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Charles Alter
Consultant, United States
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Innovation Strategy: the Three Horizons of Growth (McKinsey)
One of ways of thinking about innovation strategy is to use the 3 Horizons of Growth developed by Steve Coley at McKinsey.
The framework provides a useful mold to formulate an organization's product and service portfolio strategy. It's a diagnostic tool that allows for evaluating the health of a product/service strategy pipeline and for setting up the alignment of short, medium, and long term (innovation) plans of an organization. The model describes 3 innovation horizons in the following manner:
- Horizon #1: The Core Business that is most associated with the company in its current state. This typically is an established business that requires most of the attention of the company's employees and generates the bulk of the sales volume, cash flow and profit. The focus in Horizon #1 is on "Defending and Extending" the core business and on superior execution.
- Horizon #2: Includes all Emerging Opportunities that could be a variety of new business opportunities that the company has developed, licensed or generated from partnerships and strategic alliances. The focus in Horizon #2 is on leveraging "Positional Advantage" and forcing these opportunities to further prove themselves and gain steam, possibly to become part of the core business in the future.
- Horizon #3: Represents Innovative New Ideas for profitable growth in the future. Focus here is on clustering ideas into themes, sorting out the good and great ideas and feeding them so they can emerge from the Horizon #3 incubator to become Emerging Opportunities.
Source: The Alchemy of Growth, Mehrdad Baghai, Stephen Coley, and David White.
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Jeff Miles
Business Consultant, Australia
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Three Horizons Concept Great thought prompter. I will use this at my next client meeting as an ice breaker and see what they come up with.
Thanks Charles.
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Edith Ohri, Israel
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New Ventures have only Horizon 3 Why starting with a core business when in new ventures many times the business is in the future, i.e. horizon 3 without passing the first 2 suggested stages.
This model has been existing a long time in all school books.
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Jorge Urrea
Consultant, Mexico
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3 Horizons of Growth I agree with Edith Ohri and, as usually, the article only presents the "what" to do and not the "how" to do.
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Vincenzo Rogione
Management Consultant, Italy
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Three Horizons: Why? Though I appreciate Charles' comment, in my opinion the framework appears conceptually obvious and does not provides much practical conclusions.
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Anna hanooman
ICT Consultant, Trinidad and Tobago
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Extensions for the 3 Horizons of Growth I agree with Ohri. In my humble opinion, the three horizons listed are not necessarily engines of innovation or growth since it seems to be based on the fundamental management of a business unit rather that new or next steps to growth and innovation.
While the three horizons have merit, it seems to me more like applications for determining whether a business is poised to diversify.
In this case, the model should be extended to reflect a phased structure; i.e. horizon four (phase two)- new ideas and analysis, horizon five- new product testing and assessment, horizon six- new market launch.
Phase three- measurement and analysis (however structured) and then the cycle begins again back to phase one (horizons 1-3) where the company re assesses its growth and then decides where it wants to be.
Though I agree that there are hundreds of business models in existence and while no one model may be a perfect fit, ultimately, what works for a business may very well be a hybrid of past strategic models.
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M Y Zainudeen
Management Consultant, Sri Lanka
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Three Horizons of Growth is in Practice for Ages Edith is correct, not only this model is in the school books, it has been practiced in the real world for centuries. There are many business entities which are engaged even in 4,5 horizons in my country though it is a tiny island.
Let us look at this in a different angle and make some improvement in order to make it as new model.
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Charles Alter
Consultant, United States
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Three Horizons of Growth Relevant for Established Businesses @Edith Ohri: admittedly, the three horizons are meant for existing, established businesses with a reasonably strong core business.
The dilemma is that core businesses are always evolving and too many companies don't see changes until they're too late. The three horizons model shows companies how to think about profitable growth in a systematic manner - and the types of skills needed in each horizon. Ultimately, a company needs to move new products from the idea stage into the core to generate revenue and refresh their business model.
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simon haafs
Student (MBA), Netherlands
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How to Implement the 3 Horizons within 1 Company I underscribe the model. The challenge is to integrate the the three horizons within one company, essential for succes. It needs though different cultures, structures and even HR policy for the different horizons. That's where the challenge comes in.
