Managing & Directing for Growth

Strategy

The 3 Horizons[1] method of defining strategies by timeframe has gained wide acceptance since first introduced in 1999. It is a simple but effective way to ensure your strategic thinking and execution is focused on what strategies will yield the greatest return in the short-, medium- and long-terms.

Importantly, it focuses management teams on earning the right to grow by delivering performance in the immediate term before becoming seduced into longer term planning. The latter is always exciting but if short-term performance is not being achieved there is little point in planning for the long term.

We once worked with an organisation that was in difficulty but the CEO had the exec team away on retreats thinking about what society might look like in…I am not making this up…400 years. Four hundred years! He was fiddling with the future while Rome burned. No doubt it was intellectually engaging but the board quickly made changes, bringing in a new CEO who could deliver immediate results while simultaneously thinking about the long term.

This is the way the 3 Horizons model operates – enabling management teams to strategically think about what needs to be delivered over say a 12-18 month horizon (the model is not prescriptive about the duration of horizons), a mid-term of some 24-36 months and a third horizon into the future. But not, I would suggest, 400 years.

The challenge with the model is to think, plan and operate over the 3 horizons concurrently.

It is difficult because we all gravitate towards working in a preferred time horizon. Horizon 1 thinkers are the doers who can be relied upon to deliver on time and to cost and quality budgets. Second horizon people are more the business developers, building on what is currently in place but extending it. The third horizon is for the visionaries, those who dream of what could be.

It is unusual to find each of the thinking modes within an individual and this is why teams, if properly constructed, can be powerful, be they executive teams or boards of directors. Different people around the table will have a different time horizon over which they naturally operate. A group comprising horizons 1, 2 and 3 thinkers would be powerful indeed.

In discussing this with a CEO recently, he asked how each of the thinking styles can be identified. Outlined below are the modus operandi for each horizon and thoughts on how to manage them effectively.

H1 Operators

First horizon people are the operators who can be relied upon to do whatever it takes. They are disciplined in the management of their own time and their expectations of others. The need for achievement is high and generally the results must be seen by them and recognised by others in the short term. Annual targets, bonuses and recognition are all essential in motivating these individuals.

These people expect and are motivated by tight management styles; they have no time for slippages. As a leader, you can rely upon H1 people to get the job done and accordingly tight Key Performance Indicators (KPIs) must be set and monitored regularly.

H2 Business Builders

Managing horizon 2 people requires a little more latitude. Their natural ability to deal with ambiguity requires a similar appreciation by managers and there be a greater flexibility in setting expectations. Good performers will deliver but as they are creating something new there will be uncertainties in timing and outcomes.

Initially, there will also be uncertainty around profitability and the focus of H2 team members is usually top line revenue growth. H2s want to create new revenue streams that H1 operators can then translate into profit.

H2 people aren’t so concerned with the minutiae and will mostly leave the detail to others.

Decision making must be rapid to take advantage of opportunities as they arise. Bureaucratic impediments should be removed and reporting focused on delivery of key milestones and achievement of goals. KPIs established for H2 strategies must have latitude built in to accommodate the uncertainty.

H3 Visionaries

H3 team members are the visionaries of the group, viewing the world with radical amazement and identifying opportunities unseen by others. This is where innovation comes from and these people need time and space rather than being bound by the typical key performance indicators used in H1 and H2. To try to rein them in will be to lose the revolutionary ideas and the excitement of contemplating what might be.

The concept of ‘skunk works’, pioneered by Lockheed Martin in 1943, has today been replaced by innovation hubs, accelerator programs and kickstarters. Whether it is done in a formal structure or a physically remote location, the concept is the same: give the visionaries space by separating them from day-day activities and allowing them to dream.

Leading across Horizons

A CEO must be able to traverse the horizons with ease, motivating and managing team members according to their natural time horizon predilections.

Importantly, CEOs should spend more time thinking about H2 and H3 opportunities than the here and now of H1. A Chief Executive can be secure in doing this if they have chosen effective H1 operators. The CEO, as the chief strategy officer, can then be free to focus on the glide path to future growth.

In team discussions on strategy, CEOs should share the leadership of the meeting around to allow the key thinkers in each horizon to lead the discussion. This will challenge and stretch other team members and ensure that one style does not dominate, like it did with our four-century CEO mentioned above. If he had genuinely shared the leadership of the strategic thinking around his executive team the H1 operators and H2 builders would have brought a more balanced view to the strategy.

Implications for Boards

This approach to team formation can be extended into the boardroom. Board composition decisions are usually, and appropriately, skills based but consideration could valuably be afforded to the thinking styles of each director. It would be limiting to have only H1 thinkers and dangerous to have only H3’s around the boardroom table.

With a smattering of each of the preferred styles, board deliberations can focus on both short-term performance from the core and long-run opportunities for the future.

For chairmen, consider how you might get the best out of each of your fellow directors by allowing space in board discussions for them to play to their natural temporal strengths. When the focus is on the longer term, let your H3 director lead the explorations of the future. Similarly, when discussing business development opportunities, allow an H2 director to lead the debate. Considering delivery and performance will be the domain of the H1 board members.

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Diverse thinking styles within executive teams and boards creates what was once termed the ambidextrous organisation[2]. Such an organisation is one that can exploit core business efficiencies while simultaneously exploring new opportunities for growth. As a chairman or CEO you might reasonably consider the thinking styles resident within your board or team and determine if any gaps exist. But before doing this, take time out for some self-reflection to understand if any imbalances exist in your own thinking style and how these can be supplemented by other team members if you give them the space.

For more information, please feel free to email me at john.barrington@barrington.com.au.

 

[1] Baghai, Coley, White, 1999

[2] Tushman and O’Reilly, 1996

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