Traversing different horizons for transformative innovation

Irrespective of the organization, we all struggle with transformational innovation. So often we are simply comfortable in our ‘business as usual’. We gear performance to the short-term, we put the emphasis on the current fiscal year, and we support the core business in numerous ways, usually with lots and lots of incremental innovation, so the results are realizable in this year.

We are sometimes comfortable or confident enough to move into adjacent areas, to expand and feed off the core but these are less than transformational in most cases. This space is the one we are the most comfortable to work within, this is the horizon one of the three horizon model approach outlined to manage innovation across a more balanced portfolio of investment.

In summary, the three horizon model for innovation is actually a reasonably simple idea: with Horizon One (h1) being the current business focus, Horizon Two (h2) being more the related emerging business opportunities and Horizon Three (h3) being those that are moving towards a completely new business that can have the potential to disrupt the existing one.

The complexity lies underneath this simple idea, you need to manage these different horizons with completely different mindsets. You need clear well-structured ways to extract the real return from managing a comprehensive innovation portfolio based on knowledge, experience, intelligence but exploring plenty of the unknowns about the future and openness to get you there, as ready as you can be . Its necessary today.

The seeds of destruction lie in horizon one

Within our ‘business as usual’ attitudes lies the seeds of destruction. Today there is a relentless pace; we are facing stagnation in many maturing markets. We place a disproportionately high amount of our resources here to defend what we have and what we know; we actually subvert the future to prolong the life of the existing. We constantly look to make it more efficient and more effective but this is in the majority of cases just incremental in what we do, both in innovation and our activities. These are often simply propping up the past success instead of shifting the resources into the investments of the future.

This is why the three horizon approach has real sustaining value because if we don’t have this longer-term, transformational perspective we are just prolonging the existing until it gets disrupted by others. This is where the working across different horizons for ‘thinking’ through innovation does need different tools and mindsets and these should be based on (h1) see and operate, (h2) adjust your thinking frame and solutions, (h3) more evolutionary. Each has different techniques to explore as I’ve previously outlined in my navigation guide to this approach.

Clayton Christensen has written about this theory of disruption in his book “The Innovator’s Dilemma”. Professor Christensen then went on to write extensively on this and one further book “Seeing What’s Next” co-authored with Scott Anthony and Erik Roth develops this disruptive theory into how the future will unfold and how to make wiser choices on these insights. The three horizon connecting approach is an excellent methodology to use to help in managing these wiser choices.

The hardest part is to traverse across into horizon 2 for new ‘breaking’ innovation

We do need this longer-term perspective and we do need to traverse into the future in clear thinking through steps (or horizons). Our horizon one does begin to decay faster today than ever, it does not fully cover off the strategic fit we want and can begin to lose its dominance over time. We need to manage this transition, not let others manage it for us.

It is how we manage this transition becomes so critical. We need to exploit developing trends that are emerging (h2) and begin to tune into possible options in the future (h3).  Within these options will emerge the winners and become the more dominant systems or solutions that we should be moving towards, even from today. Some of these only have faint emerging signals but they need to be brought into the innovation portfolio activity to explore, often in novel ways.

The horizon two is beginning to address some of the current decay arising from the core within the existing activities (or system). Here we have the highest tension.

The Collision Zone (h2) of the Three Horizon Approach

The Collision Zone (h2) of the Three Horizon Approach

The discussions that centre on often conflicting views of the future, compared to the existing realities and those providing the returns for today’s business. Often we can detect change but we consciously ignore it. This is the place where the disruptor’s are at work, existing or new competitors, working at displacing your products and market positions. They look to be more agile, they might have greater entrepreneurial ways, they are ready to explore emerging practices far more than the established leaders, they look to leverage different business models and are certainly not handicapped with legacy and mindsets stuck in the past. Increasing competition is today’s certainty.

Horizon Two needs a totally different mindset.

You need to see H2 with different metrics, with different perspectives, with more open minds. This is not easy. This needs to become the meeting point or “the space for transition” where you begin to let go of just protecting your core and open up your thinking to experimentation, prototyping, exploring different business models and begin to figure out how these will impact your existing core, to become more agile and adaptive than you are in the existing system or structures

These horizon (h2) concepts being explored  really do need ‘ring fencing,’ so you can protect these from all the ‘vested’ claims that your horizon one focus will continually demand to keep, so as to bring in the results in this calendar year. It is a real fight, these ideas or nascent concepts ‘give off’ negative results, they are still a mix of the tangible and intangibles where you can’t get the ‘hard’ fix on the ROI, on their real market value or potential.

