Three Horizons Framework For Innovation and Intrapreneurship
The three horizons framework for intrapreneurs creates a guideline of recommended behaviours that can aid leaders and organisations work more effectively. Intrapreneurs have a key role in helping organisations innovate sustainably in an increasingly uncertain paradigm.
As the world is gradually opening up and taking back some sense of normal life, the post-pandemic business environment is riddled with uncertainty and ambiguity.
Will the inflation rate rise uncontrollably and trigger a market crash? How will town centres and transport infrastructures react to a different approach to work? How will consumer behaviour evolve? And crucially, how will Governments and organisations react to the increasingly discernible manifestations of the Climate Crisis?
The solution is making innovation the core around which organisations are built, and ensure resilience across any level.
Some organisations have already begun to shift their focus on how to profoundly rethink their structure and their approach to innovation.
For example, Danone’s CEO Emmanuel Faber recently said that they are “starting a pivot to reinvent Danone . . . we can deliver superior, profitable, sustainable growth in the long term. But to do this, we need to adjust the way the company works”.
We believe that internal entrepreneurial talent, or intrapreneurs, are key for successfully completing this.
So what is the Intrapreneur’s role in innovation exactly?
First of all, not all innovations are equal.
Some of them are improvements of current products and services, some others create whole new business models for an established organisation.
One way to categorise innovation is to place them into “Horizons”, as the strategy consultancy firm McKinsey suggests.
As Steve Blank puts it in an article for HBR, since their inception in 2000, the Three Horizons Framework allowed senior management to visualize what an ambidextrous organization would look like — the idea that companies and government agencies need to execute existing business models while simultaneously creating new capabilities — and helped to prioritize innovation products and programs.
Over the years, the three horizons framework has been adapted. This is what we like to use with our clients and partners:
As you can see, on the Y-axis we have technology, starting from current tech at the bottom to futuristic ones at the top. Depending on the application, customer segments may replace technology on the Y-axis.
On the X-axis we have the organisation’s business model, from the current one on the left to future ones being able to completely “change the game” on the right
Horizon 1 innovations
Horizon 1 innovation is about improving the core business by leveraging existing technology and capabilities from within the organisation.
Horizon 1 innovations tend to improve existing products or processes. For example, that might be introducing automation through existing technologies into an existing workflow.
For example, the Facebook “like” button has been transformed into a series of emoticons and evolved into “reactions” in 2016.
Reactions were an example of a horizon 1 innovation. At Facebook, they improved a key tool that was driving users’ engagement by giving them even more options. They have used the same technology to generate more revenue from advertising.
Horizon 2 innovations
Horizon 2 innovations expand advanced capabilities and technologies to new commercial domains. They create new products or processes that complement or bolster the existing ones.
The launch of the SKY Q box from the European pay-TV broadcaster Sky TV in 2016 is an example of Horizon 2 innovation.
Sky already had a set-top box, allowing subscribers to watch and record TV programmes broadcast via satellite. However, it added completely new features such as online content from YouTube, Netflix, Disney+ and Spotify.
By using new technologies (online video streaming) Sky has expanded its revenue streams through partnerships or affiliate business models and increased customer loyalty.
Horizon 3 innovations
Horizon 3 is the most disruptive kind of innovation. They are usually very ambitious, and they are about transforming the business models of organisations by using the most advanced and futuristic technologies or targeting a completely different customer segment.
Amazon Web Service, or AWS, is an example of a Horizon 3 innovation from an established organisation: from selling books and goods online to hiring servers on the cloud by taking to the next level technologies they were using. Amazon launched it in 2002, and by 2020 AWS accounted for more than 63% of the entire company’s operating profit.
This is the potential impact horizon 3 innovations could have on organisations.
What’s the role of intrapreneurs across the different horizons of innovation?
Intrapreneurs are employees who think and act like an entrepreneur within a business. They apply problem-solving, creativity, communication skills and critical thinking to deal with ambiguity and to become agents of change and growth for their employer.
