The Corporate Dilemma of the Current Business vs. the Future Business

It is not easy for the senior management team of an existing company to navigate the white water conditions of a dynamic marketplace. Everything seems to be constantly changing—products, technologies, competitors, customer needs, distribution channels, and so on. How should the company respond? Is it better to take action or wait for the market to settle down? Should the company stick with their current strategy or move to a new one?

On the one hand, the company must manage its current business, which has been proven and time-tested in its ability to find a market and deliver a product or service to that market. This predictability represents a low-risk means for the company to meet its financial goals, ensuring its survival. It is the goose that laid the golden eggs. However, that current business is probably working off an older business model, created in the past when the market conditions were quite different. Being an older business model, it may have an infrastructure and overhead expenses that are inordinately high, keeping prices high and making the market an attractive target to new, leaner competitors.

A start-up company with a Web site and access to cheap manufacturing capabilities overseas could replicate your products at lower prices and steal your market share. A global goliath could apply its considerable resources and technologies to offer your customers more than you can. All existing businesses are vulnerable, to some degree, to competitive pressures in a dynamic marketplace, making their futures uncertain. On the other hand, there are countless ways for a company to create new business opportunities in a dynamic marketplace. Change in the status quo of any market component creates some degree of disequilibrium, which means that there are likely to be customers somewhere who are being underserved or business systems that are not working at full efficiency. This results in the potential to create value, which is the basis for new, future business opportunities. Revenue generated from these new ventures can help fuel the future growth necessary to keep the company financially vital and attractive to investors, suppliers, and employees. However, new business opportunities have a downside. They can introduce potential new risks to the company’s financial equation, as the development and successful implementation of a new business opportunity is far from certain. Spending too much or taking too much time to pursue these new, untested opportunities may kill the goose, cutting off your golden egg supply.

This ‘‘tension’’ between focusing on the current, lower-risk (but vulnerable) businesses versus higher-risk new business opportunities is often a critical factor in the creation of a corporate strategy. It is the corporate strategy that identifies how the company will allocate and develop its resources to meet both current and future market needs, while keeping the company financially viable. Therefore, it is an important strategic imperative to consider how a company will balance the needs of today’s business while pursuing the business needs of the future. Jim Collins and Jerry Porras, in their book Built to Last: Successful Habits of Visionary Companies, write, ‘‘Managers at visionary companies simply do not accept the proposition that they must choose between short-term performance or long-term performance. They build first and foremost for the long term while simultaneously holding themselves to highly demanding short-term standards.’’

Although allocating time, attention, and resources to managing the future business will divert time, attention, and resources from managing the current business—and vice versa—this tension between the present and the future business is a healthy tension to foster in an organization. Linda S. Mayer, the senior vice president of marketing and product development at Moen, calls it the need for ‘‘bifocal vision.’’ It requires everyone to always determine and strike a balance of the two, thus preventing the urgency of the present from overshadowing the importance of the future.

This difficult trade-off between the present and future businesses of corporations. To succeed both today and tomorrow, managers must play two different games simultaneously. The management of today’s business requires a focus on efficiency and stability, aligning and improving the productivity of all facets of the business model. The business of the future, however, requires ‘‘streams of innovation,’’ which can be a destabilizing force because they require corporate change. ‘‘Given these contrasting forces for change and stability, managers need to create ambidextrous organizations—organizations that celebrate stability and incremental change as well as experimentation and discontinuous change simultaneously.’’

One way to foster this healthy tension is to create an internal corporate system focused on strategy innovation and the future. By formalizing such a system, senior management makes a corporate commitment to the importance of the company’s future, while still running today’s business.