As the global center of technology entrepreneurship, there’s a lot to love about the Silicon Valley, but it’s easy to be overwhelmed by the sheer number of impractical “strategic technology frameworks.” It seems a new framework is minted every quarter by academics and management consultants who have never created a product or built a successful new venture. Business frameworks are only useful when they’re steeped in practical business experience and help solve real-world problems.
No borders, only horizons
One of the most useful frameworks I use at Mach49 is the Three Horizons approach to growth and innovation. Popularized in 2000 by the authors of The Alchemy of Growth, Three Horizons is an incredibly powerful tool. It helps executives and intrapreneurs by providing a shared vocabulary to evaluate tech-driven innovation based on goals and timeframes. Most important, Three Horizons informs decision-making about big challenges that confront global companies in every industry. Let’s take a closer look.
Within this horizon, business leadership looks one to two years out, with an eye to extending core technologies. They use existing technology to improve their business model and maximize their value and effectiveness in the short-term. Big companies love Horizon 1, because it plays to their capabilities. Horizon 1 enables them to deliver their core products and services while embracing incremental change.
In Horizon 2, companies survey the future to develop new opportunities two to five years out. They invest heavily in emerging technologies to generate substantial value in the future. Often, they’re focused on disruptive growth opportunities. Horizon 2 programs are designed to extend a company’s business model and core capabilities to entirely new customers, markets—or both. I’ll have more to say about Horizon two shortly.
The third horizon is the most distant. Business leadership seeks a viable future vision in the five- to 10-year range. Often research programs and academic collaboration involving early-stage tech result in entirely new capabilities and business models. This is the realm of R&D labs in large organizations, as well as government labs like DARPA, that are responsible for the development of emerging technologies.
Well, you should, because the success of your business depends on executing well on Horizon 2 programs.
Have you noticed that certain initiatives in your organization, like implementing AI for predictive maintenance or adding IoT to your industrial processes, are always two to four years out, year after year? That’s because Horizon 2 programs defy corporate innovation processes and remain stubbornly out of reach for most organizations. There’s always a reason to reject Horizon 2 initiatives in favor of safe, incremental Horizon 1 programs.
Nearly all global companies do an exceedingly poor job of executing on Horizon 2, and seizing disruptive growth opportunities on this horizon are critical, not just to your company’s success, but to your company’s survival. For example, most of the oil and gas companies I work with are slowly losing margin and market share, but not at a rate that threatens their long-term viability—yet.
Disrupt markets, create new opportunities
In my 30 years of experience, I’ve only seen one successful strategy for Horizon 2 programs: Create autonomous teams of entrepreneurial people, get them the hell out of the office, and lift corporate governance. As a growth incubator, we’ve seen remarkable results at Mach49 by assembling high-performing teams of people from huge companies, training them in startup methods, and building a “new venture board” to support the team and remove obstacles.
As a case in point, it’s been gratifying to work closely with RWE, a German electric utilities company. The RWE leadership team knew they couldn’t keep pace with the market using internal growth processes, so they selected an entrepreneurially-minded employee named Sukhjinder Singh to lead an internal startup pear.ai.
Thanks to Sukhjinder’s boundless energy and drive, Pear is driving a Horizon 2 initiative forward, embracing AI-enabled chatbots and natural-language processing to extract value from energy data. RWE delivered a Horizon 2 program in record time. If they had employed their internal innovation methods, the new business would never have seen the light of day.