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Gary Stead
Director, United Kingdom
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3 Horizons : Sources for Ideas for Innovation It seems the real innovation is in horizon 3. The open question is "Where to hunt for the ideas to put into the mixer". Procurement leaders will tell you 80% of innovation comes from suppliers. I know a CEO who expects it come from his team. Others solicit innovation from customers - and still others keep a wary eye on competitors. Where else would you look?
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Rajan Johri
India
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Combine the Three Horizons of Growth with the 5 C's of Marketing Strategy You can augment the 3 horizons with the 5 C's of Marketing Strategy to be grounded into application (1. Customer Needs, 2. Company Skills, 3. Competition, 4. Collaborators and 5. Contect.
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MdL Mario TERRALAVORO
Interim Manager, Italy
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Balancing Product's Innovations and Future Products The 3 Horizons combine looking at future products developments and new trends of the market and new consumer's trend with improve the current products.
You can create a new friendly product extending your product line, invent something really new. But avoid to copy a successful product to be only a follower with small margins.
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KATHRYN STEINER, MBA
Entrepreneur, United States
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Three Horizons of Growth Understandable and Useful Across Sectors / Industries @Charles Alter: hello Charles, you have explained these critical elements so that I can apply them to my experience working in the past for Globalmed, here in Scottsdale, a company which has evolved strategically and with respect to product offerings dramatically in the past 4 years. The elements as you have presented add to the business concepts I acquired during my MBA, and could be useful across all sectors and industries.
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Feraidoon Bakhtiari
CxO / Board, Iran
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3 Preparation Stages for Horizons of Growth I like the idea and I share the concepts with participants in my workshops. But prior to that you need to scan the environment in order to identify red and green spots on your strategic policy orienta...
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Saeed Khodaee, Iran
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Status Quo to Boost Future Plans @Edith Ohri: undoubtedly, without maintaining the status quo, it might be jeopardizing to jump to step three. Any strategy must fulfill the requirements of a standard competition and base its future p...
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SAMUEL NDUATI MBUGUA
Management Consultant, Kenya
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The Three Horizons and Competitiveness Whereas the main objective of the three horizons is the development of an innovation strategy, its emphasis is on the development of the competitive strategy. This is because instead of exploring on n...
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marc romano, United States
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3 Horizons of Growth is Still Valuable as a Foundation This basic framework is very sound. It provides a solid platform for expansion and application depending on the market environment, industry dynamics and industry susceptibility to change.
I would s...
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Leodegardo M. Pruna
Professor, Philippines
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Three Horizons of Growth The first horizon to my mind is where an enterprise should maintain both a comparative and competitive advantage. The second horizon is where an enterprise should have developed a competitive edge res...
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Sorni Tindanzo Namateng
Student (University), Ghana
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Three Horizons of Growth are Practical Thank you Charles, today is my first time at 12manage and its obvious I've been missing a lot. This three horizons of growth model sounds rather practical to me and I think, as potential entrepreneur,...
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Tadeusz Sudol
Strategy Consultant, Poland
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Where to Hunt for Innovation Ideas? @Gary Stead: The answer is: everywhere, but the process of innovation development has to be structured. See: Roberto Verganti, Design Driven Innovation and other publications. I used his concepts in p...
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Raghu Bala
Manager, United States
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The Right Distribution of Resources over the 3 Horizons Businesses struggle with distributing resources to make strides on all three horizons. Resources that are capable of contributing to horizon #3 are almost always stuck in defending core businesses (i....
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Osama Kamal
Management Consultant, Egypt
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Exploring Uncertainity with the 3 Horizons of Growth It's like these 3 horizons. I will use the model in my own career. In Egypt businesses nowadays have high uncertainity and this may last for a while. As a consultant, I need to explore more business i...
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SAMARENDRA KUMAR MOHANTY
India
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Innovation Strategy: the Three Horizons of Growth (McKinsey) @Edith Ohri: steps 1-2 are required to generate resources and provide backup in case of failure of step 3 which is more risky....
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Brijesh Dave
Manager, India
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Three Horizon Concept for Challenging the Status Quo Good concept to generate thoughts to challange the status quo, will talk about this my next meeting. Thanks Charles....
