Transformative Strategies and Sustainable Innovation

Fueling Today with Tomorrow Eating the Seed Potato or Planting the Seed Snake

"Do Not Mortgage Your Future for Small Gains Now" - Nassim Nicholas Taleb

"Business leaders are being motivated and rewarded to heat their houses by burning their furniture." - Mark W. Johnson

In our pursuit of immediate comfort or short-term gains, we often sacrifice the foundations of future success. This principle is captured in countless cautionary stories. In this week's Thursday Thought, we explore those of the Irish Potato Famine, corporate strategy, and the unexpected world of collectible snakes. To build a sustainable future, we must resist the urge to mortgage it for fleeting rewards. As the old saying goes, "We do not inherit the Earth from our ancestors; we borrow it from our children." Similarly, our future isn't something we passively receive—it’s something we shape with the choices we make today.

The Irish Famine: Eating the Seed Corn  

During the Great Irish famine, desperation led farmers to consume their seed potatoes—the very resource needed to secure future harvests. Fishermen sold their nets, and artisans sold their tools, sacrificing not just physical assets but the means of their future livelihoods. This poignant image of short-term survival at the expense of long-term resilience serves as a powerful metaphor for organisational decision-making.

In the corporate world, this dynamic plays out when companies sell valuable assets or slash critical investments in research and development and innovation to sustain short-term valuation. Consider Sears, a retail pioneer that, under financial pressure, sold off its highly profitable financial arms, including Discover Card and Allstate Insurance. These divestments provided immediate capital but stripped Sears of lucrative assets that could have supported its survival during the retail industry's famine. By "eating its seed potato," Sears left itself with little to plant for the future.

Efficiency-driven strategies are seductive because they deliver quick results and a sense of control. Yet, these strategies often resemble mining soil without replenishing it. Companies that prioritise cost-cutting and share buybacks over innovation may temporarily appease shareholders, but they risk sacrificing their ability to adapt and grow. The story of Heinz under CEO Tony O’Reilly is a cautionary tale.

To boost earnings, O’Reilly slashed R&D and marketing budgets, undermining the company’s long-term competitiveness. Bill Johnson, O’Reilly’s successor, later admitted, “We weren’t supporting our brands, and we weren’t being innovative at all…. In terms of cost cutting, the mistake for the industry, in retrospect, is that it did not take the cost out of the system. It took the cost out of the product.” Like farmers consuming their seed potato, Heinz prioritised immediate gain over future resilience, leaving it vulnerable to shifting market demands.

Planting the Seed Potato: Philips’ Strategic Reinvestment

Philips serves as a masterclass in planting and replanting the seed potato for future success. (We discussed Philips with friend of the show and prolific author Paul Nunes, links here and video embed below). In 2006, while still profitable, Philips made the bold decision to phase out its incandescent lighting business, recognising that LEDs would soon become more cost-effective. Rather than eating the seed potato of its legacy business, Philips acquired smaller LED-focused companies, cultivating this new field until its LED division grew into a $7 billion powerhouse. By 2016, Philips had spun off its lighting business into Philips Lighting (now Signify), freeing resources for its next strategic planting.

In an impressive act of replanting, Philips pivoted to the healthcare industry, focusing on diagnosis and treatment equipment. Through careful planning and a balanced portfolio strategy, Philips invested heavily in this fertile ground. By 2017, most of the company’s revenue came from high-end medical equipment, cementing its place as a leader in the healthcare sector. This transformation was not an overnight miracle but the result of strategic foresight and the courage to reallocate resources from legacy crops to future harvests.

Planting the Seed Snake

On this week's Innovation Show, our Keynote speaker at the Reinvention Summit, Seth Godin shared the story of Justin Kobylka. Justin is a pioneer in the snake breeding industry. Once a small-scale operation where pythons sold for $20, the market transformed thanks to the internet, which expanded access to collectors globally. Justin's key differentiator was his early investment in his facilities and the genetic quality of his pythons.

Many times, he might have sold off his prize python for a healthy reward and many times he resisted. Instead of cashing out by selling his most valuable snakes for immediate gain, he retained them to breed even more extraordinary future generations.

Conclusion: The Cost of Strategy Decay

In our forthcoming series with Gary Hamel, we discuss the concept of strategic decay. Strategies, like assets, have a finite lifespan. Over time, the competitive advantages that once fuelled growth erode. Rivals replicate best practices. Market dynamics shift. Without reinvention, even the most successful organisations fall prey to strategy decay.

This decay is exacerbated when companies rely on short-term fixes to prop up performance—share buybacks, cost-cutting, or selling off valuable assets. These actions create the illusion of health, but hey mask future problems. These problems are often inherited by an unassuming new leader, who soon discovers that damage done by her predecessor.

Organisations that thrive in the face of disruption are those that embrace innovation as an ongoing, foundational practice. This means fostering a culture of long-term thinking, experimentation, and creativity. It also requires the discipline to let go of what no longer serves the mission and the courage to invest in what does.

The choice is to burn tomorrow’s fuel for today’s warmth, or invest in building a sustainable fire that will burn brightly for generations to come.