Digital Business

How CXOs can prepare to support the innovation horizons that drive growth

Jun 06, 2024
Capitalizing on innovation horizons Capitalizing on innovation horizons

Innovation is difficult for companies large and small. That’s at least in part due to a number of unanswered questions that tend to obscure the process and its intended outcomes.

What is innovation? Who does it? Why do they do it? Is “innovation” really a strategy? Who’s responsible for driving it? Are there competitions and crowdsourcing of ideas? 

Whatever form innovation takes, you can be certain the CIO/CTO team will be expected to facilitate and support it. When facing such a varied array of possible drivers, it’s helpful to frame innovation in terms the IT team understands, including how it helps to grow the business. And once you’re called to execute, having laid the groundwork for success can make or break the organization’s understanding of your impact.

For around 15 years, a popular way of thinking about innovation and strategic growth has been the three horizons model, first introduced by McKinsey consultants Mehrdad Baghai, Stephen Coley, and David White in their 1999 book The Alchemy of Growth. It is a framework designed to spawn focus as teams set out with such nebulous goals as “innovation” and “growth” in mind.

  • Horizon 1 entails looking at the business today and ensuring everyone is engaged in driving innovation in the current business model. This is where the most varied and constant stream of innovation demand comes from. 
  • Horizon 2 evaluates opportunities adjacent to the business you do today. Fewer organizations look at these opportunities. It may fall squarely on a business development team, and you may have a simpler relationship with them as ideas become projects with funding, timelines, deliverables, etc. 
  • Horizon 3 imagines the different things a company might explore to change the fundamental business model upon which they operate. It is very hard to know what kind of IT challenges may come from this bucket of innovation that very much still lies over the horizon.

Innovation horizons in the real world

Consider these three innovation horizons in relation to the real-world ride-sharing app Uber. Imagine surge pricing as a Horizon 1 innovation. It is an enhancement to Uber’s core business of pairing drivers and riders. Horizon 2, on the other hand, might entail expanding to entering new cities or adding UberEats as a supplementary service. Horizon 3 involves looking at self-driving cars that might precipitate a wholesale change in Uber’s operating model. 

As a CTO/CIO, imagine how these horizons could shape the incoming demand pipeline you see. In my experience, all three horizons share some common core technology demands you must anticipate to be ready when a new idea becomes a reality.

Here are some essentials as I see them:

  • Capacity & scalability – Compute capacity requires public cloud infrastructure. Long gone are the days when cost was a driver for cloud and, while a few companies are all in on cloud, most are a hybrid public/private mix. Ensuring your applications can expand into that public capacity provides the flexibility to handle the capacity a new innovation requires – whether this be adding multiple new data elements to an existing process, operations within a new country, or a completely new product line. Ideas that may have been months or years in the planning can sometimes land on the CIO/CTO in an afternoon. The cloud can help with that, but only if the landing zones, security considerations, and financial flexibility have been sorted out in advance.
  • Security – Security is the other main area where innovation must outpace the demand curve. Zero trust tools hold the best promise for secure scalability allowing one company to work safely with others on the innovation horizon. When the business says, “Partner before buy, buy before build, build only for specific advantage,” what they are actually saying is, “Atomize the value stream, integrate multiple systems from multiple companies, execute in multiple venues like cloud VPC and hosted, and do it all securely and fast.” Hence the importance of zero trust architecture. You cannot allow every partner on your VPN.The time it would take to verify their security is unworkable. Instead, you will most likely provide connections via API’s, so your API security stack, traceability, attack detection capabilities, and the rest must be in place by the time the innovation demand call comes.
  • User experience – An improved user experience stems from both cloud capacity and the zero trust approach to security. The speed with which users can reach new applications or transfer files all relate to your ability to bring into existence the innovation ideas that the business is counting on. Knowing that thousands of extra users can be added securely to applications that can scale is vital. And all of this new traffic has to flow through a set of scalable infrastructure to potentially anywhere in the world.

The ability of the CIO/CTO to anticipate innovation-inspired demands is more than wishful thinking. While it’s important today’s tools are sufficient to meet the organization’s needs, that’s only one piece of the puzzle. Future-ready IT and security leaders must constantly imagine how their operations can scale to meet around-the-corner demand. 

Depreciation cycles and subscription service anniversaries are opportunities to anticipate growth horizons. You should actively create scenarios for each horizon to game out how current toolsets would handle additional demand. To establish real staying power, use your experience to pinpoint these gaps and to plan for upgrades that will enhance your readiness when the time comes to better empower the business. 

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