In the long run we are all dead – John Maynard Keynes
The economic concept of the long run is the period that it takes to be able to change every variable in a system. It is the time it takes a system to adapt fully.
The long run defined this way is a handy concept for an organisation to use when thinking about change. Your most disruptive threats will pick the variables that you find hardest to change. Because you cannot or will not change these variables quickly then you will be in danger of losing value to the disruption. For example:
- newspapers: struggled to change an economic model where advertising in the paper funded content to attract an audience when internet businesses offered alternatives for both advertisers and audiences
- music industry: struggled to change their ways of identifying and managing talent and the economics of distribution models tied to physical distribution when digital music distribution disrupted both
- premium airlines: struggled to change high costs of labour, fixed cost infrastructure and the value perceptions of their other premium offerings when low cost competition attacked
If you want to improve your organisation’s ability to respond to disruption, you need to shorten the long run, your adaption time, by speeding up your slowest areas of change. In most cases these will not be simple decisions. The slowest areas of change are often those deep in the hidden infrastructure of the organisation.
One thing you can do is invest in capabilities to help you change all areas of your business more rapidly:
- people capabilities: change leadership, talent, agility of structure and performance measurement
- system capabilities: flexibility of systems, agile development, standardised integration and ability to leverage new technologies in experiments.
- process capabilities: continuous improvement, process measurement, agility of change, etc.
The long run is also the end of the period when the ugly impacts of disruption are felt. We would all like to move faster through the periods of confusion, pain, adjustment & loss and get back to competing aggressively to win.
Ultimately, it comes down to the culture in the organisation. Can you build an organisation that has a long run that suits your business and its environment, where you can change the way you think and work fast enough to survive?
If you can’t shorten the long run, then you can guarantee in an era of disruptive innovation, your organisation will be dead.