A customer-focused approach can curb short-termism: companies like Amazon, Southwest Airlines and Costco define long-term business success and financial returns primarily based upon customer metrics.

• Author: Hooda, Sheila
• Position: SHORT-TERMISM

Amazon, the fifth most valuable firm in the world with a market cap of $400 billion, has a singular focus on the customer--with metrics like customer growth, loyalty and brand effectiveness being primary drivers of their definition of success.

This long-standing focus is a key reason the online-shopping giant isn't a short-termism casualty.

Short-termism--defined as an excessive focus on assessing company performance over short periods of a year and most often less than two years--has been widely criticized for the destruction of company value. Management and boards have been vilified for failing to invest in long-term growth projects or R&D and for managing quarterly results. At a macro level, this intense focus on the short-term has resulted in slower economic growth, reduced job creation, stagnating wages and a de-emphasis on much needed investment and innovation.

While most current business thinking on corporate value is focused on "maximizing the stock price for the shareholder," I suggest a refreshed focus to "maximize value for the customer."

At Amazon, the company culture and all long-term step up investments have been completely focused on building the customer experience through service, technology and convenience, enhancing selection and reducing pricing. The goal is to always deliver compelling customer value through a laser focused data-driven approach.

CEO Jeff Bezos has been quoted saying, "The most important single thing is to focus obsessively on the customer. Our goal is to be Earth's most customer-centric company." He believes, "In order for innovative ideas to bear fruit, companies need to be willing to wait for five to seven years, and most companies don't take that time horizon."

In line with this thinking, Bezos is also known to spend "less than six hours a year on analyst and quarterly calls," focusing instead on long-term investors who do not churn and who believe in his long-term customer-focused vision.

Jeff Bezos: "In order for innovative ideas to bear fruit, companies need to be willing to wait for five to seven years, and most companies don't take that time horizon."

Other companies frequently mentioned for this customer-driven strategy include Southwest Airlines and Costco--proving that industry sector is not a factor in driving the longer-term stock price or corporate value when a customer-focused strategy is followed. In effect, it further illustrates that the best way to maximize the stock price is to...