Over the (Technology) Horizon

Contemplating innovation portfolios

I am, I will confess, a magpie-like collector of tools, models and frameworks. A further career in strategy consulting beckons, perhaps. Actually, perhaps not …

One of the simple models I have sought to apply in practice is the concept of ‘technology horizons’.

The idea of technology horizons (originally attributed to McKinsey) is that, to develop a balanced innovation portfolio for an organisation, technologies can be usefully partitioned into three temporal ‘horizons’. Horizon 1 comprises ‘immediate technologies’ with a timeframe that looks out up to two years to value realisation. Horizon 2 covers ‘emerging technologies’ with a timeframe that looks out two to five years. Horizon 3 encompasses ‘future technologies’ with a timeframe extending from five to ten years.

Investment can be apportioned across the horizons, typically 70% to technologies in Horizon 1, 20% to Horizon 2, and 10% to Horizon 3. The proportions can be varied to suit, as can the timeframes allocated to each horizon. There is no science in this, so far as I can determine. The benefit of the approach is to focus attention on longer-term innovation and the disruptive potential of more distant opportunities. In this respect, the model is helpful, even though I can scarcely imagine a business planning meeting that might adopt it wholesale. There are, of course, some fairly obvious problems.

First, and not entirely tongue-in-cheek, there is Horizon 0. This comprises all the technologies that are readily available, have the potential to deliver immediate business value, but, for want of knowledge and market insight, are not being used. There is much more in this horizon than is commonly acknowledged. I will draw a veil over Horizon -1, the realm of actions already overdue, and Horizon -2, the shadow of deep technical debt.

Second, and more seriously, how do you determine which technologies belong in which horizon? The near-term items should be easy, but once you look further out, certainly beyond two years, you enter into the thicket of hype, start-up prospectuses and Wired magazine articles.

Finally, although the model envisages that technologies identified within Horizon 3 are more risky, there is an implicit assumption that surviving technologies proceed at an even stately pace, in lockstep, across the horizons. The reality is, of course, one of sharp accelerations and, what appear from a distance to be, inexplicable pauses. Many technologies burn bright for a period and then slowly fizzle without being wholly extinguished.

So, I would like to propose an alternative approach. My three horizons are defined not by time, but by the predominant source of uncertainty.

• Thus, Horizon 1: ‘application uncertainty’, where the risk is associated with the extent to which the fit between the application and the technology can be achieved. This is principally about the alignment of the requirements, the users, and the technology.

• Horizon 2: ‘engineering uncertainty’, where the risk is associated with the ability to get the technology to actually work in the envisaged environment. This is principally about properties such as scale, performance, reliability, security, and cost.

• Horizon 3: ‘scientific uncertainty’, where the risk is associated with whether —in principle— the technology is capable of being implemented. This is principally about whether or not the hypotheses that underpin the claims for the technology are in fact sound.

The transitions between the horizons are particularly interesting. You cross from Horizon 2 to Horizon 1 by demonstrating that you have secured the engineering properties necessary to meet the requirements of the application, and from Horizon 3 to Horizon 2 by formally assuring that the necessary engineering properties can be achieved.

I would like to gather some proper evidence to support my instincts about investment in a portfolio. Unlike the taper in the original model, I would allocate 40% to technologies in Horizon 1, 45% to Horizon 2, and 15% to Horizon 3. I am weighting the reduction of engineering uncertainty and accelerating the technologies through the mid-phase to implementation, with a view to securing an edge on the competition, and putting a little more into the high-risk category.

And, because I cannot resist the temptation … Horizon 0: ‘resource uncertainty’, where the risk is associated with whether I can develop a business case for the technology in the context of a disciplined planning and resource allocation process; and Horizon -1: ‘competence uncertainty’, where the risk is associated with whether I have the skills and knowledge necessary to deploy the technology.