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2.2 The Typical Reaction to Challenging Environmental Pressures

In my executive education classes and consulting projects, I ask my students and clients what their planning horizon is since strategic leaders are responsible for the long-term performance of their organizations. One response by the president of a major nonprofit medical center is instructive: “Ten years ago, my planning horizon was 5 years into the future. Five years ago, it was 2 years. In today’s environment, where health care reform is the flavor of the day, it is now down to 2 months.” Another CEO of a Fortune 500 chemicals company told me, “There is merciless pressure to deliver the financial results that Wall Street expects each and every quarter. Even though Wall Street denies this, our stock price often gets punished by looking beyond the next 3 months.”

Both of these quotations from CEOs, one from the nonprofit sector and the other from the for-profit sector, imply that the best that senior executives can do is to respond quickly to an increasingly volatile and demanding environment. While I agree that organizations today must be more “nimble” in reacting to such things as unexpected competitor moves, a seemingly short-term focus by the owners of the organization, and unpredictable “disruptive” technologiesChristensen (1997). that change the competitive dynamics of an industry overnight, this focus is overly narrow and too reactive. To succeed in the 21st century, organizations today must not only nimbly and flexibly respond to their changing environments but also build capacity for change.