The Three Horizons & the P5 Standard
Sustainable Business Analysis: the 3 Horizons and the P5 Standard
In this article we will reflect on how the discipline of Business Analysis is fundamental for sustainable development, sharing two tools that can help companies anticipate and define their sustainable future: “The Three Horizons Framework and The P5TM Standard.”
In the current discussion on sustainability, it always begins with defining the vision, mission, strategy, and promoting a culture oriented toward sustainability. This evolution is of great relevance and emphasizes how Business Analysis is guiding the transformation process toward a more sustainable present and a better future.
Business Analysis as a Key Driver of “Sustainable Transformation”
Why is Business Analysis (BA) indeed the engine for achieving sustainable results?
This is rooted in its intrinsic nature of facilitating change to deliver valuable outcomes.
The answer can be found in the foundations of BA, which are summarized in the BABOK® Guide v3 by IIBA®, in the very definition of Business Analysis, in the Business Analysis Core Concept ModelTM, and in the BA Competency ModelTM.
Business Analysis definition
Today, enabling change involves adopting and implementing strategies and actions aimed at meeting the needs of communities, individuals, and environment, all considered stakeholders, through solutions that generate value from an economic, social and environmental perspectives and therefore also from a sustainable Business Analysis perspective.
Business Analysis Core Concept ModelTM
Having a deep understanding of the six core concepts and their interconnection and interdependence is essential for gaining a comprehensive view of Business Analysis and its sustainable application. These concepts outline how Business Analysts identify needs, collaborate with stakeholders, develop valuable solutions, consider the context, manage change, and ultimately deliver results aligned with the organization’s strategic objectives. This understanding is crucial for conducting effective business analysis and achieving successful project outcomes, especially when it comes to delivering sustainable solutions.
Business Analysis Competency ModelTM (BACCMTM)
The Business Analysis Competency ModelTM outlines the core competencies and skills that Business Analysts should possess to excel in their roles. This model has been designed to assist organizations and individuals in assessing strengths and areas for improvement in Business Analysis, thereby promoting change, professional development, and sustainable career advancement.
The BABOK® Guide, the BACCTM, and the BA Competency ModelTM contribute to developing the skills that all organizations should possess to operate adaptively and generate sustainable value. This sustainable value translates into positive impacts for both people and the environment, going beyond mere economic aspects and promoting shared and collective prosperity.
Let’s examine the Three Horizons framework, to understand the current context, even if sustainable, and make the most of our Business Analysis capabilities.
The Three Horizons Framework
The Three Horizons framework is a model of strategic planning and foresight that supports both organizations and individuals in managing complex challenges and transitions, including those related to sustainability. It was developed by Bill Sharpe and is often used to systematically explore and define the future. This framework is based on the following four fundamental principles.
1. The Three Horizons
- Horizon 1 (H1) – Represents the current state of the business, existing systems, practices, technologies, and business models. In the context of sustainability, it would include current environmental, social, and economic conditions and practices.
- Horizon 2 (H2) – Represents the future state of the medium term, typically spanning several years to a decade. It is the transition horizon where innovations and changes occur. It represents emerging trends, technologies, and initiatives that are currently in development but not yet widespread, and have the potential to disrupt existing systems. In the context of sustainability, it might include new green technologies or sustainable business models and practices.
- Horizon 3 (H3) – Represents the long-term vision of a desired future. It encompasses aspirational goals and transformative changes that individuals or organizations aim to achieve. It involves radical innovations that may not be feasible with current knowledge and technology. In the context of sustainability, this horizon would include ambitious objectives such as achieving a fully sustainable and regenerative future where environmental and social goals are met.
2. The Transitions
The Three Horizons framework encourages organizations and individuals to think beyond short-term goals and consider a more balanced and sustainable future. It recognizes that progressing from one horizon to another involves transitions. Moving from unsustainable practices of the first horizon to more sustainable practices of the second horizon requires change management and uncertainty management. Moving from horizon 2 to fully transformative changes of horizon 3 involves scalability and institutionalization of new practices.
3. Balancing the Horizons
Effective sustainability planning involves balancing efforts across all three horizons.
- Horizon 1 involves identifying current unsustainable practices and focuses on optimizing and efficiently managing current practices.
- Horizon 2 involves analyzing sustainable innovations and adapting to them.
- Horizon 3 requires a long-term vision and a strategy to imagine sustainability goals.
4. Ecosystem Perspective
Sustainability is not solely about individual organizations; it involves the broader ecosystem and requires collaboration among different actors to achieve sustainable results.
The Three Horizons framework encourages collaboration and ecosystem thinking, skills possessed by Business Analysis professionals.
In summary, the Three Horizons framework provides a structured way to address sustainability by considering the current state, the transition phase with emerging changes and innovations, and the future with long-term visions. It emphasizes the importance of managing transitions and takes into account the broader ecosystem in pursuing sustainability goals.
By doing so, it is possible to develop strategies and pathways to move towards a more sustainable future.
To implement such transformations, it is essential to have Business Analysis skills as an integral part of the organization’s activities. These skills guide current and future state analyses to understand the real needs of stakeholders, including considering social and environmental impacts, maximizing the effectiveness of technologies, and defining solutions to contribute to the creation of a sustainable world.
Now, let’s explore another fundamental standard for implementing strategies and executing projects that generate sustainable results over time: the P5TM Standard.