As innovators, their role is to spot issues to be solved or opportunities in the market to be seized by an innovative initiative.
This means putting in place a series of behaviours that enable them to be effective across the three horizons framework:
Intrapreneurs need to be aligned with the overall strategic objectives of their organisation.
Where do senior leaders have the ambition to be in 5 – 10 years time? What are the short term objectives they want to achieve during the financial year? What are the strategic bets they are willing to explore?
Knowing this will allow them to focus their creativity and problem-solving mindset on the right challenges for horizon 1, 2 and 3 innovation.
Intrapreneurs need to keep themselves up to date with the most recent industry and technology trends.
Whether it is following thought leaders on Twitter or LinkedIn, or attending webinars and networking events, they should devote at least 5% of their time to keep themselves updated about what is coming next, both in their market and from a broader technology perspective. This will help them expand their thinking to areas where opportunities for horizon 2 and 3 innovations may arise.
Intrapreneurs need to create strong connections across the organisation.
Whether it is having casual lunches, regular catch up over a coffee or even being active on the company’ slack channels, they are required by their role to have eyes on the ball. Is anyone being frustrated about the complexity of certain tasks or procedures?
Is anyone implementing new technology in a specific area of the business? Has a new strategic partnership just been signed? Intrapreneurs need to know this so that they are able to come up with great horizon 1 ideas.
One last point about metrics. Not all companies provide open access to KPIs from across the business. Sometimes we have observed divisional or department leaders being secretive with their metrics as a way to protect themselves from criticism or scrutiny.
While we appreciate this, we also would like to stress how important it is for innovators across each level to get a snapshot of what is happening across the organization. Transparency encourages anyone to acknowledge problems or spot opportunities, thus unleashing horizon 1 and horizon 2 innovation.
What can leaders do to foster innovation across their organization?
Intrapreneurs are not lone geniuses working in silos. On the contrary, they are often the average employee equipped with the right mindset and toolkit. Learn more on how to upskill them here.
Leaders’ behaviour can have a tremendous impact in empowering intrapreneurs and have them deliver innovative solutions across the three horizons. This is why in our Intrapreneurship Guide we say that Intrapreneurship is like a tango, it takes two (namely Intrapreneurs and Leaders).
Innovating internally by leveraging existing resources is one of the most effective ways to achieve sensible outcomes in a cost reduction paradigm. By engaging with internal talent who know the business, the industry, customers and internal processes better than anyone else, leaders have the opportunity to make innovation part of the DNA of an organisation.
In order to succeed, a few steps need to be taken into consideration. Top-down alignment being one of them. If the overall strategy is not clear enough, the attempt to unleash internal entrepreneurial talent may not succeed.
Entrepreneurial employees can’t be fast and autonomous in launching new initiatives unless they have clarity about the strategic direction, and which metrics will define success.
In fact, “I don’t have a clear view on what the key business objectives are that my organisation cares about and would like me to focus on” is one of the most common complaints we hear from Intrapreneurs we work with.
What should leaders consider doing:
Get clarity from top execs on the overall strategic objectives for the organisation, and how success will be measured. This will help with innovations across the three horizons framework, particularly with levels 2 and 3.
Assess what the strategic ambition means for their division or department by getting together with peers in a series of workshops. Again, this will help with innovations across the three horizons framework, particularly with levels 2 and 3.
Define a series of KPIs that will be monitored within their division or department, getting a snapshot of the current situation and defining a vision for future success. This will particularly help with horizon 1 innovations.
Make sure anyone across the team has access to the KPIs monitoring in real-time. Again this will help particularly with horizon 1 innovations.
Organise internal all-hands meetings to share the strategic vision and the KPIs in simple terms. Asking someone external – eg your partner – to review the deck for the event might be of help to make sure everyone will be able to understand it. This will help with horizon 1, 2 and 3 innovations.
Empower the entire team with entrepreneurial tools and techniques. This again will help create a common understanding of what it means to have an entrepreneurial mindset across the organisation, thus helping with horizon 1, 2 and 3 innovations within the three horizons framework.
