With economic short-sightedness, you will lose out in the digital transformation.

A long time ago, I wrote about how damaging the quarterly thinking that is widespread among large companies is when it comes to investing in digital ventures. Unfortunately, I still often see this today. It’s not just a lack of strategic foresight, but often downright economic short-termism.

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Far-reaching changes require moderate investments?

I often observe how companies struggle to come to terms with the changes taking place around them. They are often still in denial. It is true that we are now basically over the fact that decision-makers are still questioning whether “this Internet will prevail”.

But when it comes to the details, I often hear: “We don’t believe that applies to our customers as well.” In our sector, the existing model will remain in place for a long time to come. And so on and so forth.

If it is recognized that there is a need for action – which in my experience is the case for all companies sooner or later – there is no corresponding investment. No. There is a wait-and-see approach, preliminary projects or a few “me too investments” are made.

The result of this tactic is always similar: half-baked products and projects emerge. And in the end, you are no further forward.

Can’t see it or don’t want to see it

I ask myself whether people can’t see this development or don’t want to see it. And often enough I can’t find a clear answer for myself. Sometimes, I have the feeling that it’s a mixture of both.

Everything is becoming faster and more short-term – investments too?

When it comes to investing, you have always been well served to work counter-cyclically, against the masses. For example, when I started investing money in the stock market at a young age, I always lost in a fort. My decisions were always driven by my intuition and this intuition was (and is) very much influenced by the masses and the opinions of fellow investors.

One evening, I had just lost again for a week, I told myself that if I had already found a reliable system for losing money, the opposite decisions should actually lead to profits. So I simply did the opposite of what I intuitively thought was right. If I had bought 10 shares of xy, I sold 10, etc. To my astonishment, this had exactly the desired effect. Since then, I’ve known that intuition is generally a bad advisor when it comes to investing.

In a world where everything is moving faster and faster, it feels intuitively right to demand ROIs from investments in the corporate sector in ever shorter timeframes. However, I believe that this is precisely what is dangerous.

Not all investments are the same

It is dangerous for two reasons:

On the one hand, the investment backlogs of some companies with regard to digital are so large that the investments cannot be amortized within a reasonable period of time. The question of whether, for example, the digital infrastructure needs to be created and can be amortized then no longer arises, as without the infrastructure there will be no business in the future. In most cases, these necessities are recognized so late that the change in business becomes very critical.

On the other hand, testing and establishing new business models and products usually requires staying power. As with start-ups, you have to learn from things and turn and adapt the case. Anyone who thinks they can do this in a few quarters is almost always wrong. And quickly run into guidance issues of an unpleasant kind.

More farsightedness required

In a time of ever faster change, I believe that a far-sighted approach to investments is becoming increasingly important. I know that feels strange at first. But I think that’s exactly how it is.

And this usually means sacrificing short-term profits for good long-term positioning and sustainable earnings. Because a company that is strategically financially optimized to death in the short term is one thing above all: death. The pile of a company’s long-term problems usually increases progressively with the high quarterly profits achieved in the short term. Great dividends and bonuses or not.