Horizon planning has come to be known as an innovation concept used to describe the time horizons for different levels or degrees of innovation. Improvement to existing core products in a business belong to Horizon 1, or H1, and are undertaken as a normal course of business. Incremental or adjacent innovation, requiring bigger changes to products, perhaps using new technology or adapting to trends or changing market conditions, are Horizon 2, or H2—innovations requiring two to four years of product and market development before revenue. Breakthrough innovations resulting in new technology or reinventing business models take at least five years to develop and are considered Horizon 3, or H3.
This model was cribbed from the book, The Alchemy of Growth, by David Hodge White, Mehrdad Baghai, and Stephen Coley, which describes the different time horizons for any endeavor that result in new growth. If you wish to launch an existing, core business product into an emerging market, but don’t expect to see returns on that investment for three years, it is an H2 project.
The latter part of the model is useful; the former is one example of how growth might happened and shouldn’t be used to define horizons.
First, innovators don’t get to predict the level or degree of innovation. The market decides. Second, innovators don’t get to predict the time horizon for returns based upon the degree of innovation. Third, to a large degree, a company shouldn’t really care where new growth comes from, i.e., degree of innovation, just that it comes.
Portfolio management requires investing in different product or market initiatives that will mature within a range of time horizons. That’s great. What’s silly is applying a “level of innovation” moniker to them. Who cares? Extending existing product lines, adapting existing products for different markets, launching into emerging markets, and so on are all great endeavors. They should be carefully planned and resourced, with their timelines predicted as best as possible, and most assuredly, they can leverage Lean Innovation principles to deal with their uncertainty.
Those concerned with corporate innovation will benefit from going back to the original definition of horizon planning.