I will be the first to admit that numbers matter. It matters that you set them, pursue them and achieve them. As leaders, we need to be across the numbers – from revenue targets to cost centers, investments to acquisitions, and everything in between.
But not all numbers matter in the same way.
I was reminded of this recently, reading startup entrepreneur, Steve Blank’s article on the challenges facing chip manufacturer, Intel.
Like most large enterprises, Intel is building and optimizing its business based on its past successes. As one of the most successful technology companies of the past century, Intel has been at the forefront of tech-driven innovation. How many of us remember the “Intel inside” stickers emblazoned across our computers, servers and laptops? But there has been a shift recently.
Intel’s last two CEOs delivered outstanding numbers – both in terms of profit and R&D investment. They optimized and executed at scale, with assured expertise. Yet, at the same time, Intel also missed two significant technology trends. As Blank points out, the first was the shift away from desktop computing and the second, was the opportunities presented by collaboration and licensing of technologies.
While Intel has recently announced layoffs to the tune of about 11% of its workforce, it’s not yet the end of the road. It’s chip architectures still dominate data centers the world over, it has deep expertise, capability, intellectual property and leadership. But can it look to a different type of number to drive its future performance?
The Three Horizons model of innovation provides leaders with a framework for managing current and future growth opportunities. For example:
- Horizon 1 are mature businesses
- Horizon 2 are rapidly growing businesses
- Horizon 3 are emerging.
It is likely that leaders will already have a combination of these opportunities in place. For example, you will have a solid core business, some business unit level innovation, and new acquisitions all operating at the same time. As I have explained previously, innovation is not an either/or proposition. The Three Horizons provide a framework for leadership thinking and action:
- Horizon 1 – this is where leaders will feel most comfortable. This is your mature business, and it’s where you feel most in command of your numbers. Look for incremental, year-on-year improvement across your key metrics
- Horizon 2 – these are growth businesses. It’s where Intel was in the early days – accelerating ahead of the market, creating new categories. The numbers here are focused on growth not optimization. Investments are made after solid business plans are developed. It’s the beginning of your corporate venturing and needs to be measured with some latitude
- Horizon 3 – these are emerging businesses and keep your enterprise (and leadership) engaged with the challenges and opportunities of the future. Investments and metrics here are higher risk, but likely smaller in scale. The business models here relate to exploration, return on portfolio investments (many investments spread across strategic areas rather than big bets) – and all these require new measures and models.
Nina Nets It Out: Of course, shifting into a three horizons mindset can’t happen overnight, but neither should it take months or years. “Agile” isn’t just a process, it’s a mindset – and its one that leaders must increasingly bring to the Boardroom table. Corporate history is littered with the corpses of slow moving and slow thinking executives. Don’t join that number.