Steve Blank The fatal flaw of the three horizons model and how to fix it

I am a big fan of The McKinsey Three Horizon Model of innovation. (If you do not know it, briefly describe the following paragraphs.) This is one of the fastest ways to describe and prioritize innovation ideas in a large corporation or government agency.

However, in the 21stcentury, the Three Horizons model has a fatal flaw that could put companies out of business and government agencies behind their opponents. According to traditional analysis, it takes years to develop the disruptive innovations of Horizon 3, but in the world This is no longer the case. The three horizons are not linked by time. Horizon 3 Ideas – Disruption – Can Be Delivered as Fast as Ideas for Horizon 1 – Existing Products.

To avoid being left behind, companies / government agencies need to focus on speed of delivery and deployment across all three horizons.

When articulated for the first time by Baghai, Coley and White in the 20th century, the Three Horizons model was a simple way to explain to management the need for an ambidextrous organization – the idea that businesses and government agencies perform Existing business / mission models while simultaneously creating new capabilities.

The three horizons provided an incredibly useful taxonomy. The model describes innovation taking place over three time horizons:

  • Horizon 1 ideas bring continuous innovation to a company's business model and core capabilities.
  • Horizon 2 ideas extend existing business / models and core capabilities of a business to new customers, markets or targets.
  • Horizon 3 is the creation of new capabilities to take advantage of or to address disruption opportunities, or to counter disruptions.

Each horizon requires different focus, different management, different tools and different goals. McKinsey suggested that to stay competitive in the long run, a company allocates its dollars and resources in research and development to all three horizons.

And here is the big idea. In the past, we assigned a parent Delivery time to each of the Horizons. For example, some organizations have defined Horizon 1 as new features that can be provided in 3 to 12 months. Horizon 2 as a business model / mission extension from 24 to 36 months; and Horizon 3 as the creator of new disruptive product / activity / mission models in 36 to 72 months. This temporal definition made sense in the 20th century, when new disruptive ideas took years to research, develop and produce.

This is no longer true in the 21st century.

Today & # 39; hui, disturbance Horizon Ideas 3 – can be delivered as quickly as Horizon Ideas 1.

For example, Uber was inspired by existing technology (smartphone app, drivers) but built a unique business model (traffic economy that disrupts taxis) and Russians used existing social media tools to lead a political war. A rapid disruption occurs by leveraging existing technologies configured, packaged, and / or delivered uniquely, and combining them with a state of mind of "deployment speed efficient enough as a multiplier of strength".

An example of Rapid Horizon 3 implementation?
In the commercial space AirBnB, Uber, Craigslist, Tesla and the explosion of machine learning solutions (built on hardware originally designed for computer graphics (Nvida)) are examples of radical upheaval that uses technologies existing over extremely short periods.

In the governmental space, Russia's interference in the elections and the construction by China of island bases in the South China Sea, as well as the reallocation of ICBMs in conventional arms to attack the aircraft carriers , are examples of radical upheaval due to existing technologies deployed in extremely short time.

How are the Rapid Horizon 3 Disturbances different?
These fast results of Horizon 3 focus on the disturbances, the asymmetry and especially speed, compared to any other feature. The ease of maintenance, maintainability, comprehensiveness, scale, etc. are all secondary in speed and asymmetry.

For existing competitors or for existing requirements and acquisition systems, they look like viable minimum products – just finished, iterative and incremental prototypes. But new products leave the building, disrupt existing businesses and, once installed, are then restructured and resized. The incumbents are now facing a new competitor / threat that is obsolete with their existing product / infrastructure / business / mission model.

Why do challengers / new entrants have the advantage?
Ironically, the disruptions of Horizon 3 are most often used not by market leaders, but also by challengers / new entrants (startups, ISIS, China, Russia, etc.). The new players no longer have any legacy system to maintain, no demanding requirements or acquisition process, and are resolutely focused on disrupting existing businesses.

Four strategies to deal with disturbances
For incumbent operators, there are four ways to combat rapid disturbances:

  • Encourage external resources focus on your goal / mission. For example, NASA and commercial replenishment services with SpaceX and OrbitalATK, Apple and the App Store, are questioning the DARPA price. Large companies have used startups that can quickly create and deliver products, offering their customers something they need – contracts, a distribution platform, or pricing. This can be a contract with a single startup or a larger network to entice more than one.
  • Combine the strengths of a company / agency and its business / mission model into acquire external innovators which can work at the speed of disrupters. For example, Google buys Android. The risk here is that the inadequacy of the culture, processes and incentives can strangle the newly acquired innovation culture.
  • Copy quickly new disruptive innovators and use the business model / mission of the holder to dominate. For example, Microsoft copies Netscape's web browser and uses its operating system distribution dominance to win, or Google copies Overture's pay-per-click model and uses its existing dominance in the search to sell ads. The risk here is that copying innovation without understanding the customer's problem / mission can lead to solutions that are missing from the target.
  • Innovate better than disrupters. (Extremely difficult for large companies / government agencies because it's as much of a culture / process problem as a technological problem.) Start-ups are born of everything. protect legacy.) and Amazon Web Services (AWS). Government agency and armed drones.

Lessons learned

  • The Three Horizons model is still very useful as a shortcut for prioritizing innovation initiatives.
  • Some disturbances of Horizon 3 take long periods of development
  • However, today, many Horizon 3 disruptions can be quickly implemented by reorienting existing Horizon 1 technologies into new business / mission models.
  • The speed of deployment of a disruptive / asymmetric product is a force multiplier
  • The attackers have the advantage because the incumbents are in charge of
  • Four ways for operators in place to fight against rapid disturbances:
    • Encourage external resources
    • Acquire external innovators
    • Innovate better than disrupters

Classified in: Customer Development, Uncategorized |