Many executives ‘defending’ the core will ‘attack’ or hold back any release of their resources to help these emerging initiatives. It is a ‘hard-nosed’ reality.  It needs a very high level and conscious set of decisions coming from the top to determine these new moves. Do not believe that when most executives ‘just’ react and shrug their shoulders regarding h2 as a natural, everyday occurrence, it is far from not. Many have to come ‘kicking and screaming’ to supporting emerging activities. Far too much ‘invested’ interest comes into play. They see this more as a threat not an opportunity. It is not their sand box so why should they ‘play’.

The Conflict Sapce of Horizon Two

Horizon Two- Where policy and strategy are played out in the Three Horizons

The tensions are not just visible but played out in many subversive ways.

Just take performance metrics, if these are solely structured on the calendar year, are you realistically expecting a dilution of focus as their compensation is totally caught up  in this. Horizon two poses a real challenge within any management of our organizations. If it provides current small bases of volume, no real meaningful profit from the investments made it can be a hard sell across the organization.

Projects that focus on the future work mostly are based on ‘best’ assumptions. Sadly it is often executives expect to see the same ‘hard’ metrics being applied as the existing business. We ignore significant differences and  this is a huge mistake. So you get these clear sense that many are sceptical or pay lip service to the products of the future as the thinking, judgement and value orientation are at such odds with the existing measures and metrics they apply to run today’s business and how they get judged.

Often we then impose a set of metrics to compensate for this resistance.

This allows for a sudden rush of promising new products entering the market, of chasing and competing for those same resources as the ones focused on the core. The push to validate, explore and experiment might make the situation worse. You introduce waves of inefficiency into your highly tuned supply chain, you detract from selling and competing in tough market conditions and you then hear that comment “we took our eye off the ball”

This new ‘push’ for establishing the rising stars ends up that most of the promising concepts never really cross the finish line of moving from ‘interesting’ to main stream. The core also starts to suffer from these multiple distractions and eventually ‘innovation’ gets a bad rap. Many promising ideas get starved or killed off from emotional reactions.

The demand from supporting horizon two products or emerging concepts demands managements serious attention to getting resource allocation, response and focus into ‘actively’ managing this very real and tangible ‘innovators dilemma’.

Managing the rising stars or future potential one is hard in existing structures.

The concepts that emerge from horizon two will include the rising stars of the organization and will, over time, become even the new core business. These are a mixture of step-outs from today’s core, or extensions that have come from the adjacency work consciously being undertaken or are truly emerging as new activities that need new depth in capabilities and time to build.

These all have the potential to shift the organizations revenue base and challenge today’s cash generators. These need careful ‘portfolio and resource’ allocation. These extend the organization from your existing into new competencies, new markets and new challenges. Just please don’t use the same measures or metrics when you mix H1 and H2, although there is a huge temptation because it is just simply easy.

Horizon two is where you work through your future options

This is where you try out, experiment, explore. This is the transiting point (my space of transition) where you work through different dilemmas and paradoxes to shift the organisation through this horizon two to position it for the longer-term future. This horizon is a real point of disruption to be well-managed as you navigate from shifting resources from today’s core to that third horizon, the predicted future where ideas and proposals are still forming.

Horizon two actually ‘claims’ more time and attention than on the surface it deserves but this is the wrong mindset,  it simply needs too. This is not about supporting the ‘existing’, this is working actively on the ‘preferred’ as it is working to reduce current shortcomings, injecting new life and vigour into the present to offer a broader sustaining future.

Horizon two investments should be challenging ‘business as usual’ and should contain many of the catalysts for renewal, for the future growth. It is renewing the ‘fitness for purpose’ through innovation taking you along different pathways to the long-term successors of your business.

Horizon two can be a powerful catalyst.

 It can alter the way you are currently doing things, in new business models, in new systems, structures and delivery. It points you to a new, hopefully preferable future, worthwhile to pursue and attractive. It refreshes, it can invigorate and this horizon holds the keys and transition path to realizing that vision laid out in the ideas forming in horizon three.

To battle the increasing pace of obsolescence, we need to not just see and operate in today’s world; we must look towards the future. We must break out of incremental steps alone in our innovation activities, they just don’t simply ‘cut the mustard’ any-more, they are simply not good enough, in our rapidly changing world where increased competition is appearing from anywhere. We need to build out new capabilities, capacities through new innovation competencies.

We not only need to envision our future and the part we want to play within it but need a clear approach to working through the challenges and tensions to achieving a real balance in our innovation portfolio that work towards the same goal of being a material part of the business.