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Falk Heinrichsohn
Business Consultant, Portugal
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Look out of the Window and see 3 Horizons The three horizon approach may help with the problem of innovation of companies if management is involved too much in maintenance engineering. If they would "look out of the window" as Peter Drucker o...
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Dr zahra gheidar
HR Consultant, Iran
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Time is Important Point Certainly, these frameworks are usual steps for establishing a company but, we should consider that innovation and entrepreneurship will not create anything unless by creativity.
For a creative compa...
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Charles Alter
Consultant, United States
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Three Horizons of Growth all about Innovation and Marketing Thank you to everyone who has replied and shared their thoughts on this subject. One parting thought from Peter Drucker, who said there are only 2 critical functions in any business: innovation and ma...
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Aladdien Mohamed
Manager, Saudi Arabia
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Don't Focus too much on Horizon 1 Actually I have a comment on stage 1. Organizations should not consider its current form as their main business nor keep defending its existence all the time. We need to question periodically its rele...
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Jaap de Jonge
Editor, Netherlands
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Senior Managers Should Focus on Horizons 2 and 3 That's right, the 3 horizons of growth are especially useful for top managers to remind them of the 3 levels of thinking about the future of their firm, and to spend most of their time on H2 and H3....
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Cristina Isenrath
Director, Argentina
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Where are the Resources.. @Gary Stead: more looking inside ourselves... To find resources we need to have time to think, to care about ourselves......
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GAMANSON
Management Consultant, Sri Lanka
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Protect your Bread and Butter First Any business has to ensure first it survives in the short and middle terms and it is the core business that generates revenue for survival. Hence as the model suggests horizon one is the core business...
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Martin Kerr
Project Manager, Australia
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Consistent Context Using Horizons In our organisation the 3 horizons are standard dialogue. Whilst most people within our organisation see them as timelines rather than capabilities, it works for us....
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Jaap de Jonge
Editor, Netherlands
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All 3 Horizons are Important, but... @Gamanson: all 3 are (equally) important for any business, but but senior / top managers of large organizations should not spend too much time on the current business (unless there is a special need t...
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Sandy Findlay, United Kingdom
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The 3 Horizons of Growth Help to Decide on Innovation Resources Excellent model for drawing attention on where resources should be focused. I sometimes struggle with getting clients to focus on these different horizons but this will definitely help in explaining t...
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Francesco Cuoco, Italy
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3 Horizons of Growth... Only for Large Companies? Seems a correct approach for medium- large companies.
What about SMEs? Can the same approach give valuable results?...
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Julius Belleza
CEO, United States
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3 Horizons of Growth Reminds and Helps us Prepares for Change I agree with Gamanson and Aladdien Mohamed. For business survival, especially in current global economy, H1 and H2 are priorities.
The definition of innovation does not mean we have to invent someth...
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Charles Alter
Consultant, United States
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Three Horizons of Growth at SMEs @Francesco Cuoco: For SMEs (small - medium size enterprises) the model works, but needs to be scaled to the situation in such company to analyse the core business and existing efforts at growth and in...
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FUNSHO
Accountant, Nigeria
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Consider the Reasons for Growth in 3 Horizons Business growth cannot be limited to these 3 horizons. We need to critically consider the widening future in line with the business objective. As soon as the business achieves its start-off objective,...
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Olawale Christopher Olamiju
Financial Consultant, Nigeria
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3 Horizons Model - A Good Start for the Strategic Planning Process... No doubt, this 3 horizons model is not cast in stone and it does not necessarily mean that all businesses must follow in that linear progression.
I agree with some opinions on this forum that it bes...
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Leodegardo M. Pruna
Professor, Philippines
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Time to Spend on Each Innovation Horizon @Zahra Gheidar: there is no fixed rule on how much time to spend in each horizon. What is necessary is for the enterprise to move to the next after is has ascertained that it is ready to deal with th...
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ENRIQUE CARLOS POZO, Spain
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Transversal Innovation I think the three horizons must be parallels, not serial. The graphic gives an idea of each stage beginning when the horizon before is finished.
The innovation must be transversal for all horizons o...
