Why Non-Profit Organizations Should Use the McKinsey Three Horizons Framework

Understanding Three Horizons

Introduction to Three Horizons

Meet the McKinsey Three Horizons Framework, a trusty playbook helping organizations – even the charitable folks – juggle growth and keep their game strong right now. First popped onto the scene in The Alchemy of Growth back in ’99, this model breaks down growth into three snappy bits. Each bit represents different timelines and innovation flavors, from cranking up today’s operations to dreaming up tomorrow’s big ideas (McKinsey).

Horizon one is all about fine-tuning your current gigs that rake in the dough and pile up the profits. Horizon two is where fresh and exciting ventures get their time in the spotlight. Then, horizon three takes you on a long-haul ride into growth adventures, like high-flying research projects or all-new business concepts. This model keeps organizations from getting too comfy with their present wins and gears them up for future twists and turns.

Evolution of the Model

The Three Horizons concept kicked off in the 20th century out of necessity, urging businesses to nail the balance between their current hits and future dreams. It highlights the need for companies to be nimble, running today’s show while also cooking up tomorrow’s breakthroughs (Steve Blank). Time has shown this model as a guide for smart resource management, urging companies to spread their bets across all three horizons wisely.

Back in the day, cracking the code on revolutionary ideas took forever, fostering a strategy that combined existing products, tiny tweaks, and big, crazy projects. Businesses are nudged to keep tabs on opportunities across all three horizons, flexing their plans to keep up with market changes and societal shifts. The emphasis here is juggling all three at once, not one before the other, which is clutch for steady, solid growth (Harvard Business Review).

So, the McKinsey Three Horizons Framework gives organizations a nifty lens to tackle the messiness of strategy, keeping them sharp now while gearing up for the future. For a deeper dive on how this framework ticks, check out our insights on the McKinsey Three Horizons Framework for non-profits.

Core Concepts of the Framework

The McKinsey Three Horizons Framework gives organizations, including non-profits, a way to juggle today’s needs and tomorrow’s possibilities. This bit explains each of the three horizons, showing why they matter.

Horizon 1: Current Business

Horizon 1 is all about what you’re doing right now—your bread and butter. It’s about keeping your main business activities running smoothly. Here, it’s crucial to stick with what’s working and milk it for all it’s worth.

Key Things	What it’s about
Making Money	Business efforts that bring in the dough
Getting Better	Fine-tuning what’s already good
Where the Money Goes	Pouring funds into keeping today’s successes alive

The main gig for this stage? Sticking to the financial plan and keeping things ticking like clockwork. This also sets up for bigger things down the line in the other horizons.

Horizon 2: Emerging Opportunities

Horizon 2 is about spotting things on the rise. Here, organizations stretch their boundaries a bit with neat projects that could lead to tomorrow’s cash cows.

Key Things	What it’s about
Fresh Ideas	Cooking up new concepts and business setups
Broadening Horizons	Checking out new folks or places
Playing It Smart	Balancing risky business with smart strategies

This horizon helps organizations stay cool with changes in the market. The 70/20/10 rule advises throwing 20% of your resources in this pot, keeping a healthy focus on new while nurturing what you got. Learn more about this setup in the article on mckinsey three horizons framework process.

Horizon 3: Future Growth

Horizon 3 is all about the long haul and ambitious dreams. It’s packed with speculative moves that could, but might not, lead to huge payoffs.

Key Things	What it’s about
Ideas on the Forefront	Innovations that could change the game
Big Picture	Connecting with where the world might be headed
Betting on New Stuff	Chasing after startups or new shiny objects

Plowing into Horizon 3 comes with risks—some projects will flop. But these visionary steps are vital for long-term success. Tossing a modest 10% of resources this way encourages shooting for the stars. More on how to balance these ideas is in the article on mckinsey three horizons framework purpose.

By grasping what the McKinsey Three Horizons Framework offers, non-profits and other players can better tackle strategic planning chaos and decision drama. This structured approach gives leaders the tools to effectively drive value across different timelines.

Implementing the Three Horizons Model

Getting the hang of the McKinsey Three Horizons Framework in the nonprofit scene requires some smart planning and a few brain teasers. We’re gonna hit on the big ideas like how to juggle where your dough goes, the 70/20/10 rule, and rolling with the punches.