That is managing innovation not just in today’s horizon (h1) but in traversing into the future with more breakthroughs (h2) and transformational innovation (h3) that is organized around the three horizon methodology.  Making that essential traverse through horizon two is the toughest part. It needs carefully managing to have any really sustaining pathway to the emerging future.

Innovation Empowerment Is So Elusive

Looking across a sea of faces you feel that certain resigned feeling, that lack of empowerment, you press on, encouraged by the movement, not within the eyes but the clock. Is that the only thing ticking? You shudder.

How many times have you felt that ‘wave’ of oppression when one colleague looks nervously at his boss just sitting across from him in the same workshop or conference, hoping to gain some new, fresh glimmer of hope? None comes, just a stony, empty blank face staring straight back.

It is really sad but with all that is written about innovation, discussed, offered as leading, best or emergent practice, the majority still simply don’t get it and if they do, they often are forced to keep quiet about it. It can be depressing to witness.

Often you get that feeling the different (and latest) innovation message simply rolls over, a little like the mist rolling in off the sea on a foggy wet day, slowly clawing itself up over a wet rock to suddenly stop and hang there, waiting for something to change.

Will ‘getting it’ change for the many or does this resigned feeling wait upon the boss suddenly waking up and getting innovation, so it all suddenly changes and the innovating sunshine comes out. Empowerment needs enactment

Why is it so?

Here’s a vital question to answer:  who is the most important person when it comes to innovation?  Many people will argue it is the person with the best idea.  Others will argue that it is the person who can make the idea a reality.  We believe the CEO or another senior executive is the most important person, since they have the ability to:

  • link innovation to strategy,
  • direct funds and resources to good innovation programs, and
  • accelerate good ideas to market as new products and services.

In mid-sized and large companies, CEOs and senior executives are vital to innovation success.  What’s more, these leaders want innovation to happen.

“Hope springs eternal” perhaps?

    “Hope springs eternal in the human breast;
Man never Is, but always To be blest:
The soul, uneasy and confin’d from home,
Rests and expatiates in a life to come.”

– Alexander Pope, An Essay on Man

Jeffrey Phillips and I have been working on a collaborative ‘white paper’ on this real leadership gap when it comes to innovation. We are still moving this back and forth between us but it does seem from these exchanges from our own independent experiences we have one awful yawning gap to plug before we get that ground swell of innovation empowerment. More will emerge in the weeks and months ahead to get the message of hope out.

If we cannot get this vital message out to the one person that matters for making innovation happen then we will continue to look out and see this sea of faces, who are really wanting to engage. Deep down they do know the problem but can’t seem to influence the way innovation is managed. Just simply knowing that yet they are not in the position to change it. It can’t be ‘released’ until they have been  given permission which so often seemingly falls only at the highest levels within the organization, so they wait. They wait so they can safely extract from all the environment and tools that can be easily available to make it happen, if they have this feeling of confidence and given belief and lasting support.

How can we bring “innovation into every persons life?  Jeffrey and I are trying to construct some different ways to get the message out there and make a more meaningful connection to the leaders than can ‘allow’ empowerment.

Wrapped in a belief helps me

All I know is that ‘relief’ when you come back in from that walk on the cliffs, you shudder from that damp cold and are just grateful you can feel the sunshine just beginning to clear away that mist. We need to organize the winds of innovation change at this leadership level.

We simply need to find ways to unlock and unleash that incredible latent energy waiting to come out of many organizations, locked in their yoke of innovation oppression.

Empowerment should not be so elusive, it needs to be demanded, so innovation can really change our lives and allow “great things to happen” that we can all find hidden within ourselves.

In the US, they are entering the political season again but I feel we should offer “the yes we can” one up for innovation this time as a movement of change, as it offers the pathway towards real engagement and growth, surely that is empowering for us all, leaders especially.

The Navigation of the Three Horizon Framework- An Emerging Guide.

I have planned to explore in three simultaneous blogs, a trilogy of blogs, the three horizon model more extensively. It is a most valuable one to build into your thinking about strategy and innovation.

This is the final blog of the trilogy on the Three Horizon Framework and offers my thinking on an emerging framing to help in navigating through this.

The need is to define your different horizons.

Firstly time is relative; relative to your industry, your situation, your changing circumstances. They can often compress into one but the likelihood is that you can separate out each horizon for its value and time.

The Value-Time within the Three Horizons

An emerging framework to help navigate across the different horizons.

This is my view of the distinctive aspects of navigation across the three horizon framework and where you shift your emphasis to ‘adjust’ your thinking and mindset to reflect the different horizon and aspects required to ‘see things differently’.

Navigation across the Three Horizons Framework

To summarize the three horizons framework.

