In my previous post, I introduced some implications on working with the Three Horizons Framework. In this short post, I’ll share my very straight-forward thoughts related to strategic business planning and resource allocations.
Systematic Renewal Work and Concurrent Horizons
Continuous renewal is a necessity. While one might argue differently for any one company, the statistics are brutal as summarized in this Harvard Business Review article based on research by Vijay Govindarajan and Anup Srivastava: the rate of corporate death due to sticking with “business-as-usual” is really, really high.
The whole point of the Three Horizons Framework is to systematically – and concurrently – work with the current “bread and butter”, with the next wave of your emerging business and with even the longer perspective where many futures and opportunities are plausible.
Now, then, one of the key questions, of course, is how to plan for working with these three different timelines. You need to organize for the work between them, keep them reasonably independent, but at the same time, aligned enough and manage it all.
The Handicap With Project Portfolio Management
Corporations tend to organize for something called ‘project portfolio management’ to keep their development efforts transparent, prioritized, and systematic. I’ve worked on dozens of such endeavours and trained a couple thousand people on the topic. I’ve even posted some more thoughts about this at Aalto Leaders’ Insight (apologies, this article is in Finnish only).
Long story short, I do know steering/management structures such as project portfolio management can be really beneficial.
What’s more, I also know the majority of organizations fail to exploit project portfolio management to its full potential. Most portfolio management setups tend to miss the proactive nature of business planning and steering, and, thus, fail to run development along the Three Horizons.
Project portfolio management oftentimes becomes reactive, while solving prioritization and/or resource allocation conflicts between the on-going projects and new project candidates, for example. Nothing really wrong with that, it’s just that this rarely helps in keeping your “eyes on the big picture”.
Planning For The Three Horizons
Very simply put, I think your strategic plan should proactively set an ideal allocation of funds and other resources for the three Horizons. In project portfolio management terms, you’d need to proactively set the targeted balance for your portfolio, perhaps called ‘the ideal portfolio’. In practical terms, but for illustration purposes only, you might then have three different types of projects in your portfolio, such as
- ‘optimization projects’ to enhance the competitiveness of your current operations on the Horizon 1 (today’s bread and butter); allocation target 70% of all resources
- ‘development projects’ for introducing new services, products, partnerships – and whatnot – for your emerging new businesses and/or business models of the Horizon 2; some of these might even include discontinuing current Horizon 1 offerings; allocation target 25% of all resources
- ‘research and/or experimentation projects’ to work for the longer future, i.e. Horizon 3; allocation target 5% of all resources
Systematically following up on your efforts, you will soon realize that your current portfolio would never be in that target balance. Thus, decision-making over project prioritization, new project candidates, resource re-allocations, and so on, would then be based on steering the portfolio balance closer to the pre-set, ideal balance. This, of course, would not be the only decision-making criterion, even if it would be the most strategic one.
Obviously, project portfolio management is not a prerequisite for working with the Three Horizons Framework. On the contrary, having all projects in one portfolio and perhaps even working with them in one line organization might be a show-stopper for real innovation.
To Be Continued…in Part III
Even if the above seems simple, acting accordingly is quite hard. In my upcoming posts in this blog series, I’ll at least dig into those practical organizational and cultural aspects I’ve come across.
In case you want to hear more about how to utilize the Three Horizons Framework in your strategy work and strategy execution, please don’t hesitate to contact me. Let’s discover your next Horizon.
Oh, and in case you like to surf the social media; join the discussion on Twitter #3Horizons!
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(Article image via Pixabay.com)