Three Horizons: Model for successful digitalization strategies
By addressing the current state, fostering innovation, and anticipating future shifts, the Three Horizons framework guides businesses in developing effective digitalization strategies that ensure long-term success and adaptability.
Three Horizons – At a glace
- Importance and Application: The importance of the “Three Horizons” framework lies in its ability to help organizations anticipate future disruptions and strategically plan for long-term transformation while managing present-day operations. Its application spans various fields, including business, policy, and innovation, where it helps identify emerging trends and guides decisions that balance immediate requirements with long-term goals.
- Conducting Three Horizons: Conducting the “Three Horizons” process involves mapping out the current state (Horizon 1), identifying emerging trends and innovations (Horizon 2), and envisioning a transformative future (Horizon 3). This approach facilitates stakeholder dialogue to prioritize strategies and actions that support a smooth transition from the present to the envisioned future.
- Strengths of the Method: The strengths of the “Three Horizons” framework lie in its ability to balance short-term needs with long-term aspirations, fostering innovation while addressing present-day challenges. It promotes collaboration among diverse stakeholders, providing a structured yet adaptable approach for exploring various future scenarios and identifying strategic opportunities.
- Weaknesses and Challenges: The weaknesses of the “Three Horizons” framework include the risk of oversimplifying complex systems that don’t neatly fit into the three horizons. Aligning diverse stakeholder perspectives can be difficult, and the uncertainty of future trends can make it challenging to take decisive action or make concrete decisions.
What is the Three Horizons Framework?
The Three Horizons Framework is a strategic tool used to explore and navigate future change by mapping out different time horizons. Horizon 1 focuses on the current system and its issues, Horizon 2 looks at emerging innovations and trends, and Horizon 3 envisions a radically transformed future. By using this framework, organizations can integrate foresight into their planning, balancing short-term stability with long-term innovation. It guides them through the transition from present challenges to future opportunities, ensuring they remain agile and prepared for what lies ahead.
How the Three Horizons works?
The Three Horizons works by organizing thinking into three distinct time frames or “horizons.” Horizon 1 represents the present state of affairs, focusing on sustaining current operations. Horizon 2 highlights emerging changes and innovations, while Horizon 3 envisions the future system’s transformation, enabling organizations to identify trends and opportunities that bridge the gap between the present and future.
When to use the Three Horizons Model
The Three Horizons Model is best used when organizations need to navigate complex changes and plan for the long term while maintaining current operations. It is particularly valuable during periods of uncertainty or disruption, helping to identify emerging trends and transformative opportunities. This model also encourages brainstorming sessions among stakeholders, fostering strategic conversations to align on both immediate goals and future aspirations.
Understanding the Three Horizons
The Three Horizons framework is a strategic tool that helps organizations manage the transition from current operations to future innovations. It allows businesses to balance present needs with long-term planning, guiding them through evolving challenges and opportunities.
Horizon 1: Maintaining and improving the core business
Horizon 1 represents the present, where the focus is on maintaining current operations and addressing immediate challenges. While essential for stability, this horizon faces the risk of becoming outdated as markets and technologies evolve. Companies need to continuously improve their existing systems while preparing for future disruptions.
Horizon 2: Exploring emerging opportunities and innovations
Horizon 2 is about experimenting with new ideas and innovations that could disrupt the current system. This phase involves exploring emerging trends and balancing investment in new initiatives with the need to keep core operations running. It’s a time of uncertainty, where organizations test new approaches and gradually shift resources toward promising innovations.d.
Horizon 3: Creating future disruptive innovations and business models
Horizon 3 focuses on transformative innovations that reshape industries. This long-term horizon is where disruptive technologies and business models take hold, creating a radically different future. Success in Horizon 3 requires visionary thinking, investment in breakthrough ideas, and the ability to navigate uncertainty, paving the way for long-term growth and leadership in a changing market.
Advantages of the method
The Three Horizons framework offers several key benefits. It encourages long-term thinking while addressing short-term needs, helping organizations balance current operations with future growth. By structuring the future into three horizons, businesses can manage immediate performance (Horizon 1), explore emerging trends and innovations (Horizon 2), and prepare for transformative changes (Horizon 3).
The method fosters collaboration by bringing together diverse stakeholders, promoting open dialogue and shared understanding. It also helps organizations identify strategic opportunities early, enabling them to stay agile and responsive in fast-changing environments. Additionally, the framework reduces the risk of stagnation by encouraging continuous innovation and ensuring businesses remain competitive.
Finally, it supports better decision-making by offering a clear structure for prioritizing resources and managing uncertainty, ensuring that companies invest wisely in both their present and future.
