“Horizon 2 initiatives are doomed from birth.” – Goeffrey Moore, in Escape Velocity
In case you’re not familiar with The Three Horizons Model of portfolio management, and how it maps to the Growth/Materiality Matrix, here’s a crash course:
- Horizon 1 refers to current businesses that generate today’s cash flow; investments made here are expected to delivery returns in 0 to 12 months
- Horizon 2 refers to high growth businesses of tomorrow; investments today are expected to generate significant returns in the 12- to 36-month range
- Horizon 3 refers to long-term growth businesses, for which returns are more than 36 months away
Horizon 2 is a tricky beast. In Escape Velocity (click on the link to read my book report, complete with diagrams), Geoffrey Moore says: “Horizon 2 investments are expected to pay back significantly, but not in the year of their market launch. Typically they are fast growing from birth but come off a small base and need time to reach a material size. Moreover, because market adoption is rarely linear, there are often fits and starts before they catch fire. In the meantime, however, they are making material demands on go-to-market resources in the current year without generating corresponding material returns, and so they demand patience.”
Sure, you can sell stuff today to pay the bills, but your growth is expected to come from Horizon 2; consequently, they’re a crucial part of your business’ strategy.
So why do Horizon 2 efforts often end in disaster?
In this post, I share some of my own experiences working with Horizon 2, and intersperse with more insights from Mr. Moore, in the hopes that it’ll help you out in your own product endeavours.
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