what is business planning horizon

Three Horizons Framework To Help You Grow (With Template)

Ready to take your company's strategic planning to the next level? Let's dive into the McKinsey Three Horizon Framework!

We'll break down the framework's three horizons of growth and give you some real-life examples of companies that nailed it. Plus, we've got a free template for you to use in your own strategic planning process .

Here’s what you’ll discover in this article:

What Is The Three Horizons Framework?

What are the three horizons of growth.

• What Does Mckinsey's Three Horizons Of Growth Help You To Achieve?

How Do You Apply The Three Horizons Model To Your Business?

Hidden trap of the three horizons framework you should be aware of (and how to avoid it), three horizons framework template, conquer the future with cascade 🚀.

⚠️ McKinsey's framework maps future growth, but the future needs action today. Cascade Strategy Execution Platform bridges the gap between foresight and execution. Talk to our experts to translate your 3 Horizons insights into a clear, actionable plan for sustainable growth.

McKinsey’s Three Horizons Framework is a strategic planning approach used to help organizations manage their growth strategy and unlock transformational potential. It takes an adaptive management approach based on three distinct categories of growth —Horizon 1, Horizon 2, and Horizon 3— which provide a framework for identifying and responding to changes in the business environment.

The Three Horizons Framework, also known as the Three Horizons of Growth, consists of three horizons:

• Horizon 1 : Maintain and defend the core business

Horizon 2: Nurture emerging business

• Horizon 3 : Create genuinely new business

Let’s take a look at each a bit more in-depth:

Horizon 1: Maintain & defend core business

This is the first horizon of growth and focuses on leveraging existing products and services. Think of it as "business as usual." For a retailer, this would include the day-to-day goals associated with selling, marketing, and serving your product and customers.

Some other examples of Horizon 1 initiatives could include product upgrades, new features, or adding new services to existing products. Or introducing a subscription model for existing products or launching new services such as customer service, technical support, or digital marketing.

Your goals in Horizon 1 should be focused on improving margins, improving current business processes, and increasing short-term profits.

The second horizon of growth focuses on taking what you already have and extending it into new areas of revenue-driving activity. It’s all about trying out new approaches as a response to the shifts in the market. You should focus on creating new innovations in the existing market or exploring new markets.

There may be an initial cost associated with your Horizon 2 activities, but these investments should return fairly reliably.

This is based on them being an extension of your existing business model. Examples of Horizon 2 strategic initiatives include launching new product lines or expanding your business geographically.

Some of these initiatives will be absorbed into your business as usual, others will pave the way for the emergence of radically different strategic initiatives under Horizon 3.

Horizon 3: Create genuinely new business

This horizon is the third and most distant of the planning horizons. It’s typically characterized by long-term goals and investments that have unprecedented strategic or competitive implications. The third horizon can encompass up to ten years or more and focuses on creating growth opportunities, exploring new markets, and making discretionary investments to capitalize on those opportunities.

For example, your organization could invest in the development of new products, the research and development of AI or automation, and the development of new technologies or services. This could also involve things like research projects, pilot programs, or the start up of completely new business units through mergers and acquisitions .

What Does McKinsey's Three Horizons Of Growth Help You Achieve?

Most organizations want growth. Most organizations also acknowledge that innovation is a critical component of achieving that growth. Yet so many of them treat innovation as a one-off event, such as a huge project to be delivered or a set "innovation program" to be introduced.

One of the most common reasons for this approach is the perceived gap between the innovation of tomorrow and the reality of running a business today.

👉🏻 McKinsey's Three Horizons of Growth aims to help you bridge this intellectual gap. It does this by creating stepping stones between running your business profitably today and growing it for the future.

This strategy framework helps ensure that you consistently balance your focus between the needs of today (Horizon 1), the future state of your business (Horizon 3), and the steps that you need to take to get there (Horizon 2).

The Three Horizons of Growth framework is an extremely versatile strategy framework applicable to most organizations. In particular, the framework lends itself to organizations that have identified that growth and innovation have been a stumbling block.

If you feel as though your organization is mired in "chugging along" and delivering business as usual, McKinsey's Three Horizons of Growth might just be the right strategic framework for you.

📚Recommended reading: Innovation and Strategy: The Correlation

OK, so you've decided that growth and innovation are indeed critical to your business, and you're willing to give McKinsey's Three Horizons Model a shot at helping you get there. This is how to go about applying it to your own organization:

1. Start with a deep understanding of your Horizon 1

You first need to identify your biggest assets today. The main reasons why your business makes revenue or succeeds at what it does. If you were Starbucks , this would be your brand and perhaps your distribution channels.

