What are the 3 Horizons of Transformative Innovation?

There’s a particular kind of flavour of frustration that comes with working on ideas that matter.

You can see the problem clearly. You understand, perhaps more deeply than most, why the way we currently produce food, generate energy, build with materials, or organise healthcare is fundamentally mismatched with the biophysical realities of the planet we live on. Yes, yes, you’ve done the reading. You’ve run the numbers, and it all looks pretty grim. You know deep down that something needs to change.

And yet, and yet. The market doesn’t reward you for it. 

The funding isn’t structured for it. 

The regulatory environment wasn’t designed with you in mind. 

The incumbents who dominate your sector have every structural incentive to keep things exactly as they are.

This isn’t bad luck. And no, it isn’t a gap in your pitch deck. It’s a systems dynamic. And understanding it – like, really, really understanding it – is one of the most useful things any innovator, investor, or institution working on transformative change can do. Especially if you’re interested in systems innovation and systemic investing.

So without further ado, please welcome the Three Horizons Framework.

What Are the Three Horizons?

Originally developed by Bill Sharpe and colleagues at the International Futures Forum, the Three Horizons Framework is a way of mapping innovation across time – not just what’s happening now, but what’s emerging, and what’s genuinely possible if we’re willing to think long enough and act with enough courage.

The key insight is simple yet striking: not all innovation is the same. And treating it as if it were – applying the same metrics, the same funding logic, the same timelines to fundamentally different kinds of change – is one of the core reasons why so many genuinely transformative ideas fail to reach the scale they deserve and can be seen as a naive form of progress, as outlined by the folks over at Civilisation Research Institute in their development in progress article.

Daniel Schmachtenberger: “A Vision for Betterment” | The Great Simplification 126

It’s also worth noting how best to read the framework. The instinct is to move through it linearly. Smoothly transitioning through H1, H2 asand H3, but Sharpe suggests a different sequence: H1, then H3, then H2. Why? Because without a clear picture of the third horizon, the direction towards which we are travelling, you can’t really make the crucial distinction between innovation that’s genuinely transitional and innovation that’s just extending the life of the old world with a shitty green coat of paint.

So let’s walk through all three, then see what they actually look like across the domains that matter most right now.

Horizon One: The World As It Is

H1 is the dominant system. Business as usual. The technologies, industries, institutions, and practices that currently generate the most revenue, employ the most people, and are embedded most deeply into the infrastructure of daily life.

H1 isn’t inherently villainous. It’s foundational. Coal and gas power plants keep hospitals running. Conventional agriculture feeds billions. Synthetic fibres clothe the world. Pharmaceutical supply chains that depend on petrochemical inputs have saved countless lives. Daniel Wahl is right to caution against throwing the baby out with the bathwater – H1 systems provide essential services without which civilisational collapse wouldn’t be a metaphor. It would be Tuesday.

But H1 is also, by definition, a system optimised for the world that was. It carries the momentum of two centuries of industrial logic. It benefits from regulatory frameworks built around it, financial systems designed to service it, and cultural norms that naturalise it. And it has a very strong interest in staying exactly where it is.

This is where the structural bias lives. The sunk cost fallacy. The law of increasing returns. Game-theoretic patterns that reward incumbents for defending territory rather than reimagining it. H1 doesn’t just persist through inertia – it actively shapes the conditions in which new ideas are evaluated, resourced, and too often quietly defunded. That’s not a conspiracy. It’s just how dominant systems behave.

The deeper problem is that H1 is running up against hard limits. Planetary boundaries are not negotiable. The biophysical reality of finite resources, destabilised climate systems, and ecological overshoot means that a system optimised for extraction and throughput cannot be sustained indefinitely. At some point – and we are at that point – H1 stops being a foundation and starts being a liability.

 

Horizon Three: The World That’s Trying to Emerge

H3 is the long view. It’s the vision of the future that grows from fringe activity in the present – ideas, practices, and ways of organising that are currently marginal but are far better fitted to the world that’s actually coming than anything H1 has to offer.

