“The way that you move horizons is based upon time, but it's also based upon evidence for the return on investment. So evidence of the success of whatever the initiative is.” 

Intro:
Welcome to the Agile Digital Transformation podcast, where we explore different aspects of digital transformation and digital experience with your host, Tim Butara, content and community manager at Agiledrop. 

Tim Butara: Hello, everyone. Thanks for tuning in. Today is actually the first time on the podcast that I'm joined by a returning guest, Brant Cooper. He's the founder and CEO of Moves the Needle and the author of The Lean Entrepreneur and the more recently released Disruption Proof. In our previous discussion, Brant and I talked about the most common misconception about digital transformation, and today we'll have a bit of a more focused discussion about horizon planning and how it factors into effective digital transformation. Welcome, Brant. It's a real pleasure having you back on the show. Anything you want to add before we jump into the questions? 

Brant Cooper: No, that sounds great. Thanks for having me back and I'm honored to be the first returning guest. 

Tim Butara: We're honored to have you as the first returning guest. Awesome. So for those listeners who may not know about it, I always have to ask something like this first. What is horizon planning? 

Brant Cooper: So horizon planning was a model or a framework that came out, I believe, in the 80s, actually, maybe in the 1980s, by some academics who were employed by McKinsey & Company, I believe. And basically it was, when you're doing your strategic planning, you should look at three different sort of time envelopes, the immediate, the near term, and the long term, and evaluate how you're going to protect your current markets and your current growth. And then over the two longer term time envelopes, what are you going to do to find new growth? 

That's sort of the very basics of what horizon planning is, which makes a lot of sense, right? Your business, your big business successful, you've got a market captured, multiple markets, perhaps. There are always threats to that market. So you need to be able to work to maintain that market and then some markets will just go away. Or perhaps you have very ambitious growth ambitions. 

And so you have to figure out today, what are you going to do in order to achieve new growth several years down the road by starting today. Right. Because some opportunities will take multiple years before they come to fruition. And so it's to always have this rolling plan for how you're going to capture new growth in the future. 

Tim Butara: That sounds like it can be quite a challenge in the fast moving and kind of super disruptive digital landscape that we're in today. But at the same time, if you're able to do it in such a landscape, it probably can be really, really valuable and really important. What are your thoughts here? 

Brant Cooper: Well, so I think that the digital landscape has just cut the time horizons down. Right? So I think that when this was written in 80s, the technology revolution was maybe greater – in other words, more disruptive technology was coming about. This is sort of the era that Clayton Christensen writes about, The Innovator’s Dilemma and, you know, disruptive innovation. I think that era is over. So I think it's different in the digital time than when the book was written. 

And so I think that back when the book was written, it was difficult. You had to look out– five years was for less complicated new growth strategies. But you are looking out ten years for ways that you had to maybe do something radical. And so now I think that time horizon has been cut way shorter. You need to be figuring out how you're going to sort of get these immediate returns as well as some returns that are five, six, seven years away. It's almost a luxury to start thinking about whether you could figure out how things are going to go, you know, ten years out. 

Tim Butara: But I remember that when we were picking the topic for what we were going to talk about today, we were kind of going through everything. I remember that we mentioned horizon planning being broken right now. What does that mean? And what broke it? 

Brant Cooper: So, yeah, this is like, sort of gets into my rant. So at some point, and I'm not even sure when, but at some point, the horizon model was changed. And it was changed by what I sort of disparagingly call now the innovation industry. And so this is all the people that talk about the need for companies to do breakthrough innovation, or the need for them to cannibalize themselves, or the need for them to do disruptive innovation. 

I just don't think that there's any evidence for that today. It was maybe true in the when Christensen was writing about it. I just don't think it's true today. We're not inventing new technology like we were at that pace. People are more concerned and need to be more concerned about implementing new products and services and testing new business models based upon existing technology, not inventing technology. 

But someone, at some point in time, changed the definitions of all the time horizons to be not finding new growth that's going to take 3, 4, 5, 6 years, but at the level of innovation. And so, in other words, horizon one wasn't just about doing whatever it takes to protect your existing market. Horizon one became continuous improvement of your product. And horizon two was not about finding growth wherever you can find it that's two or three years away. Horizon two was incremental innovation. And then horizon three was not finding growth wherever you can find it, five, six years away. Horizon three became disruptive or breakthrough innovation. And it completely destroyed the model, in my opinion. And I'll talk about why. 

Number one is you don't get to predict what the level of innovation is. If somebody comes up with a new idea, you don't really know what level of innovation that is until several years into it, until you've actually got a market that's demanding it and you're growing like crazy. And so this idea that you can sit around and go like, okay, time for us to do breakthrough innovation is just wrong. There's no evidence for it. 

