As we foster innovation in large corporations there will be obstacles in our way at every turn. I have learned from experience that this has nothing to do with people’s lack of effort, good will or motivation to succeed. As I posted recently, this has a lot to do with the mechanisms put in place as part of optimizing what a business does as it matures. Unfortunately, optimization kills innovation. Geoffrey Moore offers an insightful observation in his book “Escape velocity” about how organizations are run based on their horizon 1 businesses which are their established sources of revenues. These businesses cost a lot to maintain but also generate sufficient revenues to justify their existence. Since next year’s budget is based on last year’s excel sheet these businesses have a significant advantage in any discussion about budget, priorities and focus. Horizon 3 projects is where companies feel comfortable innovating since these projects are still cheap to run, they don’t generate revenues but they allow a manager to feel that their teams are innovating. The challenge lies with horizon 2 budding businesses. This is a period of 2-3 years during which a new business requires investment, priority and executive attention and at the same time is not generating substantial revenues. Due to the clear advantage horizon 1 businesses have, such businesses chances of success are slim to none. There are steps that can be taken in order to give such businesses a fair chance to achieve escape velocity. Put into a single word, what’s required is leadership as opposed to management.
The concept of the three horizons was first articulated in the book “The alchemy of growth” (Baghai, Coley & White).
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