How do you think about the growth and innovation of your organization? Focus on the Now, New, and Next in your strategic planning. Free slide deck in PowerPoint and Google Slides presentation format.
Are you considering where your business can grow in the next few years? Maybe you’ve heard of the three-horizons strategy framework from McKinsey - and perhaps you haven’t.
In any case, it’s one of the most effective ways to think about growth for almost any company. A three-horizon framework is a strategy tool with roots in organizational psychology and decision science that helps leaders understand which opportunities will have the most significant impact on innovation in their company and how to get there.
It’s a relatively simple model with enormous implications for how we think about growth at our companies and find new opportunities for expanding our businesses.
- This blog post covers everything you need to know about the three-horizons framework and why it matters as you plan your organization’s future growth.
- At the end of the post you can download the three-horizons model presentation (PowerPoint format or Google Slides) as free and fully editable template.
The 3 horizons model
everything you need to know about the model
What is the three-horizons growth framework?
The basic idea of this strategy framework is that companies have three horizons of growth — a short-term horizon, a near-term horizon, and a long-term horizon. The model was first articulated in The Alchemy of Growth by Baghai, Coley, and White in 2000.
Each of these horizons represents an opportunity to expand the business by increasing revenue, increasing profit, or bringing in new customers.
The idea is that companies that can focus on all three horizons at once are more likely to succeed than those that focus their energy on just one.
The challenge is that it’s easy for companies to lose focus on one or two of these horizons as they get caught up in the day-to-day.
Why should you care about the 3H growth framework?
It is important to have a growth strategy for your business in place. But how do you get started?
The 3H growth framework can be a helpful guide to get the whole company or your team thinking about the different opportunities for growth and innovation. To get maximum impact from the 3H framework, leaders must prioritize sharing this thinking with their teams across their business.
Horizon 1: Where to focus to achieve immediate impact (1-3 years)
The first growth horizon is focused on near-term impact and the core business. This is where you’ll find the lowest-hanging fruit that will generate revenue quickly and boost your company’s bottom line.
For example, you can increase sales with your current products or target new customers in your existing markets. You can also boost growth by reducing costs and increasing efficiency. As you think about this growth horizon, it’s important to understand where you’re starting from. Take a good look at the current metrics of your business, whether they be revenue, profitability, or another metric, and identify the low-hanging fruit that will give you an immediate boost.
Once you do, you can focus your team’s energy on tackling the low-hanging fruit and start seeing results quickly.
Horizon 2: Where to invest for near-term growth (2-5 years)
The second horizon of growth is where you can start to invest in longer-term growth initiatives. This could mean investing in new products and services, expanding into new markets, or investing in new business models. Some of these initiatives may take a bit longer to show up in your company’s metrics but will be crucial for growth in the long run.
As you start thinking about this growth horizon, think about where your business is currently. You may be at a point where it makes sense to start looking outside your current markets to find new customers for your business. It may also be an excellent time to focus on a particular product line that has seen growth but is still below expectations.
Horizon 3: Where to focus for long-term growth and future opportunities (5+ years)
This is where the majority of your growth efforts should be focused.
To succeed in this horizon, you’ll need to think about how customers use your company’s products and services, what customers’ broader needs are, and where new technologies will have the most significant impact.
You’ll want to invest in initiatives that will impact your business long-term, like finding new ways to connect with customers or expanding into new markets. Technologies that are likely to have asignificantg impact in the coming years, like AI, blockchain, and robotics, can also be a good area of focus for this growth horizon.
What is the key to success at each stage? Focus on the Now, New, and Next
Horizon 1: Superior and Excellent Execution for immediate impact, profitability, and value creation (NOW)
Horizon 2: Positional Advantage to ensure near-term growth and value creation (NEW)
Horizon 3: Insight & Foresight to ensure long-term growth and value creation (NEXT)
The Criticism of the Three Horizons Model
According to Steve Blank's HBR article 2019, the world nowadays is more dynamic, and the 3-time horizons are no longer constrained by time. In particular, Horizon 3 innovations can disrupt the status quo much faster than initially anticipated, especially when the time horizons are no longer constrained by time.
Today, with all the technological advancements, disruptive Horizon 3 innovations can be delivered as fast as projects for Horizon 1 in the existing product line.
McKinsey's three Horizons growth framework is an effective innovation strategy tool that helps companies consider the growth opportunities and where to focus to get the most significant impact.
The first horizon of growth is focused on achieving immediate impact, the second horizon is focused on near-term growth, and the third horizon is focused on long-term growth.
Discover our Alternate McKinsey Three Horizons Guides & Templates
Discover our Alternate McKinsey Three Horizons Guides & Templates
Please make sure to enhance your strategic planning with our additional content and resources.
McKinsey Three Horizons of Growth: A Strategic Framework for Business Expansion (published April 2023)
Achieving Balanced Business Grwoth: A Workshop Template on McKinsey's Three Horizons (published May 2023)
Sustainability and the McKinsey Three Horizons Model: A Path to Eco-Friendly Growth (published May 2023)
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