Google Spells Out the Next Horizon
Google’s announcement of its reorganization into Alphabet, Inc. was a surprise. Reaction has ranged from the complimentary to doomsday predictions. I think it is a brilliant strategic move that will help the company jump to the next S-Curve. More specifically, it is a great demonstration of “Three Horizons” thinking.
The Three Horizons model was described in a very insightful book called “The Alchemy of Growth: Practical 
Insights for Building the Enduring Enterprise”, by Mehrdad Baghai, Steven Coley. and David White, all of McKinsey. Horizon 1 is your current business, generating material business results. Horizon 2 is the business or businesses that will become your next Horizon 1 business. Horizon 3 is where a portfolio of options is explored to find the next Horizon 2 business. To me, this is one of the most useful analytical and formulation frameworks available to strategists. One fundamental premise under this whole model is that value migrates, and every Horizon 1 business will ultimately begin to fade.
As an analytic tool, one can assess the health of each horizon in a company. As Geoffrey Moore points out in his discussion of the model in “Dealing with Darwin”, many tech companies have great Horizon 1 businesses and invest heavily in R&D activities that might fall into Horizon 3 activities (although few companies treat them as business options rather than technology explorations). Horizon 2 is often a wasteland.
Alphabet seems to have embraced this model. Google (search and YouTube) defines a Horizon 1 business, generating about 90% of the company’s revenue and profit. Nest, Google X (including self-driving cars and Loon), Fiber, Calico, and Life Sciences are all Horizon 2 businesses. Google Ventures and Capital manage investments in Horizon 3 options. Each entity gets its own CEO and management team.
These various efforts deserve to be independent. They don’t share common market segments, can’t use a common route to market, and have little in common when it comes to technology or research. As part of a larger bureaucracy, they would be competing for resources, consuming management attention, and stifling growth.
Moreover, staying monolithic might very well smother future innovation. As seen in the cartoon, even the most promising new ideas get passed over in the name of funding the Horizon 1 business (often called the “core business”). Anything but incremental improvements in Horizon 1 is seen as a distraction. Autonomy is often counseled as the way to prevent this from happening.
With Alphabet, Google is spelling out how they will succeed over the next horizon.
Greg is a visionary, entrepreneurial executive with broad experience in formulating effective, actionable strategies for technology-based solutions. He brings leadership skills and knowledge in strategic analysis and planning, innovation management, and strategic marketing to create customer-focused competitive advantage. His extensive industry experience in companies large and small, in industries from high tech to healthcare, in product development/management, executive management, marketing, and strategy positions gives him the experience to know what works. Greg is an adjunct professor at Duke University, where he created and teaches “Competitive Strategy in Technology-based Industries” in the Masters of Engineering Management Program. He is chairman of the NCSU Technology Incubator Advisory Board, a member of the NCSU Industrial Extension Service Advisory Board, and co-founded a venture-backed startup. Greg is a Senior Member of the IEEE and a member of the Engineering Management Society, a member of the Product Development and Management Association (PDMA), and a member of the Association for Strategic Planning (ASP). He received a BS degree in Electrical Engineering from Lafayette College, and a Masters degree in Entrepreneurship from Western Carolina University. Greg is an excellent and inspiring speaker, presenter and educator. He is a frequent judge at business plan competitions and hackathons, including MetLife TechJam, Triangle Startup Weekend, and case study competitions at Duke and North Carolina State Universities.
I love the comic, used in a presentation last year.