If you were Microsoft back in the 1990s, it would be your enterprise products and perhaps your partner network.

Name these drivers of success for your business today.

Now, imagine that you lost them entirely. Imagine that you're Microsoft, and businesses refuse to buy your software anymore...

2. Your Horizon 3 is what you would do if that were to happen

Yep, that's not a typo. We're moving straight to Horizon 3. Let's stick with Microsoft as an example. The Microsoft Xbox was launched in 2001. On the surface, it was a million miles away from playing to Microsoft's core strengths at the time, which was firmly in the business and productivity space. And that was exactly the point.

The Xbox wasn't a shot in the dark— it was Microsoft's Horizon 3. They'd identified something at which they thought they could succeed (you still need core capabilities that will allow you to win). However, they didn't rely on the things that were making them a success today.

But how did they go from strength in business software/productivity to winning in the ultra-competitive gaming hardware industry?

3. Horizon 2 is the bridge that gets you there

This is where Horizon 2 comes in. Once you know what you want to do for your Horizon 3, work backward from that (and forward from your Horizon 1) to create a plan of action that will bridge the gaps.

For Microsoft, that involved launching their own line of computer games (famous ones include Age of Empires and Microsoft Flight Simulator). It also included a range of "light" hardware, such as keyboards and mice.

This gave them the experiences they needed (and a bit of extra revenue too) in both gaming and hardware, which ultimately resulted in them creating the Xbox.

Your Horizon Two doesn't have to be a revenue generator per se, but it should contain enough of your core assets from Horizon One to give you a fighting chance of it being profitable.

The bigger picture, though, is that it helps you to bridge the gap between your current state and your desired future state (Horizon 3).

The 70 / 20 / 10 rule

To put this into practice for your strategic plan , try to ensure that around 70% of your activity is playing toward your Horizon 1. After all, you need to survive and thrive today to have any chance of succeeding tomorrow.

Then, allocate around 20% of your effort to those Horizon 2 'bridging' opportunities. That might sound like a lot, but Horizon 2 will contain failures and false starts, so it's important that you have enough irons in the fire to get you to Horizon 3.

For Horizon 3, that leaves 10% of your overall effort. That 10% is important. Without it, you can easily lose sight of your ultimate goals, and get lost in a never-ending cycle of Horizon 2's.

Microsoft, for example, experimented with a range of simple game controllers throughout the 1990s called the Microsoft Sidewinder. Most of your Horizon 3 10% efforts will be on research and experimentation, with a few light product launches towards the end if you're lucky.

The Three Horizons model was first articulated in the 20th century by Baghai, Coley, and White to explain the need for an ambidextrous organization. In the past, organizations assigned a relative delivery time to each of the horizons, such as new features delivered in 3–12 months or business model extensions delivered 24–36 months out.

In today’s world, disruptive innovations happen at lightning speed. Just look at Airbnb, Uber , Craigslist, Tesla , and the explosion of artificial intelligence and machine learning solutions, such as OpenAI and ChatGPT. Every industry is at risk.

What can you do about it?

⚠️ Don't fall into the trap of using traditional strategic planning cycles.

Instead, focus on shorter, more agile cycles that allow you to quickly pivot when needed. Identify opportunities, move fast, and innovate better than your industry's disruptors. You can partner with startups, acquire external innovators, or rapidly copy the new disruptive innovators.

This is similar to a tennis match, where players must quickly read the opponent's moves, anticipate their next move, and then adjust their strategy as quickly as possible to stay ahead of the game. Speed, agility, and adaptability are key to ensuring success.

📚Recommended read: Strategy Report 2022: You're doomed or you adapt

Are you ready to elevate your strategic planning game? Our free Three Horizons Strategy Template is the perfect solution to help you do just that. Not only does it lay out the three horizons (current, emerging, and future) in a user-friendly way, but it also comes with some powerful features to keep your planning and strategy execution super adaptable.

Plus, it’s pre-filled with examples that can guide you through the planning process, or you can customize it with your own organization’s information. No matter what industry you are in or the size of your organization.

👉 Click here to get immediate access to your Three Horizons Strategy template .

You'll get FREE access to live dashboards , strategy reports , integrations , and collaboration features , so you and your team can work together and make sure everyone is on the same page.

