TL;DR

• Delphi's first paid survey is live! Agency leaders can sign up, get the quarterly pulse results, and participate in optional paid research opportunities. We target a compensation rate of ~$500/hr for valid leader responses.
• Planning for the future can be a luxury, but when you're ready, there are ways to do it that are more successful than others.
• The first issue is when agencies overindex on their core business lines without investing in future services.
• Instability in core agency ops can draw resources away from future bets.
• Some agencies do little more than talk about future capabilities. Success requires investments and actually walking the walk.
• Ensure that everyone's on the same page with respect to what's required of various initiatives. Timeline confusion and misalignment are major killers of H2 and H3 initiatives.
• Shops can set themselves up for success by: clearly defining the three horizons, setting clear goals for each horizon, allocating real resources, working horizon discussions into quarterly planning, and ensuring that projects actually graduate out of horizons periodically.

New Research Opportunity

Delphi members got their first paid research opportunity this week!

We’re digging deep into how agencies’ approach to web dev/design is changing, and we’d love your input.

If you're an agency leader, join Delphi, and we'll send over a survey invite.

We value your time. We target a compensation rate of ~$500/hr for valid leader responses.

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Wanna participate without joining Delphi? You can take the survey here, but only Delphi members will be compensated.

Successfully Implementing the Framework

Last time, I wrote about how I’m seeing a strong undercurrent of “wtf do we do next?” in the industry.

A bunch of this uncertainty is due to the market factors at play (sign up for Delphi and get the latest report for more), but a big chunk is still well within agency control. There’s historically been a mismatch at agencies between investing in their core business activities and setting themselves up for success in 3-5 years.

I get it, planning for the future can be a luxury.

There’s a ton to get right before many agencies can think long term. Revgen being at the top of the list (here’s a playbook to help with that).

Once leaders can take a breath and spend some time thinking longer than the next fire, they have to be careful about how much effort, energy, and time their team devotes to new initiatives.

It’s incredibly easy to get sucked into devoting a ton of resources to what’s next, to the point that the core business suffers.

Enter the Three Horizons framework that I summarized last time.

I got a few questions from that newsletter from leaders who said they’ve tried to do this before and struggled. So, this time, I want to dig into the common reasons that can trip leaders up and some patterns that successful shops share.

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Pits Leaders Fall Into

Even though the Three Horizons concept is simple, operationalizing it inside an agency can be tough. Here are common pitfalls that cause the model to break down:

Over-indexing on H1

The most common pitfall by far is ignoring anything that could be H2 or H3 and putting all the resources into H1 work. This is incredibly attractive because once H1 activities are defined, the mental load on leadership lightens.

It’s easier for leaders to run a known entity. Branching out is seen as risky. It seems to go against all the “specialize or die” commentary that myself and others have been pounding the table on for a decade now.

It isn't, but it can seem that way at first blush.

The thing is, it’s risky to stand still too, but the risk is hidden. Without innovating, you’re letting the market decide for you. Sometimes this works. A ton of agencies rode various tech waves to success without ever needing to make any serious pivots. The owners sold and rode off into the sunset. That doesn’t work when the market’s as borked as it has been since 2021. When the market is choppy, the firms that adapt win, and we’ve seen this play out in the data for three years now.

Avoid over-indexing on H1 activities.

Fighting fires

I believe this one is a major cause of the over-indexing on H1 issue.

When a shop gets a curveball thrown its way, it may be forced to pull H2/H3 resources and redeploy them to fight the fire. This can be due to a ton of things, some of which aren't under leadership's control.

If the positioning is off, or reven isn't revgen-ing, or if ops are a mess, any one of these will lead to a greater frequency and severity of fires and make it impossible for a shop to think long-term.

Seek stability in core services first and then use them as a foundation for future experiments.

Paying lip service to H2 and H3

This might be just as common as the first two issues, and I blame the need to be seen as a thought leader for it.

There’s a lot of algorithmic pressure on leaders to discuss industry innovations.