H3 innovation doesn’t just improve things. It reimagines them. It operates from different assumptions – about what value is, about what the relationship between human systems and living systems should look like, about what it means for something to be genuinely healthy rather than merely efficient. It draws on living systems thinking, bioregional economics, circular design, and a serious reckoning with planetary limits.

From an ecoliteracy perspective – drawing on Wahl’s work in Designing Regenerative Cultures – there is an inherent bias within H3 innovation toward solutions that create conditions conducive to life. Not just less bad. Actually regenerative. That’s a fundamentally different design brief than anything H1 logic can produce.

Working in H3 means being comfortable with uncertainty. It requires sitting with ambiguity and genuine not-knowing. It means building things for which no market yet fully exists, validating assumptions for which no benchmark has been established, and navigating regulatory environments that weren’t designed for what you’re doing. It means befriending the unknown as a creative condition rather than a problem to be eliminated.

It also means facing what the framework calls the multiple valleys of death – the funding gaps, regulatory barriers, infrastructural absences, and cultural resistance that await any innovation trying to hit escape velocity from H1’s gravitational pull. This is not easy terrain. But it is the terrain that matters most.

 

Horizon Two: The Bridge – and Its Dangers

H2 is where most of the action is, and where most of the complexity lives.

H2 innovations are transitional by nature: more ambitious than sustaining innovation, but still legible enough to the funding logic and market structures of H1 to attract resources and attention. Electric vehicles. Plant-based proteins. Green hydrogen pilots. Mass timber construction. Precision fermentation platforms at early commercial scale. These are all H2 plays – bridging the divide between the old paradigm and the emerging one.

But here’s where Sharpe’s framework becomes genuinely essential, and genuinely sobering.

Not all H2 innovation is equal. The critical distinction is between H2– and H2+.

H2– innovations get absorbed back into H1. They improve the dominant system without challenging it. They extend its life, reduce its costs, soften its edges – but they don’t change its fundamental trajectory. Carbon offsets that allow fossil fuel companies to keep drilling. ‘Sustainable’ product lines that represent 3% of a fast fashion company’s output. Bioplastics that require virgin feedstocks or can’t actually be composted at scale. These are H2–: innovations that look like progress but function as prolongation.

H2+ innovations resist that absorption. They continue forward – toward the third horizon. They build new infrastructure, new relationships, new norms. They demonstrate that different assumptions about value, time, and return are not just idealistic but functional. They create the conditions for H3 to eventually become the new H1.

The tragedy is that most structural forces bearing on H2 innovation push it toward minus rather than plus. Capital markets with short time horizons. Regulatory frameworks designed around incumbent interests. Procurement systems that default to the proven over the possible. The ever-present risk that a genuinely transformative idea gets acquired, diluted, or outcompeted by an H1 player with deeper pockets and a longer reach.

Bill Sharpe calls this H2– behaviour one of the major impediments to transformative change. Not because the people involved are acting in bad faith – but because the system they’re operating within selects for it. Understanding this dynamic isn’t cynical. It’s clarifying. It tells you where the leverage points are. And it tells you what kind of support H2+ innovation actually needs – which is decidedly not more of what H1 already provides.

What This Looks Like Across the Domains That Matter

Theory earns its keep when it meets the real world. Here’s how the three horizons map across five critical domains of civilisational transition – and the systems that underpin them.

Energy

H1 is coal, gas, and large-scale centralised grids. It’s the infrastructure that powers the modern world and the entrenched interests that depend on it staying exactly that way. H1 innovation here is carbon capture bolted onto existing coal infrastructure – a way of extending the dominant system’s life without questioning its logic.

H2– is utility-scale solar and wind that feeds into the same centralised grid architecture, owned by the same players, governed by the same market logic. Cleaner inputs, same structural assumptions. Greener H1, not emerging H3.

H2+ is distributed renewable microgrids, community energy ownership models, peer-to-peer energy trading, and the genuine decentralisation of both generation and governance. It’s energy systems designed around bioregional resource endowments – what a place can actually sustainably produce – rather than globally traded commodity markets.

