Module 9•Unit 1 of 5•12 min

The Three Horizons

The Three Horizons model, popularised by McKinsey, is one of the most useful frameworks for managing innovation over time. It recognises that a business must simultaneously run its profitable present, build its emerging future, and seed its long-term options - and that these three activities are so different they need to be managed as separate horizons.

Three horizons running in parallel: today's core, tomorrow's growth, and the future's options.

Horizon 1 - Defend & extend the core

Today's profitable business. Mostly incremental innovation to sustain and improve it. Measured on profit and efficiency. Near-term.

Horizon 2 - Build emerging opportunities

Rising businesses that could become tomorrow's core. Breakthrough innovation, growing fast but not yet dominant. Measured on growth. Mid-term.

Horizon 3 - Create future options

Seeds and experiments for the distant future - transformative bets. Mostly options and learning, not yet real businesses. Measured on validated learning. Long-term.

A fatal mistake is judging all three horizons by the same yardstick. Apply H1's profit metrics to an H3 experiment and you will kill the future before it can grow. Each horizon needs its own metrics, funding, talent, and patience. Managing them identically is how big companies strangle their own innovation.

Discuss

Can you clearly name what sits in each of your organisation's three horizons? Which horizon is thin or empty?

Try this at work this week

List your innovation efforts under H1, H2, and H3. If H3 is empty or you are measuring everything by H1's profit yardstick, you have just found the two most common - and most dangerous - three-horizon mistakes.

Sources

Baghai, Coley & White, The Alchemy of Growth, 1999 (Three Horizons).
Global Innovation Institute (GInI), Foundations of Innovation body of knowledge.
Govindarajan, V., The Three-Box Solution, 2016.

The Three Horizons & Innovation Portfolios

Balancing the Portfolio