With this template, you'll be able to:

• Identify and prioritize opportunities in each horizon and make data-driven decisions for your business's growth.
• Monitor progress and make adjustments on the fly with live dashboards.

Say goodbye to scattered planning and hello to cohesive, successful strategy execution.

Alright, that’s a wrap! We hope you enjoyed learning about the McKinsey Three Horizons of Growth and how Cascade's template can help you put it into action.

Utilizing the Three Horizons of Growth can lead to tremendous success, so why not give it a try?

An easy place to start is to take a look at your existing strategic plan and overlay what you've learned about the different horizons of that plan. Ask yourself the following questions:

• How close are you to the 70 / 20 / 10 rule?
• Do you have a clear understanding of your current reasons for success?
• Do you have a plan for if they were to be taken away from you?

If you're not happy with your answers to those questions, then McKinsey's Three Horizons of Growth could be just the framework for you.

And let's not forget, Cascade is the best choice for strategic planning and strategy execution because of the powerful features it has to offer, the user-friendly interface, and the capability to monitor progress and adjust the strategy on the fly.

So, go forth and conquer! With Cascade by your side, you'll be unstoppable.

👉 Get started today with Cascade’s Three Horizons Strategy Template .

Three Horizons Framework FAQs

Who created the three horizons framework.

The Three Horizons Framework was first introduced in 1999 in the book with the title The Alchemy of Growth, written by Mehrdad Baghai, Stephen Coley, and David White. Later on, the three horizons framework got an in-depth introduction from IFF (International Futures Forum) Member Bill Sharpe's book Three Horizons: The Patterning of Hope.

What are Three Horizons Framework alternatives to help me shape our business strategy?

There are countless other strategy frameworks out there, and we have already covered a few key frameworks that we think are extremely flexible and have been battle-tested over the years. Check them out below!

• The Ansoff Matrix Helps Organizations To Grow
• The Benefits of Applying The Stakeholder Theory
• Maslow's Hierarchy As a Business Framework
• Unlocking the Power of the Balanced Scorecard
• Value Disciplines Model & Your Competitive Advantage
• Using the VRIO Framework to Create Sustained Competitive Advantage

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What is the 3 horizons model & how can you use it?

A simple explanation (finally) of what the 3 horizons model is, what it isn’t, and how you can use it to manage your organization’s growth strategy., what is the 3 horizons model, how should you use the 3 horizons model, what does the 3 horizons model measure, what doesn’t it do, what are horizon 1 innovations, what are horizon 2 innovations, what are horizon 3 innovations, how can the 3 horizons model benefit you.

As an innovation strategist, I work with innovation professionals across a wide range of industries. From CEOs and global innovation managers to venture teams, my clients’ goals and job titles vary. But there is one thing they all have in common – they use the  3 horizons model  (aka. the horizon model). And with good reason – it’s a very handy framework. That is, if you’re using it in the right way. And not everybody does.

Each innovator I speak to seems to have a different definition for the horizon model, and they use it for wildly different purposes.

It certainly doesn’t help that every resource you find seems to explain the horizon model in a new, overly complicated, jargon-heavy way, which is why people often feel confused when they go to put the horizon model into practice. Does it help you determine the type of innovation you’re undertaking? Does it help you manage expectations? Will it enable you to predict when you can expect to see results from an innovation activity? Does it help you balance your portfolio?

We need to clear up this confusion because if you’re misusing the horizon model, you’re probably mismanaging your company’s growth strategy. So, allow me to break it down in simple terms.

The 3 horizons model is a growth strategy framework by  McKinsey  that you can use to think about the future of your company. It can help you manage growth in a coordinated way.

People often get it confused with an innovation strategy framework, but that’s incorrect. The 3 horizons model should only be used to set or challenge a growth strategy, which will help inform an innovation strategy. The innovation strategy , in turn, can help shape or challenge the growth strategy.

The horizon model’s key benefit is that it provides a common language with which to understand and talk about the different kinds of growth.

Anybody who’s ever worked at a large organization knows that each team (or board) member has a different vision for the company’s future.

The horizon model helps you manage the varying visions and guide conversations by showing your team the grand innovation plan and the goals for that plan over time – including when they can expect to see return on investment, results, or profit.

Therefore, the horizon model is great for portfolio management and growth strategy because you can use it to visualize your plans for the company’s future and convey them in a simple way.

