The Three Horizon Approach to Innovation

Thinking through the management of innovation have you ever considered the Three Horizons approach?  It is likely through this approach business leaders can adopt an evolutionary perspective across the entire innovation business portfolio.

If you are using a three horizons type approach to innovation, it becomes clear that you need to continue investing in innovative activities across all three time horizons, even if you’re in the middle of a present day crisis. To do this effectively, you need to have some idea of where you’re heading in the future, and that’s why I think it’s a useful tool for linking innovation to strategy.

Horizon One represents the company’s core businesses today. By definition these tend to be fairly mature so management must unlock and realize their remaining potential before maximizing the value of the businesses through their decline. This first horizon involves implementing innovations that improve your current operations

Horizon Two includes the rising stars of the company that will, over time, become new core businesses. These businesses may be step-outs from the core or more related extensions that simply require new capabilities and time to build. Regardless of their form they have the potential to shift to the company’s revenue base and replace the current cash generators. Horizon two innovations are those that extend your current competencies into new, related markets.

Horizon Three consists of nascent business ideas and opportunities that could be future growth engines But with uncertainty at an unprecedented level in today’s business environment, even the best analysis to determine probable outcomes will leave many unknowns about these potential businesses. Horizon three innovations are the ones that will change the nature of your industry

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The main innovation differences become more apparent.

In general, H1 innovations tend to be incremental, while H3 are more often radical innovations. There are several key ideas that arise when using the three horizons model.

• The first is that you must have innovation efforts aimed at all three-time horizons.
• The second issue is that horizon 2 is incredibly difficult to manage. H2 innovations seem very similar to your current products and services, and the overpowering temptation is to use the same metrics to assess their success. You have to figure out a way to ring fence H2 innovation efforts.
• The final point is that people often mistake the three horizons model for a planning tool – it isn’t.

The use of the three horizon model alters the nature of the tensions and dilemmas between vision and reality, and the distinction between innovations that serve to prolong the status quo and those that serve to bring the third horizon vision closer to reality (horizon 2);
So in summary, it is a reasonably simple idea with Horizon 1 being the current business, Horizon 2 being a related business and Horizon 3 being a completely new business that could disrupt the existing business. I like the model because it frames that restlessness demanded from innovation by activity seeking out and trying new businesses in H 2 and H3 in different ways of risk as well as opportunity.

To find out more and to extend your thinking on this, place in the search box on the left: “Three Horizons Framework“ to view different posts on this subject, or you can equally go to the “Insights and Thinking” page to view and download a significant collection of documents, white paper and opening presentation around the Three Horizons Framework for managing innovation.

My thanks to Tim Kastelle (http://www.timkastelle.org) for pointing me towards the three horizon framework in the first place and much of the linkage into this. Also the excellent paper written by Andrew Curry and Anthony Hodgson “Seeing the Multiple Horizons: Connecting Futures to Strategy” and also to Bill Sharpe and the International Futures Forum