Are there metrics that would reveal this perspective?
A question analysts seldom ask, and that many CEOs would perhaps be unprepared to answer, is “What is the time horizon you are managing toward?” It would be interesting to compare the responses of executives to the actions and investments their companies are taking to see how well they match. Companies that have biased toward investment in efficiency innovation (seemingly most large companies!) would seem to be managing toward a very near-term horizon. Conversely, many companies that invest in the next wave of market-creating innovation come under criticism from the investor community. Of course, no CEO would admit that they weren’t focusing on the long term, so how can investors determine whether a company is maximizing its potential versus managing short-term performance? Are there metrics that exist or should be created to reveal the potential future outcomes of the company?
In BSSE, we devote several class sessions to exploring the proposition that the metrics we use most commonly to judge performance are “innovation killers”— ratios and time-based formulas that systematically discourage investment in long-term growth. Have you come across any performance metrics that provide a window into long-term performance?