To Succeed in the Long Term, Focus on the Middle Term.
By: Moore, Geoffrey A.,
Harvard Business Review,
July/August 2007, Vol. 85, Issue 7/8
Mehrdad Baghai and his colleagues from McKinsey & Company taught us to view portfolio management as having three time horizons. In their formulation, Horizon 1 corresponds to managing the current fiscal-reporting period, with all its short-term concerns, Horizon 2 to onboarding the next generation of high-growth opportunities in the pipeline, and Horizon 3 to incubating the germs of new businesses that will sustain the franchise far into the future.
The main theme in this article is neglect of horizon 2.
Isolate and insulate Horizon 2 from Horizon 1
Use acquisitions in the short term to help fill the Horizon 2 vacuum (if there is a vacuum)
Focus on leaders: The scarcest Horizon 2 resource is a leader who understands entrepreneurial deployment and knows how to build a business to a level where existing operations can take it over.
The CEO should call out Horizon 2 ventures specifically to give them board-level visibility. At regular intervals, their progress should be measured and communicated not in terms of revenues or global market share but in terms of niche-market metrics such as customer-acquisition velocity and fish-to-pond ratio within the targeted segments.
Geoffrey A. Moore (email@example.com) is a managing director of TCG Advisors, in San Bruno, California, and a venture partner with the Menlo Park-based company Mohr, Davidow Ventures. This is his third article for HBR. His most recent book is Dealing with Darwin (Portfolio, 2005).