Challenges in Implementing the Three Horizons
Implementing the Three Horizons can be challenging due to the difficulty of aligning diverse stakeholder perspectives and priorities, which may lead to conflicting views on future directions. Additionally, organizations may struggle with the uncertainty of predicting future trends, making it hard to commit to long-term strategies. Furthermore, balancing short-term operational needs with the exploration of long-term innovations can create tension, as resources may be limited and immediate results are often prioritized.
Step-by-Step Guide to Using the Three Horizon Model
To effectively implement the Three Horizons model, organizations should follow a well-defined process that balances the needs of the present moment while actively planning for future growth and transformation. This approach allows companies to manage immediate operational concerns while keeping an eye on innovations that may shape the longer term.
By adopting three horizons thinking, businesses can create a strategic framework that helps them remain adaptable and future-ready. Below is a detailed step-by-step guide to applying the Three Horizons model in your organization:
- Gather Stakeholders: Assemble a diverse team from across the organization, including key decision-makers and representatives from different departments. This ensures a range of perspectives and insights for a holistic approach.
- Define the Current State (First Horizon): Analyze your organization’s current operations, products, and services. Identify strengths, weaknesses, and areas where the core business may need improvements to stay competitive.
- Explore Emerging Trends (Second Horizon): Discuss emerging trends, technological shifts, and market changes. Brainstorm new ideas and innovations that could disrupt the current business model or offer new growth opportunities.
- Envision the Transformative Future (Third Horizon): Develop a shared vision of a radically different future. Think about what the business could look like in the long term, with completely new products, services, or business models.
- Identify Strategic Actions: Based on the insights from all three horizons, prioritize actions that align with both immediate needs and long-term aspirations. Develop a roadmap that balances investments across the horizons.
- Monitor and Adapt: Set metrics to measure progress across all horizons and regularly review the framework. Be ready to adjust strategies as market conditions evolve and new opportunities or challenges arise.
- Communicate Findings: Share the outcomes and strategic plans with the wider organization to ensure alignment and foster engagement with the overall vision and upcoming initiatives.
Frequently asked questions and answers
The McKinsey Horizons Model is a strategic framework that helps organizations prioritize and manage growth initiatives across different time frames. It divides growth opportunities into three horizons: Horizon 1 focuses on core businesses with established products, Horizon 2 explores emerging opportunities that can drive growth in the near term, and Horizon 3 emphasizes long-term, transformative innovations. This model encourages companies to balance investments across these horizons to ensure sustainable growth and adaptability in a changing market.
The three types of horizons in the McKinsey Horizons Model are Horizon 1, Horizon 2, and Horizon 3. Horizon 1 focuses on existing core businesses and optimizing current operations for immediate returns. Horizon 2 involves exploring new growth opportunities that are adjacent to the core business, while Horizon 3 emphasizes long-term, innovative initiatives that may not yield immediate results but have the potential for significant future impact.
The simple and intuitive framework can be applied by first gathering stakeholders to map out the current state of the organization in Horizon 1, identifying challenges and opportunities. Next, participants can explore emerging trends and innovations in Horizon 2 that could impact the organization’s future, fostering discussions on potential strategies. Finally, the team can envision and articulate a long-term transformative vision in the third Horizon, empowering the organization to create a roadmap that balances immediate actions with future aspirations.
The Three Horizons method is suitable for organizations seeking to navigate complex changes and plan strategically for the future, including businesses, non-profits, and government agencies. It is particularly beneficial for leaders and decision-makers who want to foster innovation while managing current operations and addressing immediate obstacles. Additionally, the framework can be applied in collaborative settings, making it effective for teams aiming to align diverse perspectives and engage in forward-thinking discussions and an innovation strategy.
The Three Horizons Model is beneficial for organizations and leaders involved in strategic planning and innovation, as it helps them navigate complex futures. It is particularly useful for businesses facing disruption, value changes, industries undergoing rapid change, cultivating future consciousness, or teams looking to foster creativity and long-term thinking. Additionally, policymakers and non-profits can apply the model to anticipate societal shifts and develop more resilient strategies and a transformative innovation, i.e. in a rural community development.
Sources:
- https://www.researchgate.net/profile/Andrew_Curry2/publication/253444667_Seeing_in_Multiple_Horizons_Connecting_Futures_to_Strategy/links/5540aca70cf23222272f346c/Seeing-in-Multiple-Horizons-Connecting-Futures-to-Strategy.pdf (accessed 18.05.2021)
- http://intrepid-cost.ics.ulisboa.pt/wp-content/uploads/2017/01/Three-Horiszons-working-with-change.pdf (accessed 18.05.2021)
- http://www.triarchypress.net/uploads/1/4/0/0/14002490/curry-3hsystems-compass-01-15.pdf (accessed 18.05.2021)
- https://samiconsulting.wordpress.com/2017/11/22/three-horizon-mindsets/ (accessed 18.05.2021)