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KATHRYN STEINER, MBA
Entrepreneur, United States
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Differentiating Critical Functions and Costs @Charles Alter: innovation is probably also known as research and development (R&D). This component of a business is essential, I agree. However, which projects to pursue is also essential. Marketing ...
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Htin Kyaw Myint
Manager, Myanmar
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Quite Useful Model for our Organisation In fact, it is quite a good model for our organization, which is currently declining slowly and could use a systematic view at these 3 horizons....
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KATHRYN STEINER, MBA
Entrepreneur, United States
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Model for Industries That Have Complex Logistics This model would be interesting to translates into businesses such as the food service industry, where logistics can be complex, and with fluctuations that are difficult to measure to a degree. Consid...
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Dr zahra gheidar
HR Consultant, Iran
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Length of Horizons is Vital Certainly measuring a precise, definite time and degree in each horizon is unreasonable, but it is so vital for companies that they understand the approximate length of each horizon!...
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John Moses
Manager, Nigeria
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3 Horizons Model is about Strategy Stages Looking at the three horizons, it is all about different strategies deployed by organisations at different stages from inception to maturity:
- Horizon one is where the firm deploys its core competen...
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Francesco Cuoco, Italy
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The 3 Horizons for Growth I think that the model is quite generic. The real issue from my side is to understand: is the 3 Horizons Model fully applicable in a context of economic downsizing.
Moving from first wave to the seco...
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Charles Alter
Consultant, United States
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Stabilizing Current Business can be hard in case of Disruptive Innovations @Francesco Cuoco: I think that's exactly the point of the three horizons model. Companies must first stabilize their current business (horizon one), so the challenges of economic downsizing are very r...
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jasmin, Lebanon
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This is Only a Theoretical Framework This framework helps you how to think but not how to do it! I still believe SWOT analysis is more useful....
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Francesco Cuoco, Italy
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Combine 3 Horizons of Growth with SWOT Analysis @Jasmin: I guess the two methodologies complement each other.
Use the 3 horizons as baseline, identify actions to be performed using SWOT....
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Ionelia Iftimie
Director, Romania
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3 Horizons of Growth I think this proposal would be an interesting start for developing innovation by developing creativity at each stage of growth!
Also, I think it would be interesting if during the process of identify...
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Margaret
Management Consultant, Australia
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Broader Horizon Scanning @Gary Stead: Other (related) Industries, Research and Trends in the Market are all sources of ideas for innovation....
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Paramathmuni srinivas Kumar
India
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Transformation to a New State and Transcending the Existing State If new ideas have been developed, we need to quickly transform the policies, process and procedures as the requirements are in flux. Hence the need to adopt agile practices for transformation.
Once a...
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S. Lago
Business Consultant, Canada
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3 Horizons of Growth for SMEs @Francesco Cuoco: I believe that Small and medium-sized enterprises (SMEs) are involved in trying to establish a level-one core business and simultaneously employing level two and three practices.
By...
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Maurice Hogarth
Consultant, United Kingdom
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Looking over a Three-leafed Horizon? A couple of concerns about this model:
The term "horizon": a horizon is as far as we can see. Depending upon our location this may be near or far: limited or blue-sky. Strategic business developm...
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A.J.Jegadheeeson
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How to Apply the 3 Horizons Concept It is very nice and apt concept.
But we would like to know the "HOW" part of using or applying this concept in real life.
It need not be only in business; it can be applied to our personal life also...
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Jaap de Jonge
Editor, Netherlands
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How to Apply the 3 Horizons of Growth. Example @A.J.Jegadheeeson: You can apply this 3 Horizon framework in different ways, depending on the situation. Here's a simplified "3-Horizon Group Brainstorm" model to get you started and tailor to your ne...
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Maurice Hogarth
Consultant, United Kingdom
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Metamap the Three Horizons Workshop @Jaap de Jonge: Agreed with the approach; you might use the Metamapping process. This is a form of written conversation, following the precise principles given, which ensures that EVERYONE has the opp...
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Molokanova
Professor, Ukraine
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The Third Horizon The current state of society demonstrates that the world community does not keep up with the CHANGES that are taking place, as a result of which the problems of society become the subject of theoretic...
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