Looking at it, you’ll notice that the model has an axis of TIME and an axis of VALUE (sometimes labelled profit). The 3 horizons are simply 3 S-curves that occur one after the other, representing each innovation project.

How long each horizon lasts will vary depending on whether you’re in a slow- or fast-moving industry, but this version will still give you an indication.

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One important thing to note about the horizon model is that it doesn’t look at the  type  of innovation you’re doing. In fact, it has nothing to do with that. So if you’re mentioning ‘newness’ or ‘the market’ – including product diversification, market development, or market penetration – that means you’re actually talking about the ambition matrix by  Bansi Nagji and Geoff Tuff . We use our  innovation landscape  tool, adapted from  Gary P. Pisano , to help determine the types of innovation to pursue after using the horizon model.

The marrying of the ambition matrix (which maps innovation types and markets to play in) and the horizon model (which highlights time-based future growth opportunities) created further confusion as the tools are doing 2 separate strategic tasks.

This was caused by drastic changes in the speed and the nature of technological capabilities in the 21st century. Radical, disruptive, or architectural innovations could suddenly make it to market in a matter of months rather than years. Combining the 2 models was a way to ‘fix’ this contradiction but it meant sacrificing the horizon model’s original intent and usefulness.

Horizon 1  innovations are generally short-term projects that generate results in 1-3 years. Of course, the timing varies. For instance, a tech, direct-to-consumer business might move faster and see results from their horizon 1 innovations within 6 months. But generally, you’ll be able to see results within 1-3 years.

Horizon 1 innovations are easier to justify when it comes time for your team’s yearly review. That’s because tangible results will be within sight. Often, projects that fall under the horizon 1 umbrella are those that optimize what the organization already has. Think incremental, small optimizations of your existing product by expanding your user base step by step or improving internal processes.

From conception to completion, you could expect to see results from a horizon 2 project in 2-5 years.

Horizon 2  innovations take a bit longer because they’re typically (but not always) those that have been copied from adjacent markets and applied to a new context (which means they still go over well at quarterly reviews). These innovations might involve adapting technology, processes, or revenue stream structures that already function well in other industries to your own.

Last but not least, let’s talk about the big one:  horizon 3 . 

Horizon 3 ventures are long-term innovation projects that generally produce results in 5-12 years. They’re typically associated with non-incremental innovations (disruptive, radical, or architectural innovations, for instance). But in reality, we all know incremental changes in certain heavy B2B industries might only hit the market many years later, and thus show results in 5-12 years (think of the compound effect theory of continuous incremental innovation). What’s more, incremental innovations can be disruptive.

A great example of a horizon 3 incremental innovation that managed to achieve market disruption is  AMD . The organization took a huge chunk of the central processing unit (CPU) consumer market from Intel in 2019. AMD’s Ryzen processors debuted a few years ago as cheaper challengers and have since overtaken Intel in product performance. AMD products are now similarly priced, and yet sales are increasing. At time of writing, AMD had achieved a more-than  80% market share .

Lastly, it’s important to note that you can, in fact, pursue radical, disruptive, or architectural innovation in a horizon 1 or 2 timeframe.

To use the horizon model to your advantage, you’ll need to think about in which horizon each project within your growth strategy fits. How long will it take to see results? When can you expect to generate profit? What is your expected ROI (return on innovation)?

When you’ve mapped everything out, share your predictions and reasoning with your team. Use the horizon model to help the team align, make everyone feel involved, and get key stakeholders on the same page. But first, make sure they have a clear understanding of the goal and relevant use of this framework.

If people understand the horizon model and can see why long-term innovation takes time, they’ll be more likely to understand why those projects are worth the investment (and risk). Internal education regarding such frameworks is an important step you can take towards enabling your team to adopt an innovation mindset.

Key takeaway

The key takeaway here is that you should use both the  horizon model  and the  innovation landscape model  separately  and  at its relevant strategy stage. Don’t confuse them. Employ the horizon model first, then use the innovation landscape model to see what kinds of innovation you want to pursue given the horizons you’re aiming for.

For help instilling an innovation culture within your organization or demonstrating the value of your innovation activities (and eliminating programs that will achieve nothing), you can always reach out to us.

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What Is The McKinsey Horizon Model And Why It Matters In Business

The McKinsey Horizon Model helps a business focus on innovation and growth . The model is a strategy framework divided into three broad categories, otherwise known as horizons. Thus, the framework is sometimes referred to as McKinsey’s Three Horizons of Growth.

