As companies mature, they often face declining growth as innovation gives way to inertia and registered training organisations (RTOs) are no the exception.
In order to achieve consistent levels of growth throughout their lifetimes, RTOS must attend to existing businesses while still considering areas they can grow in the future. New funding models, new regulations, changes in training packages, new technologies, and constant changes in workplace practices and conditions, are setting the vocational education needs of the future.The three horizons framework provides a structure for RTOs to assess potential opportunities for growth without neglecting performance in the present.
Horizon 1 – Defend and extend core businesses
Horizon 1 contains the businesses that generate profits and cash flow today. These businesses may still have some growth potential but, eventually, they will flatten out or decline. They provide the skills and resources for growth. Innovation in horizon 1 businesses is about finding better ways to deliver the current business. You should aim to shore up your competitive position and unlock the remaining potential in the core businesses.
Although businesses may spend 100% of their resources on horizon 1 activities, you should aim to limit this to around 85% to free up resources to invest in future growth activities.
Horizon 2 – Build emerging businesses
Horizon 2 contains businesses on the rise: fast-moving, entrepreneurial ventures that may or may not be generating profits in the short term. They need continuing investment to finance rollouts. They are expected to become significant profit generators over the medium term. Innovation in horizon 2 businesses is about bringing new ideas to fruition. You should aim to build capabilities and fuel growth in new businesses.
Businesses typically spend about 12.5% of business resources on horizon 2 activities.
Horizon 3 – Create options for future businesses
Horizon 3 is about seeding options today for the future, some of which will prove successful and contribute significant profits in the long term. This may involve undertaking or partnering in research activities, pilot projects and possibly start-ups.
Innovation is horizon 3 is about identifying and nurturing options for the future. Businesses typically spend around 2.5% of resources on horizon 3 activities.