Back when it was more popular and it was about technology, you had R&D labs that were working 24/7 to invent new stuff. And you still have R&D labs, but most companies do not depend on R&D in order to find future growth. There's other companies that are doing the invention. It's usually in life sciences. And if you're not a life sciences company, that's not going to benefit you. There's maybe some AI stuff, but you don't need to do it yourself. You're going to wait for some other people to invent some AI or invent some robots and then you're going to use that technology to change how you address the needs that you're already addressing. 

So that's sort of, this fallacy number one is that businesses need to do disruptive or breakthrough innovation. They don't. The second part of it is there are startups, thousands of startups that are trying to figure out how they're going to capture market 5, 6, 7, 8, 9, 10 years down the road. So the idea that a corporate can invest in three or four or five teams and put them in a lab and compete against those well funded thousands of startups is also just patently false. It doesn't work that way. 

There are innovation labs that have produced singles and doubles and by that I mean they find new businesses and they produce millions of dollars. And sometimes maybe there's a mini unicorn in there that will produce a 100 million dollar business or something like that. But those are very unique and it's not really because they've come out of a lab. It's come out of an organization with a mindset that you've got thousands of employees that are testing ideas, not four or five teams sitting in a lab somewhere. 

So the whole idea that you can predict what is breakthrough innovation and that you can assign that to a team and that they're going to go do breakthrough innovation and that's how you're going to figure out what your new growth opportunity is five years down the road is just wrong. Does that happen? Yes, every once in a while. Is it a reasonable corporate strategy? No. So all of these innovation people that are complaining about a lack of funding because their CEOs don't buy into that, I'm sorry to tell you, I agree with the CEOs. 

Tim Butara: It sounds a bit paradoxical, almost like an oxymoron. Like trying to apply something to an area that's like completely different from the model that you're trying to apply it to. 

Brant Cooper: If people go back to the original horizon planning model, which was written about in the book The Alchemy of Growth, I think that they're way better off. I have some ideas on how to improve it, I think it needs to be improved. But you're way better off with the original model than the new version that the innovation industry is ludicrously supporting. And I even mentioned that you can go to the Harvard Business Review and read all about horizon planning and it's all the wrong version. And so I think it's really doing a disservice. 

Tim Butara: So the older version, the original version, is still applicable today, or would there need to be some adjustments to it, but just not in the way that innovation people are doing it? 

Brant Cooper: Right, exactly. I have some ideas on how to improve it, but I think that the old version is better than the current version. 

Tim Butara: So maybe you can still share some of your ideas on how to improve it. 

Brant Cooper: Right. So one of the reasons why measuring the different horizons based upon innovation level is that it sort of gets rid of, it eliminates the benefit of using time. In other words, if you're supposed to be doing breakthrough innovation that's ten years away and five years have passed, are you still doing breakthrough innovation? Is that still horizon three that's now only five years away? Or do you change that to an H2 because it's no longer a breakthrough? I mean, it just kind of doesn't make sense. 

The way that you move horizons is based upon time, but it's also based upon evidence for the return on investment. So evidence of the success of whatever the initiative is. So in other words, let's take an example. Say you've got an existing product. Maybe it's an enterprise grade 3D CAD application and it's super heavyweight and it's super complex and it costs hundreds of thousands of dollars, and you sell it to some of the biggest companies in the world. 

And you do some research, some opportunity development research. And you go like, well, listen, we might be able to modernize that application, make it simpler, offer it as a SaaS program. And we could go after a whole mid market or even a larger enterprise market and open up a whole new market. 

So if you were trying to qualify that as a level of innovation, you don't really know. I mean, you could make a SaaS product that actually completely flipped the whole industry on its head and it became “breakthrough innovation”. Or it could be that it would just– in the end it was just smaller architecture firms that used it and it was a nice little market, but it wasn't as big as you had hoped. And so, I don't know, maybe you would call that incremental innovation.

But you don't really know. What you do know is that it's going to take you three years to revamp the product and then build up the infrastructure in order to offer a SaaS product. So starting today you're predicting that in three years you're going to start seeing some sort of returns on it. You started off as a horizon three because you don't really know and you don't know the timing of it. And then you go do the research like Lean Startup and Design Thinking and some of these other frameworks to establish market evidence of how long you think it's going to take to actually get to the point that you've got a successful business there. 

And so by the research, if you determine that it's okay, well it's actually three years out, then it becomes a horizon too. So it moves from a horizon three to a horizon two, not because of the level of effort to build it, but because that's how much time it's going to take to start getting returns. And so it only moves from H3 to H1, not because now it's three years have passed, but because you now have enough evidence that suggests that this is a core business that you want to invest more in. So that the way you're measuring, the way you're qualifying what horizon the project is, is based upon market evidence of its success. 