Table of Contents

Understanding the McKinsey Horizon Model

The McKinsey Horizon Model was developed after two decades of extensive research on high-growth companies.

At this point, it is useful to make the distinction that McKinsey’s growth strategy should not be confused with an innovation strategy .

Instead, the three horizons model should be used to implement a growth strategy – which in turn drives future strategies centered on innovation .

McKinsey’s model is also ideal for large businesses with expansive member boards that have different visions for the future of the organization.

Here, the model seeks to create a united and cohesive plan for growth over time. Ideally, milestones are set regarding investments, results, and profits.

Ultimately, the McKinsey Horizon Model is an adaptable future tool. It identifies short, medium, and long term changes to an industry and details how a business might react to these changes.

Using the McKinsey Horizon Model in practice 

Imagine that three horizons are plotted on a graph, with time on the x-axis and the potential growth of the company on the y-axis.

Let’s take a look at each horizon according to its position on the graph.

First horizon

At the bottom left of the graph, a business is at the start of its journey with low potential growth .

As a result, the first horizon usually describes activities that currently contribute to revenue generation and company stability. 

Once stability has been achieved, the business can look at short-term projects that will deliver growth in the next 1-3 years – but actual timeframes will vary from industry to industry.

For example, a tech start-up might experience higher initial growth than a new café. 

Second horizon

In the middle of the graph, several years have passed and the business has experienced a moderate amount of growth .

Second horizon growth strategies should ideally span 2-5 years and often relate to adopting processes, revenue streams, or technologies from other industries. 

Therefore, the chance of successful growth is relatively high, despite the longer time frames.

Third horizon

After a significant amount of time has passed, the company now has more resources to devote to large and complex strategies that may take 5-15 years to materialize.

These strategies may relate to research, pilot programs, and brand new product offerings. 

Given their large upfront cost, third horizon strategies often have a focus on incremental improvements.

But because of their longer time frame and a large number of variables, many strategies are risky and can become unprofitable.

Case Studies

• First Horizon (Short Term): Focus on improving user experience and increasing market share through regular software updates and enhancements.
• Second Horizon (Medium Term): Explore partnerships with other tech firms to integrate complementary technologies or services, expanding the product ecosystem.
• Third Horizon (Long Term): Invest in research and development for emerging technologies, such as artificial intelligence or blockchain, to create entirely new product lines.
• First Horizon (Short Term): Optimize inventory management and supply chain processes to reduce costs and improve margins.
• Second Horizon (Medium Term): Launch new store formats or online sales channels to reach untapped customer segments.
• Third Horizon (Long Term): Experiment with innovative retail concepts, such as cashier-less stores or personalized shopping experiences, to shape the future of retail.
• First Horizon (Short Term): Streamline production processes to increase efficiency and reduce production costs.
• Second Horizon (Medium Term): Invest in electric and hybrid vehicle technologies to meet evolving consumer preferences and regulatory requirements.
• Third Horizon (Long Term): Explore autonomous driving solutions and mobility-as-a-service platforms for the future of transportation.
• First Horizon (Short Term): Enhance customer service and digital banking capabilities to improve customer retention.
• Second Horizon (Medium Term): Expand into new geographic markets with tailored financial products and services.
• Third Horizon (Long Term): Investigate blockchain technology and decentralized finance (DeFi) solutions to transform traditional banking practices.
• First Horizon (Short Term): Streamline research and development processes to accelerate drug development timelines.
• Second Horizon (Medium Term): Explore partnerships with biotechnology firms to access innovative drug candidates.
• Third Horizon (Long Term): Invest in gene therapy and precision medicine research for groundbreaking treatments.
• First Horizon (Short Term): Optimize production and distribution to reduce waste and improve sustainability.
• Second Horizon (Medium Term): Launch new product lines or acquire brands that cater to health-conscious consumers.
• Third Horizon (Long Term): Research alternative protein sources and sustainable packaging solutions to address future food industry challenges.

Key takeaways

• The McKinsey Horizon Model is a strategy that is particularly beneficial for mature companies that tend to devote fewer resources to growth .
• The McKinsey Horizon Model helps large businesses with different points of view settle on a unified direction for the future of the company.
• The McKinsey Horizon Model offers a framework of three horizons. These act as stepping stones for businesses that want to balance current profitability with future growth .

