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MANAGING THE BUSINESS OF SOFTWARE

3 Titles; 3 Horizons

3horizons

The Three Horizons model—developed in “The Alchemy of Growth,” by Mehrdad Baghai, Stephen Coley, and David White of McKinsey & Company—is one of the many useful frameworks used in our strategy workshops for product managers.

Three Horizons is a useful metaphor for defining priorities through multiple product life cycles. Each horizon has a different overall optimization goal; each requires different types of managers. This provides insights on your staffing profiles and team roles.

Successful companies plan across three horizons: immediate (Horizon 1), near-term (Horizon 2), and long-term (Horizon 3). Horizon 1 is optimized for profit; Horizon 2 is optimized for growth (revenue and market share); and Horizon 3 is optimized for learning, usually the exploration of new technologies, delivery methods, and markets.

Your current set of products should be optimized for profit: reducing the cost of sales, service, and delivery. A video company saves a bundle by reducing the cabling in installation kits from 4 meters to 3 meters. A software company moves to the cloud and can use cheaper methods for selling and servicing clients.

Horizon 1 products require a manager with a primary focus on the financials. These products are in maintenance mode—which means no new features—which drives the sales and development teams crazy. They want to add a feature here and there to help close more deals or update the architecture. But if the product is Horizon 1, it should be maintained, not extended.

Horizon 2 products—your next set of product offerings, the stuff you’re working on now for availability soon—are optimized for growth. Here’s where you add sustaining innovation. You want to get more sales to more clients. You want to get people off the 320x200 resolution onto the 1080p resolution, so you can stop supporting the old gear as well as increase customer satisfaction. You want to get customers to upgrade from version 1 to version 2 so they can benefit from the new architecture and functionality.

The Horizon 2 manager considers key new product features that generate new buyers and more renewals; he or she will explore promotional campaigns that attract new buyers into the funnel. The focus is more about scaling the business; getting more clients. You want to promote the new stuff, so your sales teams can generate new revenues.

Finally, the longer-term future is about learning; it’s about disruption. You want to embrace a new technology or expand to new markets. To succeed, you’ll need to get a deep understanding of the new technology or the new market. When exploring a new market, you have to understand its compliance laws, language requirements, cultural aspects. Internationalization is more than just translating the in-app help screens. When introducing the first apps for phones and tablets, programmers had a bunch to learn—not only how to code for these devices but how to deliver them. What are the mechanics for getting into the app store? What is the approval process? How can we launch if we’re not sure how long it will take for approval?

The Horizon 3 manager focuses on innovation and technology. They research problems with markets that are either under-served or over-served by existing vendors. They turn products into services and services into products.

The impact of traditional product management and marketing is strongest in Horizon 2 initiatives. Alas, many organizations are so caught up in the immediate—Horizon 1—they fail to plan for what’s next and what’s beyond. Instead of being focused on strategy, many product managers are consumed in execution support—providing product information for sales, support, and services.

In a recent discussion, we lamented the title “product manager.” After all, titles are a mess. What one company calls a product manager, another calls a product marketing or a product owner. It’s time to specialize the roles within product management. Each requires very different skill sets and have very different activities to perform.

Maybe 'product manager' should be a generic title—like development or sales—and we should use specific titles for the three horizons. How about Product Strategy Manager (for Horizon 3), Product Planning Manager (for Horizon 2), and Product Growth Manager (for Horizon 1) 

Executives ask, “What’s the right staffing for my product management and marketing team?” The answer is to consider how much your team is focused on strategy and planning for Horizon 2 and 3 versus how much time they spend supporting the execution aspects of Horizon 1.

For another look at roles, see the ebook Expertise in Product Management.
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3 Titles; 3 Horizons

The Three Horizons model—developed in “The Alchemy of Growth,” by Mehrdad Baghai, Stephen Coley, and David White of McKinsey & Company—is one of the many useful frameworks used in our strategy workshops for product managers.

Three Horizons is a useful metaphor for defining priorities through multiple product life cycles. Each horizon has a different overall optimization goal; each requires different types of managers. This provides insights on your staffing profiles and team roles.

Successful companies plan across three horizons: immediate (Horizon 1), near-term (Horizon 2), and long-term (Horizon 3). Horizon 1 is optimized for profit; Horizon 2 is optimized for growth (revenue and market share); and Horizon 3 is optimized for learning, usually the exploration of new technologies, delivery methods, and markets.

Your current set of products should be optimized for profit: reducing the cost of sales, service, and delivery. A video company saves a bundle by reducing the cabling in installation kits from 4 meters to 3 meters. A software company moves to the cloud and can use cheaper methods for selling and servicing clients.

Horizon 1 products require a manager with a primary focus on the financials. These products are in maintenance mode—which means no new features—which drives the sales and development teams crazy. They want to add a feature here and there to help close more deals or update the architecture. But if the product is Horizon 1, it should be maintained, not extended.

Horizon 2 products—your next set of product offerings, the stuff you’re working on now for availability soon—are optimized for growth. Here’s where you add sustaining innovation. You want to get more sales to more clients. You want to get people off the 320x200 resolution onto the 1080p resolution, so you can stop supporting the old gear as well as increase customer satisfaction. You want to get customers to upgrade from version 1 to version 2 so they can benefit from the new architecture and functionality.

The Horizon 2 manager considers key new product features that generate new buyers and more renewals; he or she will explore promotional campaigns that attract new buyers into the funnel. The focus is more about scaling the business; getting more clients. You want to promote the new stuff, so your sales teams can generate new revenues.

Finally, the longer-term future is about learning; it’s about disruption. You want to embrace a new technology or expand to new markets. To succeed, you’ll need to get a deep understanding of the new technology or the new market. When exploring a new market, you have to understand its compliance laws, language requirements, cultural aspects. Internationalization is more than just translating the in-app help screens. When introducing the first apps for phones and tablets, programmers had a bunch to learn—not only how to code for these devices but how to deliver them. What are the mechanics for getting into the app store? What is the approval process? How can we launch if we’re not sure how long it will take for approval?

The Horizon 3 manager focuses on innovation and technology. They research problems with markets that are either under-served or over-served by existing vendors. They turn products into services and services into products.

The impact of traditional product management and marketing is strongest in Horizon 2 initiatives. Alas, many organizations are so caught up in the immediate—Horizon 1—they fail to plan for what’s next and what’s beyond. Instead of being focused on strategy, many product managers are consumed in execution support—providing product information for sales, support, and services.

In a recent discussion, we lamented the title “product manager.” After all, titles are a mess. What one company calls a product manager, another calls a product marketing or a product owner. It’s time to specialize the roles within product management. Each requires very different skill sets and have very different activities to perform.

Maybe 'product manager' should be a generic title—like development or sales—and we should use specific titles for the three horizons. How about Product Strategy Manager (for Horizon 3), Product Planning Manager (for Horizon 2), and Product Growth Manager (for Horizon 1) 

Executives ask, “What’s the right staffing for my product management and marketing team?” The answer is to consider how much your team is focused on strategy and planning for Horizon 2 and 3 versus how much time they spend supporting the execution aspects of Horizon 1.

For another look at roles, see the ebook Expertise in Product Management.