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 mind-shift 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 anticipate, 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

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12 thoughts on “The Value of Managing Innovation across the Three Horizons

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  3. Hi Paul
    I’m working in an investment company and as an internal policy, directors deceided to have a portfolio of investment where 60% of the investment should be H1 innovations, 30% in H2 and 10% in H3. Do you know how i can determinate in the most objective manner if an innovation is H1, H2 or H3? Thanks!

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  4. Claudio,

    My apologies for not replying sooner. Thanks for searching me out and asking what is always a tough one to be definitive on without more insight but lets begin

    I think structuring on 60:30.10 is not a bad place to start but I’d argue a little differently. H1 is to protect our existing core, to keep what we do (well) funded and up to date. Can one be smarter and develop a wider knowledge gathering set of insights and become faster to ADAPT from what is going on in breaking new offerings. I think so, I believe being capable and GEARED to being a fast follower allows for adopting good practices and emerging practices.

    I think within investment you need to be good at protecting in the here and now but predicting better for the future. without knowing your organization, its position, size etc I’d instinctively argue for a 60:20:20. Technology pushes us to the future and I feel this is the H2 area, we need to EXPLORE and EXPERIMENT but it is picking up the WEAK SIGNALS in today’s business and H2 activities are amplifying that give us the future and H3 usually requires a different set of capabilities and skills to work on these breaking opportunities.

    Of course it depends on the budget size. In any portfolio there is redundancy, slack and opportunity to prune so as to channels this release of money into those greater opportunities further down the horizon chain (H2, H3).

    Now being more objective. I think technology, I think investment activities, I think service orientated are more future orientated. I’ve seen the argument for 70:20:10 in technology but these were innovations being brought out into the today’s market. Are you playing catch up to others so you need to invest in todays technology and skills more or do you want to get ahead of the curve in specific areas or on a broader front? All alter the decision of the split.

    Starting not at the allocation, I’d start in the discussions PRIOR to this. Setting up three separate discussions requiring different mindsets. H1 the present position and challenges the business faces establishes the case for change (and investment decisions in H1). Then what is the desired future state (H3) and what actions and indicators for the reasons why this is possible and what and who do we get there, what does this mean in investment, what does this mean in the gap between today and this future state we need to invest in. Then what are the tension points that might (can) occur between moving from the present to the desired is H2.

    To ‘contain’ the discussions the signs (weak signals) of change are somewhere within the present, in one form or another (trends, market movement, breaking technology, new social desires and expectations (from investment parties), governance, openness, engagement, relationship building, lifecycle approaches etc, etc.

    There are not an either/ or, good / bad set of discussions but you need to initially separate these three horizons into different mindsets
    H3- motivated by ideals, by a vision, values and beliefs. Don’t get caught up in detail here
    H2- Straddling the present and the future requires an Entrepreneurial mindset, attempting to detect shifts, thinking possible new Business models that separate today with tomorrow or link them through a migration path.
    H1- Today’s mindset- the here and now one. One that is translating on more knowns than unknowns, more action orientated, execute the best we can, the base for what we know into what we think.

    Hope this helps
    Regards
    Paul

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