For nearly two decades, companies have used frameworks like McKinsey’s “Three Horizons” model to manage innovation activities and allocate resources over time. This model—based on distinct phases of innovation—provided a structured way to balance short-term priorities with long-term growth. Horizon 1 centered on maintaining core businesses, Horizon 2 expanded existing capabilities into new markets, and Horizon 3 explored disruptive opportunities. While effective in the past, today’s fast-paced innovation landscape renders it increasingly obsolete. Why? Because it reflects an internal, linear perspective. Innovation today isn’t about timelines—it’s about the speed of learning and diffusion.
Generative AI models like GPT have redefined industries in mere months, proving that innovation no longer waits. Companies must adapt in real time or risk being left behind in the wake of rapid ongoing transformation.
The belief that companies can control the pace of innovation by neatly categorizing efforts into phases or horizons is wishful thinking. Time is no longer a luxury for organizations operating in a world where startups and disruptive technologies move at breakneck speed. The unique advantage of modern disruptors is their ability to execute quickly, repurposing existing technologies into entirely new business models that incumbents struggle to replicate. For established companies, the notion of being in the “steering position” of time is not just flawed; it’s dangerously misleading.
Speed as the ultimate differentiator
The real differentiator in today’s innovation landscape is SPEED (for example: the speed of diffusion of innovation by Everett M. Rogers, the speed of mass deployment as written by Steve Blank, the speed of learning as unfair advantage for startups by Ash Maurya). It’s not about spending years in Horizon 3 to develop disruptive capabilities; instead, it’s about how quickly you can respond to or create market shifts. Take the example of generative AI models like GPT. These technologies have been absorbed into everyday life at a pace never seen before. From automating customer support to generating creative content, GPT models have redefined workflows across industries in mere months. We have clearly passed a significant inflection point, and yet many companies are still grappling with what this means for their existing products, services, jobs, and roles. Industries are being reshaped in real time, and the pace of transformation is leaving slower-moving organizations behind.
The assumption embedded in the Horizon Model—that disruption is a long-term process that can be planned for over years—no longer holds. Today, disruption is immediate and often asymmetric. Startups and new entrants can deploy technologies rapidly, creating business models that incumbents, burdened by legacy systems and slow decision-making processes, cannot easily replicate. Airbnb did not take decades to disrupt the hospitality industry by avoiding investments in properties and long-term payoffs. Similarly, Uber reshaped transportation in just a few years, bypassing the need to invest in and pay off physical car fleets. They succeeded by leveraging technology and addressing massive markets with "unfair" business models that attracted large-scale user adoption to their platforms and services. Now, generative AI is rewriting the rules of productivity almost overnight. These shifts highlight a critical point: innovation isn’t linear, and speed of execution has become the most significant advantage in the modern economy.
Efficiency vs. market maintenance vs. market creation
Another limitation of the Horizon Model is its focus on timelines rather than the types of innovation that drive value. Broadly, innovation falls into three categories as coined by Clayton M. Christensen: efficiency, sustaining, and market-creating.
Efficiency Innovation: This type focuses on doing more with less—streamlining operations, cutting costs, and improving throughput. While essential, it does little to create new markets or drive transformational change. Instead, it often frees up capital that, ideally, should be reinvested in more disruptive pursuits.
Sustaining Innovation: Here, the goal is to improve existing products or services to better serve current customers. Think of new car models, upgraded smartphones, or enhanced customer service. Sustaining innovation helps maintain market share but rarely disrupts industries.
Market-Creating Innovation: This is where real disruption happens. By addressing unmet or underserved needs, companies create entirely new markets or redefine existing ones. The key to market-creating innovation isn’t just technology; it’s business model innovation. Uber didn’t invent taxis, but it reimagined how people could access rides. Similarly, Airbnb leveraged existing assets (people’s homes) to unlock an entirely new market in hospitality.
The Horizon Model’s focus on timelines obscures the fact that these types of innovation don’t follow a predictable sequence. Market-creating innovation can happen at any moment, often catalyzed by existing technologies deployed in new ways. The speed at which these innovations occur means that waiting for a “future Horizon 3” is a recipe for irrelevance.
The myth of being in control of time in innovation
The belief that companies can steer the timing of innovation is one of the most dangerous misconceptions perpetuated by traditional linear frameworks like the Horizon Model. In reality, markets don’t wait. Disruptors don’t wait. The pace of change is dictated by the ability to execute, not by carefully laid-out timelines.
For incumbents, this means rethinking their approach to innovation entirely. Instead of categorizing efforts into time horizons and assuming they can control the clock, companies need to focus on agility, speed, and the ability to pivot quickly. This might involve acquiring external innovators in order to become or stay relevant, as Google did with Android, or creating internal ecosystems that foster rapid experimentation. However, the challenge lies not just in adopting new technologies but in aligning culture, incentives, and processes to move as fast as disruptors.
The path forward
To remain competitive in this era of rapid innovation, companies must abandon outdated notions of linear progression. The future belongs to organizations that can:
Recognize inflection points early: Being attuned to shifts in technology, customer behavior, and market dynamics is crucial.
Experiment with speed: The ability to deploy new ideas and business models quickly is what sets disruptors apart.
Focus on market-creating innovation: Addressing unmet needs and reimagining value creation will be the key to long-term success.
The Horizon Model served its purpose in a slower, more predictable era. But in today’s world, speed has become the ultimate unfair advantage. Companies that fail to adapt to this new reality risk being left behind, not because they lack the resources or capabilities, but because they’re still trying to steer a ship on a timeline that no longer exists.
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