The three horizon framework has real value. Not only in scenario building but in gathering often conflicting voices around a framework that asks for different mindsets. Each of the horizons has a characteristic behaviour over time.

Lastly, how you frame innovation, spotting firstly emerging dilemma’s, the tensions that occur between the focus on today’s business and the needs of adapting to tomorrows and finally, the ability to detect those weak signals to explore options, of where the markets will  possibly radically alter in the future, so you are better positioned to seize and shape your place within this changed environment.

A final comment

Gary Hamel remarked “I don’t think you shuffle your way from one S Curve to the other. You have to jump.” The three horizons will help you in your jumping.

Resources & References used across the three blogs on discussing the three horizons

“Seeing the Multiple Horizons” by Andrew Curry and Anthony Hodgson.  Autumn 2008- Journal of Future Studies.

Baghai M, Coley S & White D, “The Alchemy of Growth – kick starting and sustaining growth in your company”, Orion Business, London, 1999.

Various McKinsey documents on this subject.

NB: This is a part of three simultaneous blogs on the three horizon model exploring it more extensively, Part one is here , part two is here and part three here (this post).

Connecting the Future Across Three Horizons combining Strategy and Innovation

This is part two of three blogs on the Three Horizon Framework and follows my one called “The value of managing innovation across the three horizons.” It further adds to the initial blog I wrote last year, called “the three horizon approach to innovation (http://bit.ly/ck8KfN). That blog gave a short introduction to the three horizon approach arguing we should take a more evolutionary perspective across the entire innovation business portfolio by using this model.

Going beyond that initial introduction in a trilogy of blogs, I plan to explore in this one, the second of these three simultaneous blogs, much of the thinking behind the Three Horizon model.

The Innovation Clustering within the different Horizons

I’ve drawn on different articles and views and acknowledgement to these authors is at the end of the third blog. I’ve added my interpretation to a number of visuals that significantly help understand the value of the Three Horizons in aligning innovation and strategy as it connects the present with the future in a useful way.

The future never stays the same

Much of what we do today is the dominant force behind where we go in the future. What we must be constantly alert too is the emerging changes taking place and also pick up on the often ‘weak signals’ that lead often to completely radical change within our industry or the society we serve.

The problem for management is anything discussing the future enters the ‘zone of uncertainty’ and this ability to often ‘read the tea leaves’ determines the future health of the organization. Ignore these shifts or signals and you are on the path to your own ‘destruction’.

The ability to scan the horizons

Not only should we search for possibilities that extend and strengthen our existing core offerings but we should search out on a wider basis. We need to often challenge our existing assumptions, gather different views of the world, spot shifts taking place within our markets so we can anticipate and preperare more for inevitable change that simply occurs more and more. There are different steps to this scanning and this visual provides a useful process of moving from scoping to developing a response to the ‘threat’ or shift.

It is also useful to think about the way to fund and resource these different horizons

Managing across the stages with the Three Horizons

Managing across the stages with the Three Horizons

This approach fits with existing management thinking but it works really well within the Three Horizon framework as outlined in the visual. The ability to create, to build and extend occurs within the three horizons. It is investing in all three horizons but in appropriate levels of allocation. How much is dependent on your conditions.

A example of allocating appropriate resources

Possible Three Horizon Investment Portfolio Allocation

In this example, as the knowledge of the market grows and the emerging understanding of technology you have different horizons to invest in, to allocate your funds and resources. Firstly those that continue to build on the existing market that is currently known and served (H1). Then those that exist but you have not yet fully understood or entered but seem to be potential places where disruption might happen. Then you need to be represented (H2) and finally, then those new markets, that become new categories, even radical that might change the market dynamics where you must have some ‘readiness and awareness of’(H3). Perhaps you invest your resources on this 70:20:10 basis as an example..

The need is to define your route so as to navigate the different horizons. An emerging framework developed by myself is explained next, in a separate and final blog of the trilogy.

NB: This is a part of three simultaneous blogs on the three horizon model exploring it more extensively, Part one is here, part two (this post) is here and part three here

The Value of Managing Innovation across the Three Horizons

I wrote a blog last year called “the three horizon approach to innovation (http://bit.ly/ck8KfN). That gave a short introduction to the three horizon approach arguing we should take a more evolutionary perspective across the entire innovation business portfolio by using this model.

