The 3 Horizons Framework is a strategic tool used to manage innovation and growth in businesses. It helps companies balance their focus between sustaining their current operations, building new opportunities, and envisioning future disruptions. The framework categorizes activities into three horizons:
- Horizon 1: Focuses on maintaining and defending the core business.
- Horizon 2: Involves exploring emerging opportunities and scaling new business lines.
- Horizon 3: Encompasses visionary projects and future trends that could disrupt the current business.
Horizon 1: sustaining the core business
Horizon 1 is all about optimizing and defending your current business. The focus is on improving efficiency, reducing costs, and maintaining customer satisfaction.
real-world example: apple’s iphone business
Apple continuously innovates its iPhone product line, but the improvements are usually incremental, focusing on better performance, camera quality, and design. This allows Apple to sustain its core business while keeping its customer base satisfied.
how to apply it to your startup:
- Identify your core product or service that generates the most revenue.
- Focus on optimizing processes, enhancing customer service, and improving product quality.
- Allocate resources to ensure your core business remains competitive.
Horizon 2: building emerging opportunities
Horizon 2 is about investing in new opportunities that could become significant revenue drivers in the near future. These are adjacent markets or new customer segments that you can explore by leveraging your existing capabilities.
real-world example: amazon’s expansion into cloud computing
Amazon’s move into cloud computing with Amazon Web Services (AWS) started as a Horizon 2 initiative. It was an emerging opportunity that leveraged Amazon’s existing IT infrastructure but targeted a new market. Today, AWS is one of Amazon’s largest revenue generators.
how to apply it to your startup:
- Identify adjacent markets or customer segments where you can expand.
- Invest in research and development to explore new product lines or services.
- Pilot these new initiatives on a small scale, monitor their performance, and scale them if successful.
Horizon 3: envisioning future disruptions
Horizon 3 focuses on radical innovations and future trends that have the potential to disrupt your current business model. These are high-risk, high-reward projects that could shape the future of your industry.
real-world example: google’s investment in self-driving cars
Google’s investment in self-driving cars through its Waymo project is a Horizon 3 initiative. It’s a futuristic technology that could potentially disrupt the transportation industry, aligning with Google’s long-term vision of innovation.
how to apply it to your startup:
- Dedicate a small portion of your resources to exploring future trends and technologies.
- Encourage a culture of innovation where team members can brainstorm and develop radical ideas.
- Set up an innovation lab or a dedicated team to experiment with these ideas, even if they seem far-fetched today.
Balancing the three horizons
The key to successfully implementing the 3 Horizons Framework is to balance your efforts across all three horizons. Focusing too much on Horizon 1 may lead to stagnation, while neglecting Horizon 1 can result in immediate business challenges.
How to balance the three horizons in your startup?
- allocate resources strategically: Divide your time, budget, and team efforts across the three horizons. For example, 70% on Horizon 1, 20% on Horizon 2, and 10% on Horizon 3.
- set clear goals: Establish specific, measurable objectives for each horizon to ensure you’re making progress.
- review regularly: Conduct regular reviews to assess the performance of initiatives in each horizon. Adjust your strategies based on what’s working and what isn’t.
Conclusion
Implementing the 3 Horizons Framework allows your startup to thrive in the present while preparing for future growth and innovation. By balancing efforts across all three horizons, you ensure that your business remains competitive, explores new opportunities, and stays ahead of industry disruptions.