Planning Innovation Across Horizons

Understanding Three Horizons Framework

Overview of Three Horizons

The McKinsey Three Horizons Framework is like a trusty map for organizations navigating growth. It helps them keep an eye on new chances for expansion without neglecting what’s already working. This framework breaks down into three parts:

1. Horizon One: Here’s where businesses polish what they’ve got going on. It’s about squeezing every bit of juice from current operations to make sure profits are at their prime.

2. Horizon Two: Things get interesting here. This is where businesses peek into the future, spotting potential in new markets, products, or services that fit snugly with what they already do. It’s all about taking a chance and investing in what’s to come.

3. Horizon Three: This is the galaxy far, far away. It’s for those wild ideas that might turn into something big way down the line. Think of it as the lab for experiments that could eventually change everything.

By juggling these three areas, companies can keep the present ticking smoothly while the future unfolds. If you’re curious about diving into this tool properly, check out the McKinsey Three Horizons Framework.

Authors and Origin of the Model

Back in 1999, Mehrdad Baghai, Stephen Coley, and David White shook things up with their book “The Alchemy of Growth.” They rolled out the Three Horizons Framework, giving companies a clear path to nurture their innovative side while keeping their game strong.

Each horizon has its own vibe. Horizon One’s more about grit and getting the most out of day-to-day operations—it’s where team leaders shine. On the flip side, Horizons Two and Three are where big wigs step up, sketching out bigger plans and choosing new directions. This means they can adapt when the ground shifts under them.

Bringing the Three Horizons into the mix can light the way for new directions, making growth less of a mess. Curious about more strategies like this? Swing by scopy.me to explore!

Exploring Each Horizon

The McKinsey Three Horizons Framework is a handy tool for anyone in charge of a business, helping them zero in on growth chances while keeping an eye on what’s working now. It’s split into three horizons, each taking care of different parts of business planning.

Horizon One: Core Business Focus

Horizon One is all about the stuff that’s currently raking in the dough and keeping things afloat. It’s about squeezing everything you can out of what you’ve already got going. Keeping the lights on and the cash flowing are what this part’s all about. That’s why making sure things run smoothly and efficiently is a big deal (McKinsey).

Key Focus Areas	Description
Profit Maximization	Juice up current products/services to boost sales.
Performance Improvement	Make things work better and cheaper.
Market Share Maintenance	Keep your spot in the market and make sure customers stick around.

Strategies in Horizon One could mean breaking out the SWOT Analysis to get a grip on strengths and flaws, or using the Value Chain Analysis to find spots to tighten up.

Horizon Two: Emerging Opportunities

Horizon Two is when you put your feelers out for new stuff that fits your business and spreads your wings within the next couple of years. It’s about figuring out what you need to make those new ideas come true. Spending in this phase is deliberate and should pay off if the stars line up right with what you’re already doing (Lucid).

Focus Areas	Description
Market Expansion	Dig into related markets that match what you’re already selling.
Innovation Adoption	Drop some cash on cool new tech to stay ahead.
Resource Allocation	Figure out what you need to pull off the new projects.

The Business Model Canvas comes in handy here to picture how these fresh opportunities fit into the big picture.

Horizon Three: Long-term Growth Ideas

Horizon Three is all about planting seeds for down the road, dreaming up new stuff over the next 5 to 12 years. It’s about starting long-haul research, building new parts of the business, or trying brand-new markets. This is the big-picture stuff, where companies go for radical changes to stay successful (Lucid).

Focus Areas	Description
Radical Innovation	Cook up groundbreaking stuff that opens up new markets.
Strategic Alliances	Team up with others to tap into new tech or markets.
Visionary Projects	Back projects that promise a sustainable future for the biz.

The Ansoff Matrix is your friend here, helping spot and size up growth plans that line up with the company’s long-term dreams. The three horizons framework keeps an even keel between today’s needs and wild new paths, making sure nothing slips through the cracks as the company grows.