Balancing Resource Allocation

These organizations need to keep all balls in the air across three timelines, not just one after the other. Think of the x-axis like a timeline showing where you are and where you’re gonna be, and the y-axis as a measure of growth you’re aiming for by working on multiple angles at once. This helps the big wigs in the C-suite focus their attention and funds smartly, keeping both the lights on now and setting up for the long run, especially when everything outside seems topsy-turvy.

When shifting the cheddar around, you gotta have a plan, making sure no horizon gets left in the dust. Getting everyone on board with what this model is about is a must for it to work. Handy dandy tools like teamwork-friendly visual aids can really help nonprofits lay out and link up goals in a way that ticks all the boxes for each phase.

Applying the 70/20/10 Rule

That 70/20/10 rule is a big player in how the Three Horizons Framework divides up resources. The playbook says drop 70% of resources into Horizon 1 to keep the mothership running, 20% into Horizon 2 for your next mid-level hits, and the last 10% on Horizon 3 for those wild, exploratory shots. This way, you get a mix of keeping the lights on and chasing those pie-in-the-sky dreams.

By breaking it down like this, nonprofits won’t drop the ball on what’s urgent while still keeping an eye on their Bigfoot moments. It creates a roadmap that balances taking care of everyday stuff with chasing future jackpots.

Overcoming Challenges

It’s no cakewalk threatening the status quo with the McKinsey Three Horizons Framework. Challenges pop up when people shy away from change, or maybe they’re just not in the know about the model, or they can’t sync up resources neatly. Smashing these hurdles hinges on getting everyone comfy with fresh ideas and why this framework rocks.

Ongoing gabfests and educational tidbits about the ins and outs of the three horizons can ramp up understanding and get peeps on the same page. Laying out clear goals and using visuals for a clean look at targets helps keep the team clued into their slice of the bigger picture.

Getting ahead of potential hiccups and hyping a can-do spirit means nonprofits are more likely to nail the McKinsey Three Horizons Framework, setting the stage for making smarter choices and smashing long-term successes. To dive into more about this framework, check out our pieces on McKinsey Three Horizons Framework Process and McKinsey Three Horizons Framework Application.

Benefits and Applications

Andy and his team over at McKinsey cooked up the Three Horizons Framework with loads of perks for organizations, especially the do-gooders in non-profits, tweaking their strategic plans. Here, we get into how this nifty model helps tackle strategic choices, gets innovation ideas in sync, and sketches out plans for growing.

Strategic Decision Making

This three horizons deal is like a seasoned guide for the C-suite big wigs and strategy gurus to juggle the now and the next. By slicing tasks into three chunks, places can get a bead on where to throw their weight and dollars. This move shines in sketchy times when today’s hustle might snuff out tomorrow’s potential (McKinsey).

Horizon	Focus	Duration	Value
Horizon 1	Current Operations	Short-term (up to 1 year)	Solid and stable returns
Horizon 2	Emerging Prospects	Mid-term (2-5 years)	Growing revenue chances
Horizon 3	Future Potential	Long-term (5+ years)	Transformative future value

Innovation Strategy Alignment

By giving the Three Horizons Framework a whirl, non-profits can turbocharge their innovation game. By plunking some resources into Horizon 2, groups can whip up projects that introduce fresh processes or tech borrowed from other fields, opening up new cash flow routes or chances to revamp their schemes (Board of Innovation). This setup builds a vibe of ongoing creativity, empowering them to tweak community services while running day-to-day operations.

The ol’ 70/20/10 rule helps keep the seesaw balanced, with 70% of efforts on Horizon 1, a 20% nod to Horizon 2, and a nudge of 10% on Horizon 3 (Creately). Such a spread ensures non-profits match their innovation moves with their aims and stay in the game.

Establishing Growth Roadmaps

McKinsey’s blueprint shines when paving growth paths. Eyeballing each horizon’s clock and value tag (Board of Innovation), non-profits can highlight their strategic dreams and sniff out when those profits might roll in.

Laying out these growth plans turns a giant spotlight on strategy, easing the chatter amongst the crew and the folks funding the mission. It nurtures teamwork and pins everyone on the same map towards the organization’s big whys. This tool’s use in sketching growth paths helps non-profits steer through the mutable environments they work in.

Leaning on the McKinsey Three Horizons Framework does more than just polish internal choices; it supercharges the chit-chat outwardly, building tougher bridges with the wallets, buddies, and neighborhoods they serve.