Why the McKinsey Three Horizons Framework Is Essential in Crisis Situations

Understanding Three Horizons Framework

The McKinsey Three Horizons Framework is your go-to game plan when you want to grow the business without dropping the ball on what you’ve already got going. It helps organizations look at new opportunities while keeping current operations on track.

Principles of the Framework

This framework rolls out in three parts, each focusing on a different flavor of business growth:

• Horizon 1: It’s all about what’s steady and familiar. These are your bread-and-butter businesses, the ones keeping the lights on and the money rolling in. It’s crucial here to keep your operations running smoothly and make sure customers are smiling.

• Horizon 2: This is where things get exciting. Picture new markets, shiny products, or services that could be the next big thing. It’s about getting out there and trying stuff that could skyrocket your growth down the line.

• Horizon 3: Imagine the crazy ideas that could change everything, even if they’re a long shot. Innovations here might not pay off right away, but they just might rewrite the playbook for future profits and success. (McKinsey).

This smart setup helps folks in charge, like management consultants, executives, and strategists, to strike the right balance between what’s working now and what could work tomorrow.

Framework Application in Crisis

When things go south, this framework is your best friend for making quick but smart moves. Think of situations like the COVID-19 chaos—rapid decisions, high stakes. Here are some strategies to keep in mind:

1. Take a Breath: Pause for a second. Look at what’s happening before jumping into action.

2. Involve More People: Get input from a variety of folks. Different angles can spark smart ideas.

3. Make Critical Small Choices: Focus on smaller, game-changing decisions that can ripple into bigger outcomes.

4. Set Up a Nerve Center: Establish a control room for fast and clear communication and coordination.

5. Empower Leaders: Let the leaders lead. Trust them to make gutsy calls with their experience and insights (McKinsey).

The Three Horizons Framework also paints the picture of what’s known as an ‘ambidextrous organization’—juggling current work while sprinkling in innovation magic (Studio Zao). Businesses jumping on board with this approach during a crisis can better steer innovation pursuits while keeping core operations sturdy.

Three Horizons Framework Overview

The McKinsey Three Horizons Framework is like a map for businesses to find new ways to grow while keeping the current stuff running smoothly. It’s got three parts: the Basics (Core Businesses), the Next Big Things (Emerging Opportunities), and the Game-Changers (Transformative Innovations). This setup helps when times are tough.

Horizon 1: Core Businesses

Horizon 1 is all about what the company already does—existing products, services, and markets. Think of it as making the most of what you’ve got by tweaking your current business setup with the tech and know-how you already have. The big to-do list here is getting better at what you do, making customers happier, cutting down costs, and upping efficiency.

Companies should poke around for ideas that use the stuff they already have to either jazz up their products or make things smoother. It’s a smart way to keep things steady and profitable, even when the world feels like it’s spinning.

Core Business Innovations	Key Focus Areas
Process Optimization	Boosting operational efficiency
Product Enhancements	Making existing products better
Customer Experience	Smarten up service delivery

You can dig deeper into why core businesses are a big deal by checking out our write-up on mckinsey three horizons framework horizon one.

Horizon 2: Emerging Opportunities

Horizon 2 is about taking what you already know and trying it out somewhere new—whether that’s fresh markets or fields. It’s all about spotting and creating products or services that go hand-in-hand with what you’re already doing.

Companies should aim to be a bridge between what they’re doing now (Horizon 1) and those big, disruptive ideas (Horizon 3). This keeps a company looking ahead and ready for whatever the market throws its way.

Emerging Opportunities Innovations	Key Focus Areas
New Product Development	Spinning up complementary products
Market Expansion	Trying out new places or people
Partnerships	Teaming up with others to innovate

For more tips on making the most of emerging opportunities, take a look at our piece on mckinsey three horizons framework horizon two.

Horizon 3: Transformative Innovations

Horizon 3 is where the big, daring ideas live. This is where companies play around with crazy new technologies and aim for brand-new customer groups. The goal is to shake up the business world and grab a serious edge over the competition.

A perfect case study? Look at Amazon’s Web Services—they kicked off in 2002 and were pulling in over 63% of Amazon’s operating cash by 2020. Talk about a game-changer.