Key highlights of the McKinsey Horizon Model:

• Framework for Growth: The McKinsey Horizon Model, also known as McKinsey’s Three Horizons of Growth, is a strategy framework designed to help businesses focus on innovation and growth . It provides a structured approach to planning for the future.
• Three Horizons: The model divides growth strategies into three broad categories or horizons, each with its own time frame and focus. These horizons represent different stages of a company’s growth journey.
• Not an Innovation Strategy: It’s important to note that the McKinsey Horizon Model is not an innovation strategy in itself. Instead, it is a tool to implement a growth strategy that can drive future innovation efforts.
• Large Business Focus: This model is particularly useful for large businesses with diverse stakeholders and visions for the future. It helps create a unified and cohesive growth plan that aligns with the organization’s goals and objectives.
• Adaptability: The model is adaptable and can be applied to various industries and business types. It identifies short-term, medium-term, and long-term changes in the industry and guides how a company can respond to these changes.
• First Horizon: The first horizon represents the initial stage of a company’s journey, where there is low potential for growth . This phase typically involves activities that contribute to revenue generation and stability. Short-term growth projects (1-3 years) are considered here.
• Second Horizon: In the second horizon, the company has experienced moderate growth . This phase spans 2-5 years and often involves adopting processes, revenue streams, or technologies from other industries. The likelihood of successful growth is relatively high in this horizon.
• Third Horizon: The third horizon is characterized by significant time passing and the availability of more resources. Strategies in this horizon may take 5-15 years to materialize and often involve research, pilot programs, and the development of brand -new product offerings. Due to the longer time frame and complexity, these strategies can be riskier.
• Balancing Profitability and Growth: The McKinsey Horizon Model helps businesses balance current profitability with future growth . It allows companies to allocate resources strategically across the three horizons based on their growth potential and risk.
• Alignment of Stakeholders: For companies with diverse stakeholder perspectives, the model serves as a tool to align these perspectives toward a common vision for the company’s future.
• Resource Allocation: The model guides decision-makers in setting milestones, making investments, and measuring results across the three horizons, ensuring that resources are allocated effectively.

McKinsey’s Related Frameworks

GE McKinsey

McKinsey Horizon Model

McKinsey’s Seven Degrees of Freedom

Minto Pyramid

McKinsey Organizational Structure

Connected Business Frameworks

• Porter’s Five Forces

SWOT Analysis

Balanced Scorecard

Blue Ocean Strategy 

GAP Analysis

Scenario Planning

Read also :  Business Strategy, Examples, Case Studies, And Tools

Connected resources:

• Ansoff Matrix
• Business Strategy Frameworks
• Blue Ocean Strategy
• Competitive Moat
• Profit Margins

Additional resources:

• Business Models
• Business Strategy
• Digital Business Models
• Distribution Channels
• Go-To-Market Strategy
• Marketing Strategy
• Network Effects
• Platform Business Models
• Revenue Models

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Gennaro Cuofano

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McKinsey’s 3 Horizons

What are mckinsey's 3 horizons.

McKinsey’s Three Horizons is a Strategic framework that sets different priorities for companies over time .

Its objective is to maximize the profit of a company in the long term .

To do so, it establishes 3 Main periods :

• Horizon 1 : Current period.
• Horizon 2 : Future in the Medium term .
• Horizon 3 : Future in the Long term .

What should you plan for each Horizon?

According to the McKinsey’s 3 horizons model, your Company’s Strategy should focus on:

• Horizon 1 : Consolidate your Current Business model .
• Increasing your margins.
• Improving your processes.
• Horizon 2 : Expand your activity.
• Offer new products or services.
• Search for new opportunities.
• Horizon 3 : Consolidate your New Business model .
• Adapting to the new dynamic..
• Obtaining the highest possible profitability.

Now, let’s see the first example:

McKinsey's 3 horizons example

If there is a company that has developed a successful expansion Strategy over time… that is Amazon.

Amazon started a a “simple” book e-commerce Site. That is all.

But years went by, and the more diversified their Business became, the more Profit and success they had .

When Amazon only sold books, their Main Goal was:

• Become a profitable online bookstore .

Then, Amazon started to diversify their Business , offering other products and services:

• All types off products (not only books).
• Logistic services.
• Web services.

For the Third horizon, Amazon had to improve the profitability in all those New economic activities .

Amazon grew so much, that its Market Capitalization exceeded 1 Trillion dollars .

McKinsey’s 3 Horizons – Amazon example

As you can guess, lots of companies don’t really plan for the long term.