And so you're investing just like you are in a startup. And you sort of assume at the beginning that it's going to take five or six or seven years. Just like you would make that assumption, investors make that assumption with startups. And then it's the evidence produced by going to market that produces the actual shift in the time horizon. And eventually horizon one means it's big enough and successful enough that you're going to roll it into the core business. 

So another example might be, we have this existing product that sells really well in North America and we believe that based upon the trajectory of India's middle class that they are going to be ripe for a version of this application. But we think it's going to take, I don't know, a long time to get there. 

So it starts as a horizon three and then we go and maybe we set up a team in India to start doing the very basic opportunity discovery, customer discovery, validation, minimum viable products using our existing technology, our existing products, and we're trying to build a business there. They get further investment based upon their success, just like a startup. And they become moved from H3 to H2 to H1 depending upon whether or not they're able to build a market there. 

So I call this visibility planning. So we determine what horizon you're on based upon how much visibility you have in the potential for success of that idea. And the potential for that success is based upon market evidence. And you develop that market evidence not by doing surveys and focus groups, but by being a lean startup or practicing design thinking or whatever it is the frameworks that you decide that are the best for you to use, but your progress is measured like a startup and you get further investment based upon your success as a startup about hitting milestones. 

And the more success you achieve, then the horizon level, you go from H3 to an H2 that has some level of success to an H1 where you've got a thriving business that continues to grow and should be brought into the core business. So it's a change to how we're measuring the progress of the horizons using this visibility planning. But it also then uses the horizon model to open up your creativity to try to think about well, what are all of the different ideas that we might have to find this new growth? And how do we invest in those ideas so that we always have this rolling, strategic plan of finding new growth opportunities? 

Tim Butara: Are you seeing companies and businesses already adopting these strategies? And maybe even more importantly, are innovation professionals also kind of catching up with this and kind of making this shift in their approach to kind of be more effective? How can they help in all this? 

Brant Cooper: Yeah, so it's an interesting question. I think that there are companies, mature companies, that kind of know how to do this. There's a couple of case studies in my book that I found particularly interesting. One is Cargill, the food company. They could see the headwinds that there is going to be all of these alternative protein products hitting the market. They did not go into a lab and try to invent, reinvent all of their meat products to be plant based products, plant protein products that would compete against everything that was going out in the marketplace. 

Instead, they sat back and watched. They did technology scouting, they did start up scouting. They invested in different startups. They evaluated what was going on in the market until they felt confident that, hey, this is how we can get into this market and help. And basically it was based upon their expertise in distribution. 

And so to me, this is an example of a company that's relying on their core DNA, their core strength, without sort of wasting this time and money pretending that they needed to go be a startup and start from scratch again. There's thousands of startups that are trying to do these things, so they just have to be participating in that ecosystem in order to take advantage of the opportunities when they come up. 

The other example is 3Com. 3Com is a technology company and so they continue to do R&D and they continue to do invention. The trick with an R&D company is that somebody needs to be out evaluating applications for that technology. And I think that that's one of the things that Clayton Christensen would write about in Innovator's Dilemma, is that companies would sort of refuse to go and figure out markets for new products because they felt like it was taking away from their existing products. 

But it's not really that big of a deal for a company like 3Com to start putting programs together that are cross business units. So they touch all of the different business units and they put together an interdisciplinary team that is evaluating how to bring new technology to market. And they partnered with a startup that they found at a startup conference to do that. 

And so again, it's not being, oh well, you have to build it all here, or we have to go and invent everything or we have to spin out a startup or all of these things. It's finding the right opportunity that is being developed, maybe in this instance by an existing startup, but that you have technology that startup will benefit from and then it's touching the other parts of your business unit that are relevant to getting that to market through distribution into enterprise sales and all of these other type of things that they have these advantages around. 

They did not acquire that startup, I think that they probably invested in that startup. And so the way you manage your relationship with that startup can differ. But again, to me it's a good example of looking at growth opportunities from a holistic point of view rather than just simply looking at it as sort of this BS level of innovation. 

I think that most innovation groups themselves kind of don't get it. I think that they are enamored with the idea that they get to go tinker and I think that they want funding to tinker. And so I think that doing all of this other stuff that I'm talking about sort of isn't fun. And so they kind of complain about getting lack of funding and yet what they really want to do is, doesn't provide value to the core business, so they’re not going to fund it. 

So I think that the evolution of this is really that an innovation group that has all of these really great skills for doing exploration work. They've got the agile people, they've got the design thinkers, they've got the rapid experimenters, they've got these people that can test business models and all the rest. Those are great skills, they're just needed throughout the business. 

And so I think that the evolution of the innovation lab or the innovation team becomes the center of excellence. And so the two things that have to happen is that the core business has to realize they need to do “explore”, that they're not in “exploit” mode only. This is another large enterprise myth that we can explore if you want to have me back for the third time. 

