We Threw Out Our Bold Vision — and Only Then Did Growth Begin
The 8 habits that set deep strategic thinkers apart. Part 1: System thinking
The antithesis of strategic thinking isn’t mindlessness – it’s self-obsession. But self-obsession has always been part of strategic thinking.
On September 13, 1970, Milton Friedman published an article in The New York Times titled "The Social Responsibility of Business Is to Increase Its Profits."
In it, he argued that shareholders are the company’s economic engine — and the only group it’s socially responsible to.
This article changed the world more than it appears. Every time tech support tells you it’s not their fault, when your new car breaks down for no reason, or when your bank treats you like you're Osama bin Laden — that’s not bad luck. That’s Friedman’s legacy at work.
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Few topics are talked about as much—and understood as poorly—as strategic thinking. My goal is ambitious: to change that. This is the first article in a series of eight that explores the habits that distinguish deep strategic thinkers. In this series, I'll cover the following topics:
1. System thinking and six stakeholder groups – this article
2. Value exchange and the value equation.
3. Futures thinking – how strategists think about the future.
4. Thinking across four layers of time simultaneously.
5. The pitfalls of strategic goals.
6. Customer centricity and backcasting.
7. Strategy as a set of hypotheses.
8. Strategic thinking: what it really is.
So, stay tuned! I wish I had been familiar with these ideas in 2010 when I made a strategic mistake.
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“Forget about net profit!”
In 2010, my company’s strategic goal was: “Increase our profits by 30% per year.” It felt right – the strategy textbooks I read in the MBA program echoed Friedman’s ideas.
We chose the right growth model (read more about growth models here). We focused on highly profitable products, market niches, and customer segments.
We aligned all our initiatives and KPIs with the strategy. Even the office fish knew our strategic goal.
It was a perfect plan — except for the small detail that it didn’t work. We kept falling short of our goal.
If I could send a message to my past self, I’d cry out: “Forget about net profit, switch your attention to other stakeholders!”
I made this mistake 15 years ago. Many experts have slammed Friedman’s ideas lately. But I still see that many CEOs, business owners, or startup founders I work with as a strategy consultant or advisor fall into this trap.
But the more you chase net profit, the less of it you see.
Zoom out
We focus on profits because we rarely see our business as part of a broader system. Imagine you’re a CEO or startup founder. You sit in the office from dawn till dusk, buried in daily routine.
But take a step back to look at your business from the outside. It’s an ecosystem. Inside it, the ‘nodes’ – departments – exchange value with one another (we’ll dive into the value exchange concept next week). They create value for others and get value in return. The stronger those exchanges, the more efficiently your business runs.
Zoom out further. Now you see your business as a node in a larger ecosystem — the market. It exchanges value with customers, suppliers, subcontractors, distributors, and so on. The stronger these connections are, the more your business grows.
Zoom out once more. Your business is part of an even larger ecosystem — the world. It exchanges value with society. The more effective that exchange, the more likely society is to support you in return.
Poor management kills great entrepreneurial ideas. If your business fails to establish and maintain strong connections with other parts of the ecosystem, it won’t be able to capture enough value to grow.
Business, at its core, is about value exchange. Business success is less dependent on your bold vision and more on what you can offer to others. Profit starts growing when you start giving more to your key stakeholders. The road to profit begins with giving — not taking.
Entering the market with a profit-centered vision is like proposing marriage with a list of demands in your hand.
The fourth chapter of my book Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism is now available as a podcast on Substack. Learn more here.
So, what’s wrong with profit?
Who does your business work for? If your only goal is profit, then it seems to serve only one group — the shareholders. But they’re only a part of the ecosystems your business belongs to.
Every company — big or small — serves six stakeholder groups:
Customers
Employees
Shareholders
Business partners
Society
Regulators
And they’re all equally important. That’s easy to prove:
Imagine just one of them losing faith in your business — how long would your company survive?
The interests of different groups often compete. To strike a balance, you need to understand their needs deeply and look for acceptable trade-offs. That’s not easy — and that’s exactly why so few businesses succeed.
What I didn’t know in 2010 was that a strategic goal or vision that starts with “Increase profit (revenue, market share, market cap, etc.) by…” contradicts this concept. It highlights the interests of only one group — shareholders — and places them above all the others.
I didn't realize that rude customer support agents, poor product quality, and indifference to customers stemmed from one source — the obsession with net profit, as proclaimed by Milton Friedman.
Who’s going to care about employees or partners if they’re treated as nothing more than cost items in a spreadsheet? And why would employees care about customers if no one cares about them?
I didn’t see that this focus turns customers, employees, and partners into mere tools for hitting financial targets — or worse, into obstacles along the way. I didn’t know that knowing their needs could help me create a new market.
I had no idea what customer-centric culture looked like at Amazon or what Steve Jobs once said: “Manage the top line, and the bottom line will follow.”
I didn’t know that self-obsession could boost short-term profits — only to sabotage long-term success. Customers are the only source of profit, and they don’t like being neglected.
That was the moment I learned what CEO loneliness feels like. My company was failing, but I had no one to talk to. My team expected confidence; the board expected results. If you're in that place now, perhaps it's time to consider this.
Conclusion
In 2011, I started visiting my clients a few times per month. It helped me understand what we did wrong to them. We revised our vision to be customer-focused rather than profit-centric.
We focused on understanding customer needs and identifying the best ways to meet them. We changed our strategic goal and all related metrics from “more profit” to “more satisfied customers.” And we started growing much faster.
What makes your company customer-friendly also makes it profit-friendly.
Steve Jobs and Elon Musk were driven by bold ambitions when they built Apple, Tesla, and SpaceX — but theirs were of a different kind. They wanted to change people’s lives for the better, not just fatten their bank accounts.
Thinking strategically, first and foremost, means seeing your business as part of a broader system. That’s why I renamed this newsletter Strategic Seeing in 2024.
Your company depends on many other businesses and people — and ignoring their needs can hurt you more than a lack of great ideas ever could.
Rewrite your vision. Cut out the ego-driven goals like revenue growth. Aim to be the absolute best for your customers, employees, and other stakeholders — and then, as Steve Jobs said, the bottom line will follow.
90% of startups don't fail because their ideas are weak but because they struggle to juggle so many relationships at once.
Next time, we'll dive deeply into value exchange – stay tuned! Paid subscribers will get a checklist with self-assessment questions related to this article – via the link at the very end of it👇.
Watch my short video and check out the best strategy jokes of the week below it:
My best Quips of the week:
– The only difference between astrology and trend analysis is that the latter comes with pretty charts.
– Some strategy sessions feel like theater: one plays the king, a few play the entourage, one’s the villain, and the rest are just the audience.
– Scribbled on the bathroom wall in a big corporation: "Right now, you’re the only one here who actually knows what they’re doing.”
Download more Strategy Quips here.
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Read also: Four Questions to Boost Your Innovation
Visit my website.
Check out my book, Red and Yellow Strategies: Flip Your Strategic Thinking and Overcome Short-termism.
Download a free checklist for this article here.