Economic Strategy – It’s the long run that counts.

What makes some organisations thrive in the longer term while others just can’t last the distance? Economic entities or all kinds – small businesses, large organisations and even Nations – can find it difficult to keep a strong hand on the economic tiller. Some are just not strong enough to withstand the storms that invariably break out of nowhere, but some blessed with substantial resources can still cause their own demise through poor strategic design and execution.

Research tells us that 30% of small businesses fail in the first two years. History tells us that a lucky few start as acorns and grow into a giant commercial Sequoia’s. But is it really down to luck? There’s an old joke that says “What is the fastest way to get into a small business?” Answer: “Start out with a big business and take your eye off strategy”.

I recently visited the Queensland Art Gallery’s Portrait of Spain – Masterpieces from the Prado exhibition in Brisbane, a

Portraits of Spain

Prado portraits at the QAG

magnificent collection of art from 16th and 17th-century Spain. (The exhibition runs until 4th November 2012 and I would highly recommed a visit to see it as a wonderful experience) . This was the era when Spain was at the height of its colonial power and was plundering Central and South America for its gold and silver. The portraits of the time reflect the opulence and grandeur that this wealth supported.

Within another hundred years however Spain’s national wealth was dissipated largely as result of the self-indulgence of the  Aristocracy, a series of expensive wars over trade and colonisation, and its neglect of the opportunity to restructure the nation’s economy from a poor agricultural base to a more industrialised one, as was happening in England and other places.

Spain continued its slow but irreversible decline and even today although culturally rich is one of the “at risk” economies of Europe.

All economic entities face a similar life cycle regardless of size or industry sector. It moves from birth, through growth to maturity and peak of power, to eventual decline. At some point on the downward path of decline the governing body through its decisions and choices can take a new path to renewal, revitalisation and sustainability or it can continue on the downward slope to ruin and oblivion. Through history we have seen these alternative paths taken by both businesses and governments, often significantly complicated by the occurrence of natural and man-made disasters.

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What is the lesson for business organisations in all of this? In short, “Ensure that sustainability is a regular item of discussion at board meetings”

In the post-GST world (although we can’t be sure we are really post GFC yet) considering the aspects of business strategy that bear upon sustainable practices in the management of assets, product development, service quality and sensible financial management can make the difference between longevity in the market and decline to bankruptcy.

Quixote - Symbol of heroic but failed business ventures

Gustave Doré: Don Quijote de La Mancha and Sancho Panza, 1863

It is interesting that one of the most common cultural images of Spain today is that of Don Quixote, and his heroic but doomed adventures. Businesses that follow a similar road of charging off over the hill without evaluating the long-term consequences of their strategies will suffer similar humiliation.

The responsibility of the Board and senior management is to continually align business strategy with a sustainability focus whereby physical, financial and human resources are planned, directed and consumed with care to ensure their ongoing availability and effectiveness in delivering positive outcomes for the business into the foreseeable future.

 

 

 

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