H1/H2/H3 Portfolio

Horizon 1/2/3 Innovation Portfolio Management

Horizon 1/2/3 innovation portfolio management: capital allocation across horizons, stage-gate, S-curve management, McKinsey three horizons framework.

Three Horizons. One Portfolio.

The McKinsey Three Horizons framework remains the most useful tool for innovation portfolio management. Horizon 1 defends the core. Horizon 2 builds emerging businesses. Horizon 3 creates options for future growth. Mature programs explicitly allocate capital, talent, and governance across horizons rather than starving Horizon 2 and 3 in service of Horizon 1.

Key Capabilities

01.

Three Horizons Framework

McKinsey three horizons portfolio management.

02.

Capital Allocation

Explicit allocation across H1, H2, H3.

03.

Stage-Gate

Stage-gate process per horizon with appropriate metrics.

04.

Talent Allocation

Talent rotation and assignment across horizons.

05.

Governance Per Horizon

Different governance and metrics per horizon.

06.

S-Curve Management

S-curve position management per business.

3
Horizons
70/20/10
Typical Allocation
25+
Portfolio Programs
4.7/5
CIO NPS

Process

01

Portfolio Diagnostic

Current innovation portfolio across horizons.

02

Strategy

Allocation across H1/H2/H3.

03

Governance

Stage-gate and metrics per horizon.

04

Sustain

Quarterly portfolio review.

Benefits

Portfolio Discipline

Explicit allocation prevents Horizon 1 dominance.

Future Optionality

Horizon 3 investments preserve future optionality.

Capital Allocation

Capital matched to horizon-appropriate metrics.

Talent Development

Talent rotation across horizons builds capability.

Frameworks & Tools

  • — Three Horizons
  • — Stage-gate
  • — S-curve
  • — BCG matrix

Industries

  • — SaaS
  • — Financial Services
  • — Healthcare
  • — Manufacturing
  • — Retail
  • — Energy

FAQ

70/20/10 right?
Industry-average. Mature companies bias more toward H2/H3. Crisis companies bias more to H1.
H3 stage-gate?
Different metrics: option value, strategic fit, learning velocity. Not financial returns.
H2 ventures?
Internal ventures, partnerships, M&A all valid H2 vehicles. Choice depends on capability and pace.
Refresh?
Annual portfolio review minimum.

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