H3 is an energy culture, not just an energy system. One in which energy literacy is embedded in how communities are planned and governed. Where sufficiency is a design principle rather than a sacrifice. Where living buildings generate, store, and share energy as a natural function of being well-designed. Where the question shifts from ‘how do we keep powering this system?’ to ‘what kind of system actually needs this much power?’

 

Food Systems

H1 is industrial monoculture agriculture: fossil-fuel-dependent, input-intensive, ecologically destructive at scale, and deeply entrenched through subsidy regimes, trade agreements, and land ownership patterns built up over generations. H1 food innovation is higher-yield GM crops and more efficient logistics for the same global commodity supply chains.

H2– is ‘sustainable’ agriculture that reduces chemical inputs or improves soil health metrics while maintaining the same commodity logic – food as a globally traded, price-competitive product optimised for yield and shelf life. Organic certification on monocultures. ‘Responsibly sourced’ labels on the same extractive supply chains.

H2+ is regenerative agriculture, agroforestry, and the serious commercialisation of alternative proteins – not as niche products but as genuine infrastructure for a post-extractive food system. It includes precision fermentation platforms, insect protein supply chains, seaweed and algae cultivation, and aquaculture systems designed around circular nutrient flows rather than linear throughput. It’s alt protein companies like Vow, Magic Valley, and the broader cohort of Australian food tech ventures demonstrating that a different food system isn’t just possible – it’s investable.

H3 is a food culture grounded in bioregional abundance. Where what people eat reflects where they live, what their landscape produces, and what their ecosystems can regenerate. Where the relationship between food, health, soil, and community is understood as a system rather than a supply chain. Where Indigenous food knowledge is not a heritage curiosity but an active design intelligence shaping how we grow, harvest, and relate to country.

 

Materials and Biomaterials

H1 is petrochemical-derived plastics, synthetic textiles, and construction materials with enormous embodied carbon – materials systems that have enabled extraordinary technological complexity but are fundamentally degenerative at their resource base. H1 innovation here is making existing plastics marginally more recyclable, or reducing the energy intensity of aluminium smelting.

H2– is bio-based materials that substitute plant-derived feedstocks for fossil ones without redesigning the underlying system – bioplastics that still end up in landfill, ‘natural’ fibres grown in monocultures with high pesticide loads, bamboo flooring shipped halfway around the world and finished with solvent-based coatings.

H2+ is materials designed from the ground up around circular and regenerative principles: mycelium composites, bacterial cellulose, seaweed-derived biopolymers, hemp-lime construction systems, and the development of genuinely local and regional biomaterial supply chains. It’s the intersection of advanced biotechnology and deep ecological design – materials that are functional, beautiful, and restorative. Companies like Alt Leather, Compound, ULUU and Fungi Solutions are working in this space right now, in Australia, with real products and real traction.

H3 is a materials culture in which the distinction between natural and manufactured begins to dissolve – where what we build with is grown, where waste is a design failure rather than an inevitability, and where the material flows of human civilisation are nested within and actively regenerative of the living systems that make them possible. Cradle to cradle not as a certification but as a cultural default.

 

Health Systems

H1 is the pharmaceutical-industrial complex: centralised, treatment-focused, optimised for acute intervention rather than systemic resilience, and structured around intellectual property regimes that concentrate value at the expense of access. H1 health innovation is faster drug discovery pipelines and more efficient hospital administration software.

H2– is a digital health technology that improves the efficiency of the existing system (better diagnostics, wearable monitoring, AI-assisted triage) without questioning the fundamental orientation toward disease management, rather than looking upstream and promoting health generation. Smarter H1, not emerging H3.

H2+ is systems-oriented health innovation: microbiome science that understands human health as an ecological relationship, preventative and community-based health models, biosecurity systems designed for genuine resilience rather than rapid reactive response, and the development of localised biomanufacturing capacity that reduces our terrifying dependence on globally concentrated six-continent, just–in-time pharmaceutical supply chains – a dependence COVID-19 exposed with particular clarity (and ferocity).

