Growth Outside the Core - Focus on the Middle Term
This post is inspired by this interesting Harvard Business Review Article: To Succeed in the Long Term, Focus on the Middle Term
Enterprise companies usually have three horizons:
Horizon 1, which is current profitable and polished business
Horizon 2, which the potential new business that passed the initial R&D and technical verification stage and now it is time to grow it and scale it.
Horizon 3, which is research projects that might be converted into a new business in the distant future.
It is easy for most companies to focus on Horizon1 (current business) projects and be conscious about Horizon 3 initiatives (long term R&D). However, many miss what's in Horizon 2 (emerging business models or products) and usually deal with it as Horizon 1. This sets the wrong expectations in terms of ROIs and resources that should be allocated to such projects. Leadership tends to be inpatient about the results and it doesn't get the right resourcing.
To increase the chances of horizon 2 projects success the following rules should be considered:
Isolate and insulate Horizon2 from Horizon 1,
Fill the vacuum of Horizon 2 through acquisitions whenever possible,
Incubate the business not products to have the full isolation mentioned earlier,
Build customized process around Horizon 2 projects (don't treat them with same metrics and performance targets as Horizon 1 projects), and
Focus on having the right leaders for the task and be clear on the expectations.
This article proposes how an organization can transform its business by moving from one "Horizon" to the other. The changing world around us forces us to rethink our business models and products all the time. While many companies do R&D to progress their business. The majority of them fail to move from Horizon 1 to Horizon 2. It was clear that Microsoft for example wasn't able for a long time to move from the Desktop business model (Horizon 1) to the new services based software and mobile eco-system (Horizon 2). This happened despite Microsoft's respectful research in these area long time before its current successful competitors at that domain.