Three Horizons of Growth

What it is

A simple series of three “S-curves” to support strategic thinking about the movement from one core business to the next, along three “horizons” related to value and time: (1) extending and shoring up the core business (e.g., through incremental improvements); (2) building and growing emerging businesses that can become the next core business (or complement them); and (3) exploring future possibilities (some, but not all of which will eventually get built). 

When to use

When thinking through longer-term growth strategy of an organization, group of market offerings, or series of improvements internal process in a dynamic markets and/or organizational environments where continuous transformation is the norm. 

When not to use

When you are playing in mature markets with slow rates of change or for parts of an organization that are focused on incremental process improvement rather than breakthrough transformation. 

Tradecraft tips

As a rule of thumb, most organizations will spend most of their time and effort in horizon 1 (defending and extending the core), then 2 (building new businesses), then 3 (exploring future possibilities)—although this last horizon should have the largest number of items since many of them will never pan out. While horizons 1 and 2 are generally populated by taking an inventory of current efforts and identifying key gaps or opportunities, populating horizon 3 is typically more of a “blue sky” ideation effort.  

Source

This tool was developed at McKinsey and brought to general awareness through the book The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise (2000), by Mehrdad Baghai, Stephen Coley, and David White. The International Training Centre of the International Labour Organization has a very nice manual on how to apply the framework to work in foresight in especially dynamic markets here.