We've already explored two of the most well-known models – the Three Horizons Model and the Innovation Ambition Matrix – that can be used to balance and monitor your innovation portfolio. Many organisations will already be using one model or the other in their planning and reporting, but if you haven't yet made the choice, what's the difference between the two, and which should you use for your portfolio?
The Three Horizons Model was originally created by McKinsey, while the Innovation Ambition Matrix originated at Deloitte, and at first glance, it can seem as if they are just different sides of the same coin. They both suggest three categories of innovation with often similar criteria, and generally the first category is easier, quicker and lower risk, while the third category is for the more difficult, long-term but riskier type, and of course the second sits somewhere in between.
The Three Horizons Model uses time as one of the key defining factors and, for this reason, it's particularly useful for time-based planning. If your organisation is looking at its three, five or seven-year plan, dividing up your innovation projects according to when they might start to deliver value makes sense. Because it is time-focused, the Three Horizons Model relates strongly to the product or business lifecycle: product ranges or businesses nearing the end of their lifecycle can create value in the short term through extensions (Horizon 1), but ultimately will not sustain a business in the medium or long term (Horizons 2 and 3). For financial modelling and forecasting, the Three Horizons Model therefore provides useful insights.
The Innovation Ambition matrix has been described as building on the Three Horizons, but uses products and markets as its defining criteria. For example, while Horizon 2 is defined as being about 'emerging businesses', but doesn't specify where these might be found, the Adjacent Innovation category in the Innovation Ambition Matrix is defined as leveraging existing capabilities to move into new markets. This allows the business to serve new customers, and build new products and assets. The Ambition Matrix is therefore a more useful model for strategic planning – as it states, when deciding 'Where to Play' and 'How to Win'. Because this model is not focused on the time it takes to develop an innovation, it is possible for an incremental innovation to take longer to develop than an adjacent one, depending on circumstances.
Ultimately as with all management models, neither is perfect – they simply provide a lens through which to examine your innovation efforts. Categorisations are rarely neatly discrete, and there are no guarantees that by using these models you might not miss an important opportunity.
Some further reading:
Photo credit: Mark de Rooij (Unsplash)