Transformative Innovations	Key Focus Areas
Disruptive Technologies	Playing with high-tech solutions
New Customer Segments	Reaching out to folks you haven’t tapped yet
Business Model Redesign	Rethinking how value gets to the customer

Get the lowdown on these disruptive innovations and their role in a business’s playbook over at our write-up on mckinsey three horizons framework horizon three.

By wrapping your head around these horizons, organizations can use their resources wisely, keep the innovation juices flowing, and hold strong when the going gets tough.

Implementing Three Horizons in Crisis Management

Using the McKinsey Three Horizons Framework during a crisis helps businesses juggle what’s happening now with plans for the future. It’s like having a roadmap to guide you through the chaos while still aiming for the stars.

Balancing Core Business and Future Growth

When everything’s on fire, sticking to your core is key to keeping the boat afloat. The Three Horizons Framework suggests keeping an eye on where you’re at now and where you want to go tomorrow. In other words, invest in what you’re doing right now but keep an eye out for that next big thing and even bigger game-changers.

Horizon	Focus Area	Key Actions
Horizon 1	Core Businesses	Keep things running smoothly and tweak what you have to tackle today’s issues.
Horizon 2	Emerging Opportunities	Spot little tweaks and new trends that could help you bounce back stronger.
Horizon 3	Transformative Innovations	Work on big ideas that’ll set you up for future wins, with an eye on the long haul.

To juggle these areas well, it’s smart to get loads of folks involved in decision-making. More folks mean more ideas and a better shot at coming up with creative ways to deal with tough times.

Strategic Decision-making During Crisis

When things go south, making smart calls means knowing where you want to end up and being ready to move fast. That’s when the McKinsey Framework comes in handy. It helps leaders figure out what matters now and what will matter later on.

1. Take a Breath: Don’t rush. Step back and really look at what’s going on before deciding.
2. Empower Leadership: Let people who’ve got good instincts and guts make the calls.
3. Establish a Nerve Center: Set up a squad to keep an eye on things and jump on issues fast.

This way of thinking not only helps you put out fires today but also plants seeds for tomorrow’s growth. By putting your chips on all horizons, you reduce risks and snag the new growth chances that crisis often unveils. For more scoop on this framework, check out our articles on how to apply this tool and the detailed process of the McKinsey Three Horizons Framework.

Three Horizons in Action

McKinsey’s Three Horizons Framework is a nifty guide for businesses to spot growth chances during rocky times. We’ll dive into how it works, with real-life examples, and see how maverick employees, known as intrapreneurs, are shaking things up in the innovation department.

Business Scenarios and Innovation Programs

With the Three Horizons Framework, companies can smartly map out different paths and kickstart inventive programs. It splits future opportunities into three timelines, helping businesses dish out resources and pick what to focus on.

Horizon	Focus Area	Example
Horizon 1	Core Businesses	Giving a little upgrade to what’s already working, like automating stuff with current tech. See more at Studio Zao
Horizon 2	Emerging Opportunities	Rolling out new gadgets or services that gel with what’s already there, like SKY Q’s box that melds YouTube and Netflix. Learn more: Studio Zao
Horizon 3	Transformative Innovations	Groundbreaking moves that flip the script, like Amazon Web Services (AWS), turning the business model on its head. Here’s the scoop: Studio Zao

By figuring out where an initiative fits in these horizons, bosses can whip up spot-on innovation efforts matching their current setup. This gives a clear path for balancing what’s working now while jumping on new ideas and game-changers.

Role of Intrapreneurs in Innovation

Within this playbook, intrapreneurs—those go-getter employees with entrepreneurial spirit—are crucial for sparking new ideas and steering innovation. They’re the link across different timelines, making sure the balance between steady sailing and bold exploration is just right.

Intrapreneurs can take charge of projects fitting in Horizon 2 and Horizon 3, spotting what’s cool and translating it into money-making ideas. They pull together teams from across the company to noodle over new concepts, while also keeping a firm grasp on current strengths.

By backing these intrapreneurial rockstars and brewing up an innovation-friendly culture, companies can build new skills, keep up with shifting market demands, and tackle crises better. This approach doesn’t just tap into what’s already around but also pushes for constant change, keeping them a step ahead in the game.

For more on how this framework kicks into gear and its uses, dig into the McKinsey Three Horizons Framework or peep examples of its usage across different industries.