Caution Secret Sauce
Ever hear you need more business acumen? As a designer, I used to hear this a lot. But my time in Silicon Valley has changed all that. I want to share some secret sauce that’s helped have better conversations with the business types here in the Bay Area.
What is it and why should UX strategists and practitioners care?
Horizon thinking is a simple way of categorizing businesses your company runs
In its simplest from, Horizon Thinking means looking at short, medium and long-term projects, products, businesses, business models, concepts, etc.
Short, medium and long term views
It is different from the more traditional way of talking about the business. Traditionally, business was making money today and working in the R&D lab on ideas for tomorrow.
Business + R&D
The Horizon model doesn’t incorporate Eric Ries’ Lean Startup model – that’s a topic of another article. However, some of the Horizon Thinking principles dovetailed into my experiences with the Lean Startup model.
In the 90s, some smart people at McKinsey & Company started talking about managing your product portfolio from a time-horizon perspective. They talked about Horizon 1, Horizon 2 and Horizon 3.
Then in 2007, Geoffrey A. Moore wrote a Harvard Business Review article titled: “To Succeed in the Long Term, Focus on the Middle Term”.
Moore’s article made the rounds at Intuit shortly thereafter. It transformed the way we talked about and planned for the work we did.
Horizon 1 businesses are the core businesses your company is in, or core products your business sells. An H1 business needs to be of a certain size and scale. Early stage startups are not H1 businesses – yet.
What are examples of Horizon 1 products? McDonald's is known of it’s hamburgers and fries. It has scaled its restaurants internationally. Intuit is known for TurboTax, Quicken, and QuickBooks and is a multinational Fortune 1000 company. Symantec is known for Enterprise products and Norton Antivirus and is an internationally recognized Fortune 500 company.
Yes, these companies are known for more than the products I’ve called out. But this is when I tell you, the other factor for talking about Horizons is how much of the total business these products bring in.
Some say these businesses are the cash cows of the company – just another way of saying they bring in the lion’s share of company revenue.
H1 products are typically the products your company has built much of the business around. You have well built out marketing, support, product, and UX teams cranking on maintaining and growing these products.
Typically, H1 businesses are well oiled machines that are fairly stable. Success is measured short and near term – sometimes quarter to quarter and sometimes annually. One of the core metrics is growth.
Horizon 2 businesses are the trickiest ones to describe. They also tend to be the trickiest ones to manage – especially at larger companies.
An H2 business needs to be of a certain size and scale but they are not yet BIG business.
These businesses are like the middle children of a family – often compared and sometimes treated like older and younger siblings alike.
They are neither BIG business nor are they small business. So questions about how to manage resources and their success often get cloudy.
Looking to Intuit again for an example, this designer would say that Mint looks like an H2. I’m sure it is debatable but at least I’d be in the debate – part of the reason we as UX need to develop our business acumen.
Mint, although a free product, does have revenue. In Mint’s case, it was acquired partially for the user base – younger (by Quicken standards) users interested personal finance.
H2 products are typically growing users and hopefully revenue. But they may not yet be profitable.
One great example of these types of products is McDonald’s Pizza. I’m not sure how many of you remember this era. It was the 90s and McDonald’s was trying to grows its business by expanding its menu. They no longer sell pizza but they still sell burgers and fries – a testament to the difficulty in growing H2s inside BIG business.
Horizon 3 businesses are not really businesses at all. They are more like experiments. Once they start to act like a business, they sometimes graduate to an H2.
H3s are quintessential early-stage startups. In big companies they are run like experiments typically to validate hypothesises and to see if “there is a there there”.
Some graduate, some don’t – in either case, they can continue or they can get shut down.
One example that I was close to, but not a part of, is Weave. It is an iPhone app for micro-entrepreneurs who needed to manage their time, small projects and a small bit of finances. These customers would never use QuickBooks but need something to stay on top of running a makers-style business.
Thinking about other examples, I see McDonald’s evolving local menus as part of the H3 to H2 continuum. For example, for several years in some regions of Canada, McDonald's sold Poutine. Poutine is a French Canadian classic – french fries, cheese curds & gravy.
Recently, McD’s made Poutine available in locations across Canada. Does this mean the Poutine business has graduated to an H2?
If you are still with me, I’m sure you are asking what does this mean for UX? When you are considering a gig or when you are looking to shake things up with the PM team, you need to consider what Horizon you’ll be working in. The Horizon will determine the kind of UX you’ll be focused on and the kinds of boundaries you can push.
H1s are about making the money to run the business and making Wall Street happy
H1: Since this is the money maker, most of your work will be around incremental change. That is evolutionary UX work – not revolutionary or disruptive work. The sexier work here will be on the web marketing and purchase flow doing A/B and multivariate testing to increase conversion rates. The stable work will be adding features. The challenges will be convincing the business not to add bloat-ware and to update the look and feel.
H2s are about growing users so they eventually become the BIG businesses of tomorrow
H2: Since the middle business is focused on increasing the user base in the short term and becoming a money making machine in the longer term, the work will be a mixed bag between H1 and H3 work. This work will me mostly evolutionary but should have more variety than the H1 work.
H3s are about proving an idea has business potential
H3: As an early stage startup or as an enterprise experiment UXer, you’ll be tasked with going beyond invention to create innovation. If you are skilled, hard working and lucky, your work will disrupt the market you are in. If the experiment fails, you can talk about failing early and gaining valuable learning you can capitalize at your next startup.
In H3 businesses you’ll be wearing many hats and doing everything you can to help the small agile and lean team get traction with the hypothesis you are testing. Chances are you’ll be pivoting more than you expect. So expect your work to be throwaway.
UX work in the different Horizons have different end-goals
UXers be honest with yourselves when considering an assignment in one of these Horizons. Do you want stable evolutionary work, or do you want to shake things up and create revolutionary designs that disrupt the status quo?
Consider your Horizon when pitching your latest and greatest idea to your business owner. Will they be receptive if your ideas go against the personality of the Horizon you are working in?
In a nutshell, considering the business context is business acumen. The secret sauce here is the understanding the characteristics of the products you are designing or the web marketing sites you are working on.
I hope this article was worth the time you invested. And I hope this secret sauce gives you the confidence to have those conversations with the business types.
Thanks, Pete