term achievements which provide immediate satisfaction will eventually lead to long-term costs that slow down development.
This isn’t a moral failing. It’s a system problem. Leaders choose short-term gains through incentives and operating cadences and investor communication because these elements require them to deliver immediate results despite their knowledge of superior long-term results. Left alone, the urgent eats the important.
A step-by-step guide exists to restore equilibrium between short-term goals and long-term objectives which will help you achieve your quarter targets without harming your decade-long vision.
The financial impact of short-term thinking has quantifiable effects that businesses can measure.
Short-term thinking exists as an easily recognizable phenomenon. You can see it in four places:
- Capex drift. The expenses for maintenance operations and basic operations maintenance have increased but new capital expenditures for growth have stopped. The company shows declining cash flow in the future but EBITDA remains strong.
- Commercial discounting. Teams pull deals forward with price cuts. Revenue sticks. Gross margin doesn’t.
- Talent mix. Senior hires replace capability bets. Contractors rise. R&D cycles shorten. You save OpEx; you lose optionality.
- Portfolio sameness. Bets cluster around the core. New S-curves receive no “shots on goal”.
Your dashboards should display only one metric at a time because showing multiple metrics leads to optimizing the scoreboard instead of the actual game.
Why It Happens (Even to Great Teams)
The current compensation system provides employees with annual performance bonuses and option vesting schedules that lead to short-term performance results.
- Disclosure pressure: Quarterly guidance becomes a cage. You control the story but not the financial aspects.
The board dedicates 80% of its time to the previous quarter but devotes only 20% to the upcoming decade.
- Metric mix: You track P&L, but not leading indicators like cycle time, innovation throughput, or NPS-to-LTV lift.
The system needs transformation to achieve new behavioral patterns from people.
The 3-Clock Operating Model
The company should operate under three time-based systems which were established during the design phase.
- Clock 1 (12 weeks): Execution. The main performance indicators consist of pipeline quality and cash conversion and unit economics and working capital turns.
- Clock 2 (12–24 months): Scaling. The company needs to expand its product-market reach and increase capacity while moving platforms and establish its position in the market category.
- Clock 3 (5–10 years): Optionality. The report presents new S-curves and frontier technologies and market entry strategies and moats which produce compound effects.
Each clock operates independently with its own set of objectives and financial allocations and management structure. Never let one meeting cover all three. The process of switching between different tasks leads to the death of long-term strategic planning.
Six Moves to Rebalance Now
1. Rewrite incentives for time horizon.
The system needs payment to operate its efficiency management system and execute plans. The current decade requires investment to achieve three essential goals: fast innovation development and long-lasting customer value and high talent concentration. The company needs to establish performance targets spanning three years which will connect to TSR and two additional non-monetary performance indicators (on-time product releases and essential personnel retention).
2. Publish capital allocation rules.
The pre-commitment to ranges should be set at X% for core, Y% for scale-up and Z% for options. The divestment process needs to follow established hurdle rates rather than political factors. Your external communication about compounding value will draw in investors who focus on this investment approach.
3. Set a “no-surprise” guidance policy.
The company needs to create a wide performance band for each year which includes particular targets for the long-term period (e.g., “We will maintain R&D expenses at 12–14% of revenue throughout the cycle”). Your long-term strategy will take precedence over your short-term quarterly results in the market.
4. Institutionalize Strategy Days.
Two board meetings per year cover only Clock 3. No operational decks. The company should focus on developing three main areas which include scenarios, moat health, platform bets and talent bench for upcoming business ventures. The team needs to perform pre-reads to examine both decision memos and kill-lists that contain zombie projects.
5. Set up a Long-Term Scorecard.
Alongside GAAP/IFRS, show:
o The number of new features released each quarter which users adopted at least 30% of the time.
o Customer equity (NPS trend × LTV/CAC trajectory).
The time span from when a company decides to launch a product until it reaches store shelves constitutes the capacity lead time.
o Optionality index (share of capex on S-curve bets with defined learning milestones).
The long-term value increases through compounding when these factors become better even though a single quarter may not produce results.
- Time protection requires governance systems instead of depending on willpower.
The students should dedicate their time to specific days for each clock as follows: Clock 1 gets Mon/Tue and Clock 2 gets Wed and Clock 3 gets Thu. Guard it with EA and COO support. Make exceptions rare and explicit.
A Simple 90-Day Plan
Days 1–30: Diagnose.
Run a “time-horizon audit.”The actual destination of last year’s dollars and leadership hours and board agenda minutes remains unknown. Segment P&L and capex by clocks. Three major obstacles need to be addressed which include low-yield discounts and an overloaded roadmap and stalled market entry.
Days 31–60: Decide.
Approve capital allocation rules and the long-term scorecard. Choose two bets to increase their value and two projects to terminate. The executive incentive system needs a total redesign to establish two performance metrics which serve as predictive indicators.
Days 61–90: Do.
Publish guidance guardrails. Host your first Strategy Day. Launch a monthly options review for Clock 3 with binary “advance/kill” calls. Explain to the Street which metrics you will track along with your reasons for doing so.
The process of investor communication requires a strategic approach to maintain clarity during discussions.
Most investors aren’t anti-long-term; they’re anti-surprise. Give them a clean story:
- Where compounding comes from. Network effects? Switching costs? Learning curve?
- How you will fund it through cycles. Clear ranges for reinvestment and leverage.
- What you will not cut. The “untouchables” that protect the flywheel.
- When you’ll change your mind. Objective tripwires that trigger pivots.
This builds credibility. Credibility lowers your cost of capital. Lower cost of capital buys time.
The Founder/CFO Edge
The founders will defend the mission. The position of CFO grants access to protect financial information. Your collective work will establish a system that develops leadership through short-term accomplishments. The best companies do both:
They finished the quarter by winning all their matches.
The path they establish will inevitably result in the approaching decade.
Not by heroic effort. By design.
References
https://3msbusiness.cloud/the-challenges-of-short-term-thinking-in-innovation/
FCLTGlobal — “Research on Long-Term Value Creation.”2020–2025. https://www.fcltglobal.org/research/
Saudi Vision 2030 — “Vision 2030 (Economic Transformation Agenda).”2016–ongoing (accessed 2025). https://www.vision2030.gov.sa/
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