Krishnan on Innovation

The 3 Horizon Approach to Growth

Do you have a portfolio of initiatives that cover both today, the future and the space in between?

Adapted from M. Baghai, S. Coley & D. White (1999).

The three horizons of growth was proposed by Baghai, Coley and White and published in a book The alchemy of growth (1999). It is a framework that has served well over the years.


Bill Sharpe presents the three horizon framework as a futures tool, a tool to drive transformative change (Three Horizons: The patterning of hope, Bill Sharpe (2013)). In a world which is facing massive disruption, driven in no small part by sustainability, the framework gains even more importance.


The crucial question facing organizations is this

Do you have a portfolio of initiates that focus not just on today, but also on the future and the path to the future?


What are the 3 horizons?


Bill Sharpe defines the 3 horizons not by time, but by the patterns


Horizon 1: The first horizon describes the current way of doing things. It is about current paradigms, assumptions, infrastructure, technologies and capabilities. It also happens to be about the things that are relevant to our immediate needs. How do we reduce the cost of operation today? How do we reduce the cost of procurement today? How do we increase sales immediately?


Unfortunately, many of the things that are relevant to the first horizon are irrelevant to the future and sometimes may be harmful to the future. For example, you may want to reduce costs by reducing the thickness of the plastic packaging, but that will harm the environment in the long term by creating a recycling problem (just ask the FMCG industry, which is struggling with this).


Horizon 3: The third horizon describes the future way of doing things. It is about future technologies, ideas, paradigms and imperatives. Most of these appear fanciful and irrelevant to the current needs. You will find some pockets of the future in the present but can easily dismiss them as a fad, elitist thinking or a short-term trend.


For example, hybrid cars and the first electrics were dismissed in the USA as an environmental fad and leftist thinking. But they were and continue to be an indicator of a future world of mobility sans fossil fuel. Similar is the case of packaging recycling laws some of the Scandinavian countries seem to be able to implement.


Key questions for organizations are

  1. Do you recognize a future that is very different from the past and present?

  2. Do you believe that you can continue to be relevant in the future, by practising the present paradigms?

  3. When should you start focussing on the future?

  4. How do you convince your organization to focus on the future?

Horizon 2: Sandwiched between the two is the transition zone of change, where incremental and radical innovations happen. This is the horizon where organizations respond to the weaknesses of the present and to the opportunities of the future.


New ways emerge, often haphazardly, with early innovators grabbing opportunities to create unique value quickly. Many of the developments resemble prototypes and custom-built products and are the seed of the future. Some of these get easily absorbed to extend the life of the present-day products, while some become pioneering products.



3 horizon thinking from Bill Sharpe (2013)

How does a 3 horizon portfolio look like


Without a portfolio of initiatives that straddle the 3 horizons, an organization is doomed.


You need to work on the horizon 3 to create the IP, understanding of needs, skills and competencies that are essential to succeed. You need to do it now so that you are ready to deal with the future.


You need a set of experiments and pilot studies now that are dealing with the future. The ideas for these experiments and pilots come from the future and they generate insights. They become the core of your future. These are the horizon 2 initiatives. Horizon 2 initiatives sometimes include fast experiments that extend the present as well and represent incremental and even radical innovations built on the present.


And then you have initiatives that are about creating excellence in the presence. These are initiatives that strengthen and grow the existing portfolio of offerings. These tend to be operations excellence programs, lean sigma initiatives, applying 10 types of innovation thinking (refer to 10 types of innovation (2013)) to your existing offer, product extensions and improvement, market extension etc.


Magnus Penker describes the characteristics of a 3 horizon portfolio in his book Sustainable Growth and Profits (Innovation 360 Group 2018)

Source: Penker, Junermark & Jacobsen, Sustainable Growth and Profits, 2018

A strong case for the 3 horizon approach to building a portfolio is made by Simon Wardley in his book Wardley Maps (2020). Wardley points out that its normal for products and technology to move from a genesis category to commoditization. He describes 3 key characteristics of people, the Pioneers, Settlers and Town Planners. You could identify town planners as people dealing with horizon 1, pioneers as the people dealing with horizon 3 and settlers as people dealing with horizon 2.


Source: Simon Wardley, Wardley Maps, 2020

Does an organization need all the resources inhouse? They need leadership resource and the operating model to pull it off for certain. Other than that they could engage with pioneers through an incubation model, deal with settlers through M&A's and partnerships.


What is absolutely imperative though is the need for a 3 horizon approach.


If you found this insightful and would like to discuss the topic further, do get in touch with me. You can book a free 60 min one on one discussion here: https://bit.ly/3eLCLGz


Krishnan Naganathan


Krishnan is a leading innovation consultant and focuses on helping people and organizations innovate and build capabilities for innovation. He brings over 25 years of experience in the industry and consulting. You can reach him by phone / WhatsApp: +919791033967 or email: krishnan@thinkhorizonconsulting.com


#innovationmanagement #disruption #disruptivetechnologies #transformation #managementconsulting #ideation

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