H3 is health understood as a function of ecological integrity. A civilisation that recognises human health and planetary health as inseparable – where the conditions for wellbeing are designed into how we build, grow, move, and relate, rather than retrofitted through medical intervention after the fact. Where the first question isn’t ‘how do we treat this?’ but ‘what kind of conditions produced it, and how do we redesign those?’

 

The Supporting Systems: Finance, Education, Governance

None of the above happens without transformation in the systems that surround and shape innovation itself. These are perhaps the most critical H2+ plays of all – because they determine whether every other domain gets the conditions it needs to transition.

H1 finance is short-horizon, exit-obsessed, and structurally mismatched with the biological, regulatory, and relational rhythms that transformative innovation actually runs on. It rewards speed, scalability, and defensibility – none of which map well onto the patient, place-based, ecologically embedded work of genuine H3 innovation. As we’ve explored in our writing on bioeconomy financing, the dominant funding architecture actively selects against the ventures most likely to matter.

H2+ finance looks like multi-capital investment vehicles, bioregional financing facilities, patient capital structures, and the serious development of non-extractive funding models – instruments that can hold the complexity of what Ethan Soloviev calls the eight forms of capital, and evaluate return across all of them, not just the financial one. It’s proof that different assumptions about value, time, and return are not just idealistic but operational (see our article on Financing the Bioeconomy for our take).

H1 education produces specialists optimised for the existing economy – people trained to think within their field, rarely about the system their field is embedded in. It produces capable operators of H1, and occasionally talented H2– innovators. It rarely produces the people H3 actually needs.

H2+ education – and we’d argue this is part of what CoLabs is trying to build – produces what we might call ecoliterate, systems-capable generalists: people who can hold complexity, navigate uncertainty, collaborate across disciplines, and bring genuine intellectual humility to hard problems. People who understand that the challenges they’re working on aren’t technical puzzles with optimal solutions – they’re living, adaptive, deeply entangled messes that require a different quality of attention. See Zac Stein’s work, Education for a Time Between Worlds, or Pedagogies of Collapse by Ginie Servant-Miklos or the world of Vanessa Anderotti speaks to this new form of education.

 

H1 governance is regulatory capture and the normalisation of incumbent advantage – the phenomenon by which rules designed to govern markets end up being written by the markets’ most powerful players. H3 governance is adaptive, place-based, and genuinely capable of creating space for transformative innovation to emerge – rather than being absorbed, delayed, or quietly outcompeted by those with the most to lose from a world that actually changes.

 

Where CoLabs Sits in All of This

The innovation CoLabs supports falls squarely in the H2 to H3 space – with a deliberate focus on helping H2 ideas avoid the gravitational pull of that sneaky minus and continue forward, entering escape velocity of the current system as it traverses toward the third horizon.

That means supporting founders working on genuinely transformative ideas in biomaterials, alt proteins, climate tech, and circular systems. It means providing the infrastructure – physical, intellectual, relational, and financial – that these ideas need to cross the valleys of death that await them. And it means doing so with a complexity-informed, challenge-led approach that doesn’t pretend the problems these founders are working on are simple problems with simple solutions.

Because they aren’t. And they deserve support (and complexity-informed funding) that knows the difference.

The three horizons don’t just describe what’s possible. They describe what’s necessary. The H1 world is running out of road. The H3 world is emerging. The work of H2+ – the work of genuine transition – is the most important work of our era.

And it starts with giving the right ideas the conditions they need to grow.

Still Curious?

• Funding the Third Horizon
• Evaluating disruptive innovation in the age of transition – Daniel Wahl
• The Three Horizons of Innovation and culture change – Daniel Wahl
• Doughnut Economics Action Lab
• Swinburne University Centre for Transformative Innovation
• Griffith University Centre for Systems Innovation
• The Halogen Playbook for Systems Innovation

Related Frameworks

• Adaptive Cycle: from Gunderson and Holling, describes different phases of change to which the horizons might be applied
• Two-Loop Model: sees the horizons as emergent and dependent on processes like creating connections and nourishment of networks

References

• Sharpe, B. Three Horizons: The Patterning of Hope. (Triarchy Press, 2020)