Three Horizons Framework
for Research and experimental development on natural sciences and engineering (ISIC 7210)
The Research and experimental development on natural sciences and engineering industry is defined by its pursuit of innovation across different stages of maturity, from basic research to applied development. The Three Horizons Framework perfectly mirrors this reality, providing a natural structure...
Strategic Overview
The Three Horizons Framework provides a crucial strategic lens for the Research and experimental development on natural sciences and engineering (ISIC 7210) industry, which inherently operates on varying timeframes and risk profiles. It enables organizations to balance the imperative of sustaining current research efforts (Horizon 1), exploring emerging technologies and applications (Horizon 2), and pursuing disruptive, long-term scientific breakthroughs (Horizon 3). This framework is vital for managing the R&D burden (IN05), funding volatility (IN04), and the challenge of translating research into commercial value (IN03), ensuring that today's successes don't cannibalize tomorrow's innovation.
In an industry characterized by high capital expenditure (IN02), talent acquisition challenges (IN05), and the unpredictability of scientific discovery, the Three Horizons Framework aids in structuring R&D portfolios, allocating resources effectively, and setting appropriate metrics for success at each stage. It helps R&D leaders communicate a coherent vision to stakeholders, demonstrating a robust approach to both immediate impact and future resilience. By intentionally nurturing projects across all three horizons, organizations can mitigate market obsolescence (MD01) and secure a sustainable pipeline of innovation.
4 strategic insights for this industry
Structured Resource Allocation Across Research Stages
The framework provides a clear mandate for allocating resources (funding, talent, infrastructure) across distinct types of R&D. Horizon 1 focuses on optimizing existing research programs and delivering current grant commitments, Horizon 2 on developing new applications or platforms from emerging scientific findings, and Horizon 3 on blue-sky research for future paradigms. This intentional allocation helps mitigate the 'R&D Burden' (IN05) by preventing short-term pressures from completely stifling long-term exploratory work.
Managing Risk and Return on Innovation Investment
Each horizon inherently carries a different risk profile and expected return. H1 projects typically have lower risk and more predictable outcomes; H2 projects are higher risk with potential for significant growth; and H3 projects are very high risk with the highest potential for disruptive, transformative returns (IN03). The framework allows for differentiated risk management and ROI expectations, moving beyond a 'one-size-fits-all' approach to R&D funding (FR07, MD01).
Bridging Fundamental Research to Commercialization
The Three Horizons framework provides a roadmap for the 'innovation pipeline,' explicitly defining how discoveries from H3 might transition to H2 for development and then to H1 for commercialization or widespread adoption. This structured progression helps overcome the challenge of 'Translating Research into Commercial Value' (IN03) and 'Slow Commercialization Pipeline' (MD06), ensuring that fundamental insights eventually yield practical impact.
Mitigating 'Technology Adoption & Legacy Drag'
By fostering H2 and H3 activities, organizations can proactively address the risk of 'Market Obsolescence' (MD01) and 'Technology Adoption & Legacy Drag' (IN02). H2 projects explore next-generation technologies that could replace current ones, while H3 seeks entirely new paradigms. This forward-looking approach ensures that the organization remains at the forefront of scientific advancement, rather than being left behind by disruptive changes.
Prioritized actions for this industry
Formally categorize all R&D projects and initiatives into H1, H2, or H3, with clear definitions.
Establishing clear criteria for each horizon helps ensure consistent project classification, facilitating strategic portfolio management and resource allocation. This clarifies the strategic intent and expected impact of every research endeavor.
Implement differentiated funding models and governance structures for each horizon.
H1 projects require strict milestone tracking and budget adherence. H2 projects need more flexible funding and agile development. H3 projects demand long-term, patient capital with tolerance for high failure rates. Tailoring governance prevents H3 projects from being prematurely judged by H1 metrics (FR07).
Establish dedicated teams or 'pods' with distinct KPIs and leadership for H2 and H3 initiatives.
Different horizons require different skill sets, mindsets, and success metrics. Separating teams—even if collaborating—fosters a culture appropriate for each horizon, protecting exploratory work from the short-term pressures of core R&D (IN05, MD07).
Develop clear 'transition gates' for projects moving between horizons.
To prevent H2 from becoming a 'graveyard' for H3 ideas or H1 from stifling H2 potential, define specific criteria and processes for projects to graduate from one horizon to the next (e.g., successful proof-of-concept for H3 to H2, market validation for H2 to H1). This ensures continuity and successful commercialization (MD06).
From quick wins to long-term transformation
- Conduct an inventory of existing R&D projects and classify them into H1, H2, and H3 to visualize current portfolio balance.
- Communicate the Three Horizons concept to leadership and key stakeholders to build shared understanding.
- Adjust budget allocation percentages to reflect desired strategic balance across the three horizons (e.g., 70-20-10 split).
- Pilot dedicated small teams for specific H2 or H3 projects with adapted governance and success metrics.
- Integrate the Three Horizons framework into the annual strategic planning and R&D roadmap development processes.
- Cultivate a culture that values both incremental progress and breakthrough discovery, providing career paths for both types of researchers.
- Underfunding Horizon 3 (blue-sky research) due to immediate financial pressures or lack of clear ROI (IN05, FR01).
- Allowing Horizon 1 projects to consume resources meant for H2/H3, starving future innovation.
- Lack of clear transition paths between horizons, leading to projects getting 'stuck' or abandoned.
- Applying Horizon 1 (efficiency, clear deliverables) metrics to Horizon 3 projects, leading to premature termination or misjudgment (FR07).
Measuring strategic progress
| Metric | Description | Target Benchmark |
|---|---|---|
| R&D Spend by Horizon | Percentage of total R&D budget allocated to H1, H2, and H3 projects annually. | Industry-specific, but often 60-80% H1, 15-30% H2, 5-15% H3. |
| Innovation Pipeline Health | Number of projects successfully transitioning from H3 to H2, and H2 to H1, over a given period. | Consistent flow, e.g., 2-3 H3 projects moving to H2 per year, 1-2 H2 projects moving to H1. |
| Time to Market/Impact by Horizon Origin | Average time from initial H3 concept to market/widespread adoption, or H2 development to market. | H3: 10+ years; H2: 3-7 years; H1: 1-3 years. |
| Talent Allocation & Satisfaction by Horizon | Percentage of highly skilled researchers working on H2/H3 projects, and their retention rates. | Retain key talent in H2/H3 roles (e.g., >90% retention for critical roles). |
Other strategy analyses for Research and experimental development on natural sciences and engineering
Also see: Three Horizons Framework Framework