Monday, 1 March, 2010

Killed by short-term thinking

Marketing’s pet peeve is that finance's short-term thinking is ruining companies. Creating value takes time. Quarterly targets are penny wise and pound foolish.


But can we have some examples? Which are those great companies that finance managers have ruined?

It’s sometimes pointed out that while Japanese car companies are headed by engineers, American CEOs are typically ex-CFOs, and the results are for all to see.

But were American car companies making great cars when the Japanese took over? Did they have fantastic plans? Were they seriously pursuing exports?

I’m not for a moment supporting finance’s short-sightedness. However, I do suspect for finance men to drive a company to self-destruction its engineers (and their equivalent in service companies) and marketing guys have to abdicate their responsibility first.  


Arya Chatterjee said...

They were not making good cars because the car designs they were making were being killed by the bosses. We all have heard of the electric car that GM killed. Now Toyota is the market leader in Hybrid and possibly will lead in the all electric or all fuel cell car. They are already the most advanced in terms of research. GM is no where near. RCA and Westinghouse discovered LCD technology. They are no where now. Samgsung and Sony lead the market. So... yes... they are nearsighted and the Japs are farsighted.

He is the CEO so that he can give the vision, allocate the money for research, stay in the market even when the TV costs 3000 and no one is buying it. Just so that when everyone eventually buy it one day, people will remember. An engineer cannot research LCD TVs in his free time. It needs a team of a 100s engineers, a whole division, buildings, billion dollar equipment, managers, etc. That kind of vision can only come from the top.

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