The P5TM Standard and Sustainable Business Analysis
“The GPM® P5TM Standard for Sustainability in Project Management“, developed by Green Project Management Global® (GPM®), aims to promote sustainability and sustainable practices in project management to achieve lasting results. It is based on five pillars: People, Planet, Prosperity, Process, and Product. The three categories, People, Planet, and Prosperity, are structured into subcategories (11) and elements (49) used to assess impacts and define measures.
This approach ensures that projects are not solely focused on functionality but also make a positive contribution to the community and the environment.
Use for Sustainable Business Analysis
By using the P5TM Standard in combination with the Three Horizons framework, sustainable projects can be directed as summarized below:
- Current projects in the first horizon focus on ‘Process,’ aiming to optimize sustainability in current operations, while also considering ‘People’ and ‘Planet.’
- Transition projects in the second horizon emphasize ‘Prosperity,’ ensuring that the transition phase is economically advantageous while adhering to sustainability principles.
- Future-oriented projects in the third horizon should fully incorporate the P5TM Standard, adopting a visionary approach that comprehensively addresses all its pillars.
The P5TM Standard allows the evaluation of strategic initiatives, considering the impacts of the product lifecycle, service impacts, and management process impacts on People, Planet, and Prosperity. It provides the elements necessary to identify actions and objectives that contribute to achieving the 17 Sustainable Development Goals (SDGs) and related ESG reporting, measuring results.
In this way, an iterative process of continuous improvement and adaptation is initiated within the current complex and uncertain context, where we are facing the challenge of ensuring a future for current and future generations.
Leveraging the Three Horizons framework and the P5TM Standard for Strategic Project Investments
Sustainability is more than just a buzzword; it is the future of business success. Organizations are gradually realizing that evaluating projects based solely on profits and losses is a short-term and limited approach. In this context, the Three Horizons framework and the P5TM Standard offer a broader perspective that highlights both immediate benefits and long-term value. Let’s see how organizations can harness these two tools for strategic project selection.
The P5TM Standard supports investment analysis by measuring the impacts of Products, Services, and Processes on People, Planet, and Prosperity. This assessment goes beyond Return on Investment (ROI) and considers Social Return on Investment (SROI) in all strategic projects. Furthermore, it provides objectives, key performance indicators (KPIs), and metrics to measure sustainability results in the medium and long term.
On the other hand, the Three Horizons framework can be a fundamental support in the strategic selection of projects, enabling a better understanding of different project types, related investments, and associated risks. We summarize them below.
Horizon 1 – “Business As Usual”
This first horizon represents “Business As Usual.” These projects aim to maintain the current operational state, primarily focusing on immediate profits and market demands. These projects provide stable returns and contribute to maintaining the current operational state. Investing exclusively in these projects may risk missing transformative opportunities. Therefore, it is advisable to consider these projects as a solid foundation but avoid allocating all resources to them.
Horizon 2 – “Sustainability Disruptors”
The second horizon consists of transition projects that challenge the current business model. These projects may involve more risks but offer a glimpse into the future of sustainability. Investing in these projects means embracing growth and adaptation, ensuring that an organization does not lag behind, as industries evolve. They balance the safety of first horizon projects while providing medium-term benefits with the potential to revolutionize business operations.
Horizon 3 – “The Visionary Future”
Projects in the last horizon represent the organization’s long-term vision, envisioning a future where sustainability is closely linked to profitability. These projects may not guarantee immediate returns but are a tangible manifestation of the organization’s commitment to a sustainable future. Investing in these projects goes beyond a mere financial decision; it is a concrete act that denotes a commitment and dedication to the broader goal of sustainability, which is an integral part of the corporate identity.
Organizations can use the “Three Horizons” as a selection criterion when deciding how to allocate funding. By examining potential projects through this perspective, they can ensure a diversified investment strategy:
- Short-Term Value: Primarily derived from first-horizon projects, which provide stability.
- Medium-Term Potential: Introduced by second-horizon projects, ensuring flexibility and resilience.
- Long-Term Vision: Embodied by third-horizon projects, guiding the organization toward its ultimate sustainable goals.
By integrating the Three Horizons framework and the P5TM Standard into investment decisions, organizations can shift from a profit-centered approach to one that evaluates overall impact and long-term sustainability. This ensures not only business continuity but also makes a significant contribution to a sustainable and well-designed global future.
The adoption of the Three Horizons framework and the P5TM Standard is achievable if organizations develop professional competencies in Business Analysis, Project Management, and create a corporate culture that embraces sustainability.
Business Analysis, Project Management, Sustainability must be an integral part of the corporate culture and professions to address current transformation challenges as active actors rather than passive subjects.
BABOK® Guide v3 – IIBA®
Business Analysis Competence Model® – IIBA®
Video: Business Analysis Competence Model® – https://www.iiba.org/professional-development/business-analysis-competency-model/
Three horizons: a pathways practice for transformation. Ecology and Society 21(2):47. Sharpe, B., A. Hodgson, G. Leicester, A. Lyon, and I. Fazey. 2016. http://dx.doi.org/10.5751/ES-08388-210247
Video: An Introductin to three horizons – https://www.youtube.com/watch?v=p90ZTg0svmM
The GPM® P5TM Standard for sustainability in Project Management Version 3 – GPM® Global https://greenprojectmanagement.org/gpm-standards/the-p5-standard-for-sustainability-in-project-management
Sustainable Project Management and the Three Horizons Concept: Looking at projects from different perspectives. September 11 – Dr Joel Carboni https://blog.greenprojectmanagement.org/
Sustainability Strategy: Mindset & Competenze, 29 Dicembre 2022 – Prassede Colombo https://www.bizanalysis.org/sostenibil