McKinsey Three Horizons of Growth
This article explains the Mckinsey Three Horizons of Growth model in a practical way. After reading it, you understand the basics of this strategy tool.
What is the McKinsey Three Horizons of Growth model?
The American consultancy firm McKinsey is the founder of the Three Horizons of Growth innovation strategy model. In terms of strategy, it is good for most companies to focus on growth and innovation.
For many companies, sitting still is indicative of decline. Growth is a general objective of organisations and most recognise that innovation is crucial in achieving it. However, innovation is not a one-off event, but rather is a continuous process.
The McKinsey Three Horizons of Growth model can help to prevent a gap between what an organisation wants in the future and where it stands today. This McKinsey Three Horizons of Growth model gives companies step-by-step insight into their growth and the achievement of their ultimate strategic goal.
Three different horizons are categorised and placed in a model. On the one hand, the y-axis represents the value for the company and the profitability (value) from low to high. On the other hand, on the x-axis, the time is arranged in order: from short (3 to 12 months), to long (5 to 7 years).
It is a strategic framework that helps to align the focus consistently between today's needs (Horizon 1), the future state of the company (Horizon 3), and the steps that lead to it (Horizon 2). The framework provides organisations with insight into stumbling blocks that prevent growth and innovation.
Through setting clear goals, all layers within an organisation know what is expected of them:
First of all, the value of the organisation must be identified: what does the company stand for, and what is its core business? Within the McKinsey Three Horizons of Growth model, this horizon focuses on the short term, from three months to a year. By knowing what the organisation does, all core activities can be described, as well as the associated unique selling points and other success factors. The main activities of the organisation are safeguarded, maintained, and communicated strongly to customers and competitors. It may not be profitable yet, but it lays the foundation for further expansion and innovation. The next step is to develop activities that best fit in with the current activities. Strategies such as market penetration (e.g. setting up a new branch), or product development (e.g....
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