Why you need to innovate on three horizons

How does your startup think about innovation? Is it a new feature that gets incorporated into the next release? Is it a new market breakthrough that’s years away?

I recently held a mini Tweetstorm where I opened the conversation to innovation across three horizons: short-term, mid-term, and long-term. Here’s more dissection on the topic beyond 140 characters…

Horizon 1: Short-term

Horizon 1 innovations are incremental…the hundreds of little tweaks and improvements that your company implements every day or week to stay ahead of the curve (mostly done through many a/b tests at the same time). For example, you might change out the processor to make your product faster and cheaper. You improve the UX on your mobile app to increase your users’ engagement. You optimize your home page to increase sign-up conversions.

Since they’re on a smaller, incremental scale, horizon 1 innovations are the most achievable. However, just because they are easy doesn’t mean they aren’t significant to your startup’s success. These everyday improvements are critical to keeping your customer base happy and maintaining your competitive edge in the current market.

Horizon 2: Mid-term

To stay relevant in your market over the years, you need to place bigger bets that redefine your business and/or open up completely new opportunities. These are horizon 2 (mid-term) innovations. For example, Apple’s recently announced Apple Watch; Amazon’s Kindle; Facebook’s introduction of a newsfeed several years ago.

Although these innovations can relate to your existing product or business focus (i.e. digital books vs physical books), horizon 2 innovations are bigger ideas that take place outside of your existing products’ budget and activities. And while you don’t necessarily want to assign a specific timeline to each horizon, these mid-term innovations probably won’t generate revenue until 3-5 years out.

Horizon 3: Long-term

To build a truly great company, you will need to define a brand new market category. These innovations are often described as breakthrough, disruptive, and discontinuities. They represent totally out-of-the-box ideas that aren’t extensions of your existing products or services. Good examples of long-term innovations are Google Glass and their work on a driverless car; Amazon’s AWS; or when Apple launched the iPad and created a completely new category.

Horizon 3 innovations require a clear vision, along with the stubbornness to achieve that vision in the face of challenges and short-term priorities. Jeff Bezos admitted that it took them three tries to get their third-party seller business to work. Today, there are more than 2 million third-party vendors on Amazon, accounting for about 40% of all items sold.

It’s not easy to make such a market breakthrough…it takes discipline to invest in something that may not come to fruition for many, many years. But if you’re looking for motivation, Jeff Bezos summed up the opportunity perfectly in an interview with Wired back in 2011: “If everything you do needs to work on a three-year time horizon, then you’re competing against a lot of people. But if you’re willing to invest on a seven-year time horizon, you’re now competing against a fraction of those people, because very few companies are willing to do that.”

The very best companies (Facebook, Apple, Amazon, and Google) excel in all three dimensions. To be wildly successful, you cannot sacrifice your long-term vision for short-term success just as you can’t sacrifice your current product and customer base for your long-term vision.

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