That pressure extends well beyond SEO into social media and even in-person conferences and events. Unfortunately, the H2 and H3 activities touted in slide decks aren’t always backed up by investments of time and money within the actual agency. These things only work if they’re invested in, and there are too many vapor-services out there that aren't contributing to the financial success of the agencies touting them.

Timeline confusion

This one’s less common, but when it happens, it’s deadly to H2 and especially H3 activities.

Sometimes, teams or individuals can misclassify initiatives as if they need to generate revenue or margins immediately. This confusion leads to mismatched goals and metrics, which makes teams either demand too much too soon from an embryonic idea or give a pass to an initiative that should be generating revenue or margins.

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How Agencies Can Do This Well

So what’s a leader to do? How can you actually use this framework to make life easier? As always, structure goes a long way.

Define the horizons

Map out your current core (H1). These are the services that drive 70-80% of your business. Note that this is way higher than the “50% of your focus” we told you to devote to H1 metrics last time.

Effort != revenue.

These should be services that you’ve operationalized. They’re relatively easy for your team to sell, and they generate consistent margins. These services have to be solid because we use them as the foundation for innovation. They’ll fund the whole thing, so they have to run like well-oiled machines.

Identify the emerging services and divide them into H2 and H3 activities. What are the emerging services your team’s already seeing some traction with? What are clients asking for that’s new? Which way’s the industry trending?

Frontline salespeople, devs/designers/marketers, and account managers are gold mines for this kind of data.

Set clear goals for each horizon

Everyone needs absolute clarity about what each service line needs to do for the agency. Define what success looks like within the context of a growth plan.

This means Horizon 1 has goals like revenue, utilization, and profit margins on existing services.

Horizon 2 might have goals such as “Launch and win 3 pilot projects in [New Service] by next year” or “$X revenue from new offerings in 18 months.”

Horizon 3 goals could be more exploratory, like “Prototype [New Product] and sign up 10 beta users” or even qualitative learning milestones.

The key is to translate vision into actionable targets. This guards against the “all vision, no action” pitfall by making sure each horizon has a roadmap.

Allocate resources

Commit a portion of your agency’s capacity to Horizons 2 and 3 from the start, otherwise H1 will consume everything.

For example, you might formally allocate 20% of your annual budget and 10% of team hours to H2 initiatives and around 10% of the budget and 5% of team hours to H3 experiments.

Adjust the percentages based on your risk appetite, but set a baseline. This could mean hiring an extra team member who spends part of their time on R&D, earmarking a fixed dollar amount for innovation, or setting OKRs that dedicate staff hours to new projects. By budgeting for it, you create organizational permission to work on the future.

Integrate your horizons into quarterly and annual planning

Don’t silo your horizon initiatives from the rest of the business.

In your quarterly business review, have a segment dedicated to Horizon projects in the vein that you review sales pipelines or key client accounts. This keeps future-focused work on the leadership agenda. It also helps in making course corrections: you might decide to fast-track an H2 idea if the market is moving faster than expected, or pause another if it’s not panning out.

Embedding horizons into routine planning legitimizes them and maintains momentum.

Pilot, Iterate, and Graduate Projects

Treat each Horizon 2 or 3 initiative as a mini experiment.

Start with a pilot or prototype, then iterate based on feedback. Use lean metrics appropriate to each horizon (for H2, maybe early revenue or client adoption; for H3, maybe successful tests or user interest).

If a pilot succeeds, have a plan to “graduate” it: a Horizon 2 service can move into your core offerings (becoming new H1 revenue) once it’s proven. If a Horizon 3 experiment shows promise, it can move into H2 for further development.

Conversely, be willing to shut down experiments that aren’t bearing fruit, thus freeing up resources for new ideas.

This graduation process is how your horizon planning leads to the actual evolution of your business model over time.

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Small Shifts Yield Sizable Improvements

There's not a ton to it, but there are some weirdly common reasons why this framework fails at a lot of shops. Hopefully, this helps shine a light on the major ones and helps you get something good out of the framework.

-Nick