But it's not– in this day and age, the core business has to be in exploration mode as well as exploitation mode. To do the exploration mode they need different skills. The innovation lab has those skills. And so I think in a mature organization, the innovation people become a center of excellence that provides those exploration skills, training, resources, templates, tools, frameworks, even list of vendors that can help in order to help the business unit do the exploration work that is along those different time horizons. 

And eventually, maybe if all of this is functioning well, you can go re-set up a lab and they get to go and pretend that they're going to reinvent banking 25 years down the road. But that long term stuff doesn't happen unless these businesses can figure out how to maintain their existing business and how they can hit their strategic priorities for the next five years or so. 

Tim Butara: This actually ties back to what we talked about on the episode that we did previously, Brant, about businesses having to balance operation with exploration, I think we said at that time. Is this the same thing or is exploitation and exploration something different? 

Brant Cooper: No, that's exactly right. The word on the exploitation side differs. People say execution, exploitation or just an operation focus. And obviously all of that is important. I think the fallacy is businesses not seeing that there's uncertainty. To me, this is what Covid drove home, right? Suddenly your core business is not operating as efficiently as possible for all these type of reasons, you don't have all of the answers. So you have to build exploration in order to figure those things out. 

And in that way, exploration is making your operations more efficient and it really is solving that H1. Because what it is, is that it's doing anything that you need to do in order to protect your current market. 

Tim Butara: I love it when different conversations tie together so nicely and it will definitely be awesome for listeners who maybe haven't yet listened to our original conversation to go check out the show notes and go check out that other one as well so that you can kind of have the big picture view of everything. 

But Brant, this has been another fantastic conversation. Just before we wrap it up, I wanted to ask you if you could tell us maybe a few more words about your book Disruption Proof, which we already kind of introduced in our previous episode. But this was just before it came out. And maybe we can talk for a few minutes about the book, Disruption Proof, and maybe how horizon planning relates or factors into being disruption proof. 

Brant Cooper: Yeah, so this has been great. I think that the dovetail between the two talks is really what the book is about. So there's a portion of the book that is really sort of driving leaders to understand that these are not changes that are a choice. These are changes that you are going to have to make in order to thrive and survive in the 21st century, in the digital age. 

And so it's getting your grip on digital transformation, but also then what are the practices and the structure of work that has to change? And a lot of that is empowering the grassroots to do this exploration work in conjunction with the execution work. And I try to point out to people that there's no startup in the world that does only exploration. It would forever be a small startup. 

And so the balance is always execution or operations plus exploration. And the amount of exploration depends upon the uncertainty that you have in pursuing whatever your priorities are. And so you can start to understand that it requires a different way of work, but it also then requires a different way of management, because your middle management needs to understand differently how to manage people that are balancing this execution or this operational approach and the exploration. 

So that's what the book is really trying to attempt to teach people and to come up with ways of making that change happen and what it looks like at the beginning and hopefully what it looks like at the end when you've created a company. The very structure of the company allows them to continue to be agile and aware of changes that are going on in the environment and to be able to dynamically make changes to what they're up to in order to continue to protect their market and find new growth. And that's really the bottom line. That's what the book is about. And I think that's the combination of what we've discussed in these last talks. 

Tim Butara: Yeah, definitely the way you told it now, definitely kind of highlights this connection between our previous conversation about kind of busting this myth of digital transformation and all the amazing insights that we had there and today's conversation, so about horizon planning. And maybe if listeners wanted to learn more about the book or learn more about you, where can they do that? 

Brant Cooper: So I'm Brant at brantcooper.com and I encourage people, if they have questions or comments or disagree or agree or whatever, drop me a line. I respond to all emails, and Brant Cooper on all social media. If you're interested at all in the corporate work, I'm at movestheneedle.com and I'm building some courses that will cover all of this stuff at startupbluebook.com. 

Tim Butara: Awesome. So definitely a lot of awesome material and relevant material from you already and a lot more stuff still to come. Sounds amazing. Thank you so much for joining us again, Brant. 

Brant Cooper: Fun conversation. Thanks for having me and look forward to the next one. 

Tim Butara: Yes, I just wanted to say I'll definitely hold your word for your suggestion previously that we'll speak the third time. 

Brant Cooper: Great. Thanks so much. 

Tim Butara: Thank you. And to our listeners, that's all for this episode. Have a great day everyone and stay safe. 

Outro:
Thanks for tuning in. If you'd like to check out our other episodes, you can find all of them at agildrop.com/podcast as well as on all the most popular podcasting platforms. Make sure to subscribe so you don't miss any new episodes and don't forget to share the podcast with your friends and colleagues.