A updated version of the three horizon model
The three horizon model (THM) is one of the best models to visualize companies struggle of keep high profits within their core business while creating new innovative products and moving into new emerging markets.
THM is one part defending your core business and one part building emerging business and one part creation of viable options. So in other words, do what you’ve always done, do something new and create something new.
What research has shown is that the speed of innovation and technological adaptation has speeded up tenfold. According to Richard Foster at Yale university the lifespan of a S&P 500 company is 15 years today. Instead of the 67 years in the 1920s.
You may call it disruption but that’s only a 2015 buzzword.
Companies often put 99 % of their effort in the first horizon. But as mentioned, in a ever changing world technology shifts is common. Eventually the business idea is old and boring.
A great example is how media houses spent billions on infrastructure in order to develop, record & deliver TV to it’s users. From nowhere the internet comes with Youtube and Amazon/Netflix/HBO/HULU/ e.t.c. The value of their investments was decimated.
The whole supply chain changed from the bottom up. The competition changed from media houses vs media house to almost every media entity in the world.
No C-suite wants to be the next Kodak or blockbuster executives. Especially now, when it’s easier than ever.
So easily put, You will probably be the loser if your company doesn’t have crazy projects that turn people heads. If you are a accounting firm and is not working on how to make an AI that turn yourself obsolete you are loosing the fight.
Therefore I wanted to create a easier way to visualize this include parameters as effort, money and management into the model. So by utilizing the research behind the three horizon model I created a updated version.
The goal was to:
- Create a visual model of companies resource management between the horizons
- A visual model suited for startups, SMB & big companies
- A adaptable model where different financial models could apply.
The innovation cycle model
The innovation cycle model illustrates combination of a per project / product view with both the three horizon model and the S-curve in mind.
The first part is where a company invest in creating radical innovation. This is where outrageous ideas as Google autonomous car or the Apple Iphone was created. It means continuous investment with no or little clue if the investment will pan out.
This is also where you try & fail a lot, so if you’re innovation lab creates a usable product 9/10 tries — it’s not in this horizon.
This phase is where most ideas fail and become a red mark in the books. But as the model will show it will give the successful innovation projects momentum into development.
When ideas moves into this phase they have shown feasibility in the market place. The company has done extensive user research and can fit the product in a market segment within 1–2 years.
This phase will not be profitable but could with the right marketing become a profitable in other ways for the company. Being a leader within innovation is seen as good will. If you are doing some “cool stuff” millennials will be easier to hire which is a big plus.
The product moves into the company’s core business when it’s profitable as a standalone product. The market has accepted it and uses it but it will be old and boring within X years.
So the cycle needs to continue.
I will continue working on making a web app focused on how the innovation process can be visualized, presented and evaluated.