The Foundation of Relevance

A company actively solving real-time problems will see its third anniversary. Your core product or service must be this solution, and should be founded on innovation. Novel ideas anchored to your core objective should form your Horizon Two (explore & discover new expansion) model. The inventiveness that disrupts markets comes only with experience, partnership, and sheer patience.

To systematically manage this journey from core business to disruptive innovation, many successful companies adopt the Three Horizons Model. This framework provides a blueprint for balancing present needs with future growth, ensuring that the pursuit of tomorrow's opportunities doesn't come at the expense of today's stability.

Understanding the Three Horizons

• Horizon One (H1): The Core Business. This is your established, thriving engine. It represents your current products, services, and markets. An H1 business generates predictable revenue and cash flow, and its primary goal is to maximize profitability and defend its market position. Its risk profile should be the lowest of the three horizons.
• Horizon Two (H2): Emerging Opportunities. These are your new ventures and scalable initiatives—often spun out from H1 innovation—that are designed to become tomorrow's core businesses. They have a defined business model and are focused on rapid growth and market expansion. They carry more risk than H1 but are on a clear path to becoming the new established order.
• Horizon Three (H3): Future Options. This horizon is where you plant seeds for the future. It consists of speculative ideas, exploratory research, pilot projects, and disruptive concepts. These are your high-risk, high-reward bets that may one day redefine your industry or create entirely new markets. By definition, most H3 projects will fail, but the ones that succeed can secure your company's longevity.

Resource Allocation: Fueling All Three Engines

A critical challenge is strategically allocating resources—capital, talent, and management attention—across these horizons. The profit from your stable H1 business must be strategically shared to fund the growth of H2 and the exploration of H3.

A common and effective guiding principle is a 60:30:10 ratio:

• 60% of resources are allocated to defending and extending the H1 core.
• 30% are invested in building up H2 businesses.
• 10% are dedicated to exploring disruptive H3 ideas.

This isn't a rigid rule; it's a strategic guideline. A company with a higher risk appetite, like Elon Musk's ventures, might allocate more aggressively to future horizons (e.g., 40:40:20). However, the universal constant is that the H1 core, being the primary funder, must retain the bulk of resources to remain healthy.

Operationalizing the Model: Building for Scale and Independence

For this model to work, you cannot manage a disruptive H3 idea with the same processes as your core H1 business. It is ideal to establish separate teams, and often entirely separate operational structures, for each horizon.

H2 and H3 initiatives need the freedom to experiment, iterate, and operate at a different pace. As these ventures scale and prove their models, successful H2 businesses will eventually mature into new H1 cores, and a rare H3 bet will graduate into a nascent H2. This cycle of renewal is the ultimate goal of the framework.

Solidifying the System: The Role of Process

Finally, the Three Horizons model cannot run on hope alone. It must be reinforced with disciplined mechanisms:

• Lean Experimentation: Validate ideas quickly and cheaply with MVPs (Minimum Viable Products) and customer feedback loops.
• Stage-Gate Principles: Implement clear milestones and go/no-go decisions to ensure rigorous oversight without stifling innovation.
• Tailored Metrics: Define what success looks like for each horizon. Measure H1 on profitability and market share, H2 on growth rate and market penetration, and H3 on learning, hypothesis testing, and option value.

By integrating these practices, you transform the Three Horizons from a simple diagram into a dynamic, actionable system for achieving sustained relevance and managed growth.