Connor Smyth

a sunset over a body of water

The 3 Horizons

I recently read Gene Kim’s, The Unicorn Project, and it touched upon the concept of The 3 Horizons. I have started to introduce this concept into my workplace and it has been getting a lot of positive responses. Today I wanted to go over what the 3 horizons are, what value can be added to your organization by exploring horizons 2 and 3, and how to continue to push for change when your organization is unsure if it wants to invest the second and third horizons.

What are the 3 Horizons?

The First Horizon

Horizon 1 is essentially what your main businesses are. It’s what brings the business the most amount of money. These types of businesses have the most well-defined practices and are fairly predictable. Exactly what makes this type of business so successful is what makes it under constant duress from competitors and disruptors.

The Second Horizon

You can think of horizon 2 as the future of the company. This could be new markets to explore, new types of customers, or new business models. The goal of horizon 2 isn’t necessarily always profitability, but it is where we can see growth in the company. Horizon 2 types of business are also what will eventually become horizon 1 businesses.

The Third Horizon

The 3rd horizon is where the businesses focus on speed, prototyping, and learning. It’s important to have many ideas that the company can explore. These ideas will almost always come from your “red shirts” as Gene Kim calls them. Your red shirts are like the ship’s working crew on the Enterprise; they are not the bridge crew. In this horizon the focus is about questioning and potentially disrupting the standards and best practices set by your horizon 1 businesses. The questions market risk, technical risk, and business model risk are all asked here. Horizon 3 businesses, if successful, eventually become horizon 2 businesses.

What Value Can Horizons 2 and 3 Add?

Let’s imagine horizon 1 as a sturdy, well built, and maintained castle. This castle has weathered many storms and battles for a millennium. It is built to last and patched up as needed. But around the year 1300, gunpowder was invented which rendered castle walls useless. They would be knocked down with ease by cannons.

Now had we invested in other types of businesses in our horizon 2 efforts, we maybe would have been slightly more prepared and created earthen ramparts that could more easily absorb the impact of cannon fire. But this also begs the question, how could we have known that we would need to prepare for something like that.

Had we invested in horizon 3, and maybe tested the stronghold against projectiles impact, then we could have known that the castle wall would not hold up. Not much effort is needed to build a little wall and start slingshotting rocks at it as a test.

So, when the question of what value can horizons 2 and 3 add is asked, the answer is that they may one day save the business. Not only that but they can also help the business grow.

For example, in my workplace we are growing to the point where we recognize that taking on developer interns can have add a lot of value to our business in the long run. The first round of these interns is a horizon 3 business venture. We are iterating daily and constantly reevaluating our mental models for success.

It can be a lot of work in the beginning but one day we may have a well-established practice where we can help take the most junior developers and lead them into something great.

How to Push Your Company to Invest in Horizons 2 and 3

There are two modes of moving cash within a business. You can either move cash out and divert it to investors and shareholders or you can reinvest it into horizons 2 and 3. Moving cash out only manages the value of the company, but it does not manage the growth of the company. If you are constantly moving money out of the company you will not see growth.

The biggest mistake when reinvesting money back into the business is to reinvest all of it back into horizon 1. As Gene Kim notes, “Left unchecked, Horizon 1 tends to consume all the resources of the company. They will note, correctly, that they are the lifeblood of the company, but that’s only true in the short term”.

In the long term, we can see the enormous positive impacts of investing in horizons 2 and 3, such as the castle walls example used earlier in this article. But if what has been described thus far is not enough to incite change in your company, then perhaps it is time to act independently and do what you can to create these initiatives yourself.

If you’re familiar with Andy Hunt and Dave Thomas’ seminal book, The Pragmatic Programmer, then you might be familiar with:

Tip 6: Be a catalyst for change.
You can’t force change on people. Instead, show them how the future might be and help them participate in creating it.

Sometimes all that needs to happen is that someone has to take the first step. When in doubt remember Art & Science’s 16th rule, Ask for forgiveness, not permission.