Three horizons of innovation.

One of the most popular frameworks ever invented in the strategic field, the three horizons of innovation help you categorize new business ideas according to their disruptiveness.

tools-3-horizons-of-innovation

What is this for?

The three horizons of innovation help strategists and innovator to map out new business concepts into 3 categories (3 horizons) of increasing disruptiveness. 

The 2 axes that frame the three horizons of innovation are:

  1. the innovativeness of the market for the new idea (is the new idea part of an existing market, an adjacent market, or it’s creating a whole new market?)
  2. the innovativeness of the offer (does the product/service exist already, is it new but adjacent to existing product/services, or it’s a whole new product/service?)

The 3 x 3 matrix created by these 2 axes identifies 3 “waves” of innovation:

  1. Horizon 1, or sustaining innovation. This is the category where you can find most of short-term innovation projects in corporates. The main goal in Horizon 1 is improving processes through process innovation, raise margins, improve the customer experience. 
  2. Horizon 2, or disruptive innovation. This category includes growth in adjacent markets with existing products or the creation of next-gen products in existing markets. Examples: designing and launching new product lines, expanding your business geographically, entering new markets.
  3. Horizon 3, or transformative innovation. This is the category of moonshots, of far innovation. Ideas in this category may take many years and continuous adaptation before proving profitable. They will require extensive user research, accurate pilot programs, and later the set up of entirely new revenue lines, needing significant upfront investment.

Step-by-step guide.

Step 1

Download this PDF and print it on an A3 or A2 sheet of paper. You can also draw the diagram on a sheet of paper if you can’t print.

Step 2

Let’s get started! Pick an idea.

Step 3

Evaluate if your idea fits in with the core activities of your business, those activities that provide the greatest profits and cash flow. Map your idea within Horizon 1.

Step 4

Evaluate if your idea includes emerging opportunities. Will your idea generate substantial profits in the near future? Do you need a serious investment to make it happen? Plot your idea within the Horizon 2 string accordingly.

STEP 5

Does your idea contain elements for profitable growth down the road? E.g. small ventures such as research projects, pilot programs, or minority stakes in new businesses? Map your idea within the Horizon 3 string. 

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