Innovation Horizons Model​ Template

What is the Innovation Horizons Model​?

The Innovation Horizons Model is a strategic framework that guides organizations in balancing immediate operational excellence with long-term innovation. It divides innovation efforts into three distinct horizons: Horizon 1 (short-term optimization), Horizon 2 (mid-term expansion), and Horizon 3 (long-term transformation). Each horizon represents a different timescale, level of uncertainty, and type of innovation, allowing businesses to manage the present while preparing for the future.

This model helps organizations avoid stagnation by encouraging them to invest in new capabilities, markets, and technologies even while maintaining and optimizing existing operations. It was popularized by McKinsey & Company and has since been widely adopted across industries as a roadmap for growth, adaptability, and strategic foresight.

The strength of the model lies in its simplicity and scalability. Whether you are a startup trying to scale or an enterprise navigating digital transformation, the Innovation Horizons Model ensures that innovation investments are intentional, balanced, and aligned with both immediate and long-range goals.

Innovation Horizons Model in Innovation

In practice, the Innovation Horizons Model provides a structured way to organize, evaluate, and prioritize innovation initiatives. Each horizon serves a different purpose, and together, they form a comprehensive strategy that fosters resilience, competitiveness, and sustainable growth.

• Horizon 1 (Core Innovation) focuses on current business models, products, services, and customers. It emphasizes efficiency, performance improvement, and incremental innovation. These are low-risk, short-term initiatives that protect and extend the existing business.
• Horizon 2 (Adjacent Innovation) explores emerging opportunities adjacent to the core business. It may include new markets, customer segments, or offerings that require moderate adaptation. Horizon 2 initiatives balance innovation with scalability and often become tomorrow’s core operations.
• Horizon 3 (Disruptive Innovation) targets high-risk, high-reward transformations that could define the company’s future. This horizon is about envisioning entirely new markets, technologies, and business models that may take years to develop but hold significant potential for disruptive impact.

By investing across all three horizons, companies ensure that they’re not just reacting to change but proactively shaping their future. The model enables teams to manage innovation portfolios strategically, allocate resources effectively, and communicate priorities across departments.

This framework is particularly useful in:

• Annual strategic planning and budgeting cycles
• Innovation portfolio reviews
• Go-to-market strategy development
• Digital or business transformation programs

It brings clarity to innovation planning and provides a visual map for managing risk, return, and time-to-impact.

Getting Started with the Innovation Horizons Model

To apply the Innovation Horizons Model in a project or organizational setting, follow these steps to map your initiatives, align your teams, and manage innovation strategically.

1. Assess the Current Portfolio

Start by reviewing all ongoing and planned innovation projects. Gather data on:

• Strategic goals and objectives
• Budget and resource allocation
• Timeframes and milestones
• Target markets and technologies

Categorize each initiative into one of the three horizons:

• Horizon 1: Enhancements to existing products or services
• Horizon 2: Initiatives entering new markets or launching adjacent products
• Horizon 3: Experiments, research, or disruptive concepts with future potential

This step reveals any imbalances in investment and strategic focus.

2. Define Horizon-Specific Objectives

Each horizon requires distinct goals and success criteria:

• Horizon 1: Improve margins, reduce churn, increase operational efficiency
• Horizon 2: Test new customer acquisition strategies, grow adjacent revenue streams
• Horizon 3: Validate early-stage ideas, explore emerging technologies, launch pilot programs

Use KPIs tailored to the innovation maturity and risk profile of each horizon.

3. Build Horizon-Aligned Workstreams

Organize your team and workflow around the three horizons:

• Horizon 1 teams focus on operational excellence and performance optimization.
• Horizon 2 teams work on scaling innovations and new business models.
• Horizon 3 teams operate in a more agile, experimental way—often like internal startups.

This structure prevents confusion and fosters the right culture and mindset in each stream.

4. Allocate Resources Across Horizons

Avoid overcommitting to only short-term wins or placing all bets on long-term disruption. Typical allocation recommendations are:

• 70% of resources to Horizon 1
• 20% to Horizon 2
• 10% to Horizon 3

These percentages can be adjusted based on business maturity, risk tolerance, and market dynamics.

Ensure that leadership is aligned on resource distribution and understands the strategic intent behind each allocation.

5. Develop a Horizon-Driven Roadmap

Use a visual roadmap to map activities across the three horizons. This helps teams:

• Align initiatives with organizational priorities
• Sequence investments and capability development
• Set realistic timelines and expectations

Ensure that short-term projects support mid-term goals, and that mid-term projects lay the groundwork for long-term innovation.

6. Monitor Progress and Rebalance Periodically

Review your horizons portfolio quarterly or biannually. During reviews:

• Evaluate what’s working and what needs adjustment
• Reallocate resources as market conditions shift
• Move successful Horizon 2 projects into Horizon 1
• Sunset initiatives that no longer align with strategy

Flexibility is essential—horizons planning is dynamic, not static.

Project Recommendations for Success

Lack of Clarity on Horizon Definitions

Ensure consistent understanding of what each horizon represents.

• Create examples and reference cases for each horizon
• Conduct training or workshops to align teams
• Use horizon tags or labels in project tracking tools

Imbalance in Resource Allocation

Avoid overinvesting in any one horizon at the expense of others.

• Review budget allocation quarterly
• Use portfolio dashboards to track distribution
• Encourage executive oversight of innovation spread

Misaligned Metrics and Expectations

Don’t apply the same KPIs to every horizon.

• Use ROI and cost metrics for Horizon 1
• Use growth and traction metrics for Horizon 2
• Use learning and validation metrics for Horizon 3

Set expectations based on time horizon, not immediate results.

Resistance to Long-Term Investment

Horizon 3 often faces skepticism.

• Share success stories of past disruptive innovation
• Involve leadership in early-stage experimentation
• Frame Horizon 3 as strategic risk mitigation

Complementary Tools and Templates for Success

• Innovation Horizons Portfolio Tracker – Visualizes project distribution across horizons
• Strategic Alignment Matrix – Maps horizon projects to company goals
• Innovation Charter Template – Documents purpose, scope, and metrics by horizon
• Agile Innovation Toolkit – Provides methods and sprints for Horizon 3 teams
• Resource Allocation Planner – Guides budget and staffing decisions across horizons

Conclusion

The Innovation Horizons Model offers a structured and balanced approach to managing innovation in uncertain and fast-changing environments. By distributing focus across short-term performance, mid-term scaling, and long-term transformation, organizations can achieve steady growth while preparing for disruption.

This model ensures that innovation is not just a buzzword but a disciplined practice embedded in strategy and operations. It bridges the gap between maintaining today’s success and creating tomorrow’s breakthroughs.

When applied effectively, the Innovation Horizons Model empowers teams to innovate with intent, invest wisely, and lead confidently into the future. It transforms innovation from a scattered activity into a strategic advantage that delivers lasting impact.