Going beyond that initial introduction- a trilogy of blogs

I plan to explore in three simultaneous blogs the three horizon model more extensively, this is the first of the blogs. Part two is here and part three here

The three horizon framework is valuable to build into your thinking about strategy and innovation.  It places emphasis on where to tackle the different approaches to innovation (incremental, disruptive and radical) and place these within their different timing frames that are often need to manage these successfully across their development cycle. The three horizon framework also allows for greater organizational participation on taking out ‘future thinking’ with different mindsets to visualize a variety of challenges in these various horizons and that has a huge value to work through and frame the activity and resources they will need over different time periods.

The Three Horizons have different focal points of value.

Horizon 1 (H1) in brief

This is the existing business, the one you need to keep your real focus upon, it pays the bills, it gives you the possibilities for tomorrow. The emphasis here in this H1 is you invent, develop and deploy through a clear portfolio of products and services and (hopefully) a robust innovation process. Your aim is to keep extending and defending your core business and this is more though an incremental approach to improve on your existing business. This horizon is the one we are most familiar with.

Horizon 2 (H2) in brief

This horizon 2 ‘feeds’ from horizon 1-much of the core is still wrapped up in this but this is where you often face that ‘point of disruption, that famous innovators dilemma described by Clayton Christensen. It is a view of the things that are beginning to change, to threaten what you have as a core, it is the place where you begin to see change. It is the place were those disruptions can offer emerging new business, others will see, if you don’t.  You certainly need to view this horizon with different metrics of its value and investment as it is often still ‘emerging’ and you need to figure this out and what this means as an impact on your existing core business. The emphasis here in this H2 you need to research, demonstrate and disrupt. To do this you need to certainly ‘ring fence’ this emerging horizon to ensure you are actively working on it in different ways (piloting, prototyping, new business models) and can be ready with possible answers if it comes towards you faster than you initially expected.

Horizon 3 (H3)  in brief.

There are pockets of the future in the present; often these are what some people call ‘weak signals’. These positions will likely change the nature of your industry, they are potentially very radical. It is where there is real possibilities of completely new ways of doing things and this is where the mindset has to be more fluid and adaptable to seeing things in different ways. There will be competing ‘voices’ on these, offering differing values, perspectives and advocacy. This becomes a challenging horizon to manage. The emphasis here in this H3 is you envision, explore and embody. Often there may be no right or wrong to these different views and often they simply cannot be grounded in ‘hard’ evidence but clear scenarios that embrace these different perspectives needs broad discussion and eventually emerging consensus of where to explore and not.

The Three Horizons – visual summary.

The present recognition –a resistance to change – managing with different mindsets.

Langdon Morris has just written a book called “The Innovation Master Plan” and he talks of mindset as the hidden problem of innovation. He suggests most executives lack both experience with innovation and within this a innovation mindset. He views this as the brutal pace of change keeps organizations constantly on the defensive, concentrating on the short term and often they are just reacting and adapting to what comes towards them. The second is often as managers we are consistently working towards ‘managing the business today’, keeping it as best as we can by trying to run it smoothly and crank out what is needed to keep it simply ahead. The issue we need to face is often one that as Langdon mentions is Joseph Schumpter’s view, of ‘creative destruction’, that is happening at ever increasing pace all around us. Management must stop looking backwards to compare events, it must look towards different horizons to see where they need to go and this is a real mindshift to bring about this change. The rear view mirror only tells you who is coming up behind you, not what is ahead of you and that is where you need to focus, to antiscipate, react and respond.

Fixation, Bias and its Consequences

It is this intensive fixation on the incremental, this huge bias on the ‘here and now’ that is creating much of this ‘creative destruction’. You see different reports on C-level’s view that they lack the big breakthroughs and this leads to the innovation deficits that catches so many organizations unaware.

So as Langdon nicely puts this in his book, there are four devious mindset traps of 1) fixation on the status quo , 2) short term thinking dominates at the expense of longer term, 3) too much incremental innovation and 4) ignorance of the real meaning of change, its rate and impact.

Three Horizons can help shift the thinking to ‘seeing in multiple horizons’

The Three Horizons can often move those intractable and contentious points through viewing them in different ‘horizon’ mindsets. They can offer a level of traction that feeds into managements thinking the social shaping trends, the emerging patterns being detected and allow for these to be articulated enough in a coherent way to shift thinking.

The Three Horizons are needed to be seen as different.

Mahatma Gandhi commented “First they ignore you. Then they laugh at you.  Then they fight you. Then you win”. It is by seeing these three horizons differently and the managing of these challenges you can break down the issue to help you have that better chance to ‘win’ in anticipating and delivering the future in a more structured way of different innovations.

NB: This is a part of three simultaneous blogs on the three horizon model exploring it more extensively, Part one is here (this post), part two is here and part three here

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.

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.

Place in search “Three Horizons Framework” to view different posts on this subject.

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”