• They have so many problems that long-term planning seems like a luxury.

That is why now, we will discuss why you should always keep in mind McKinsey’s 3 horizon model .

Why are McKinsey's 3 Horizons important?

Long-term planning may seem a sterile effort.

But, trust us: it is not.

We have studied, restructured and invested in dozens of companies that failed .

• Remember: we come from the Venture Capital sector.

And what all those companies had in common was a lack of planning .

Planning for the long-term is a very good exercise, which makes you think about :

• What you want to achieve .
• How you can you do it .

And McKinsey’s 3 Horizons is an easy-to-use tool that can help you in that regard .

* We recommend you to check our “ Scenario Planning ” Page.

• There you will find other interesting approaches to long-term planning.

Let’s now explain when you should use McKinsey’s 3 Horizons framework:

When should you use McKinsey's 3 Horizons?

We always suggest using McKinsey’s 3 Horizons as soon as a Business has defined its Main economic activity .

Once you start improving and focusing on a certain Business model, it is time to think about the future .

• You want to always be thinking about improving your Business … and your Profits.

Let’s see some examples:

McKinsey's 3 Horizons examples

In these examples, we have developed McKinsey’s 3 Horizons for 4 different successful companies .

We have tried to imagine how the different Strategy teams saw (and see) the future of these companies.

Let’s begin:

Microsoft - McKinsey's 3 horizons example

Microsoft was born with the goal of offering Operating Systems.

• With their legendary MS-DOS.

But, once they became the undisputed Market leaders, they thought:

• “Maybe, we can improve our user’s experience… even more”.

When Microsoft started, their Main goal was to obtain as much profit as they could, with their Operative Systems .

• And, of course, they were extremely successful.

Pretty soon, Microsoft had to offer new Tools and Solutions , in order to help their users as much as they could.

• They could not be left behind.

Their ultimate goal was to offer a complete Microsoft environment with all user needs met .

• Microsoft Office.
• Internet Explorer (now it is called Edge).
• Visual Studio.

However, since this economic sector is constantly changing , Microsoft surely has to go through this cycle over and over again .

• For each new Windows, Microsoft Office, the new Microsoft Edge, etc.

McKinsey’s 3 Horizons – Microsoft example.

Coca-Cola - McKinsey's 3 Horizons example

Coca-Cola is one of the most emblematic Companies in the world.

• It is the second most understood word, after “OK”.

But, even Coca-Cola had a beginning.

This is a “tricky” example because Coca-Cola has focused mainly on one single product: Coke.

• T heir 3 Horizons Strategy has worked especially in their Marketing and Promotion campaigns .

Let’s see what this 3 Horizons model looks like:

At the beginning, Coca-Cola had to promote its drink highlighting its properties :

• Refreshing.
• Relieves fatigue.

Nobody knew Coca-Cola so, they had to communicate its most basic “characteristics”.

This is the most basic and direct Promotion campaign for new products .

Years went by, and people already knew what a Coke was.

However, Coca-Cola still had to “remind” its customers to consume Coca-Cola .

To do so, they:

• Placed Coca-Cola ads everywhere (from Times Square to Picadilly).
• Sponsored Movies where people drink Coca-Cola.

With this Strategy, Coca-Cola started to “associate” values to its brand.

• Depending on who you choose to Sponsor, your brand will be associated to one value… or another .

Finally, they got what they wanted.

Coca-Cola was associated to the deepest and strongest value of all: Happiness .

• Coca-Cola is regarded by everybody as “something more” than “just a drink”.

They no longer need to highlight any features of their product.

Coca-Cola ads are 100% related to feelings .

• They have nothing to do with taste, price, etc.

Once a Brand achieve that “status”, becomes almost invincible .

McKinsey’s 3 Horizons – Coca-Cola example

Tesla - McKinsey's 3 horizons example

Tesla is a very curious company to analyze.

It has barely made a profit in the past few years … And yet its market capitalization is huge.

How is it possible that Testa is worth more than Ford when Ford makes 5.5 million cars per year and Tesla only makes 100,000?

Let’s see the 3 horizons of Tesla to understand it:

When Tesla started its activity, its main goal was to develop a successful and profitable electric car: the Model S.

• To do so, they designed the best batteries as well as a highly automated manufacturing process.

Although Tesla still had no earnings on the Model S, they started developing new vehicles :

• Model X , Model 3 … And announced the Cybertruck .

But … How is it possible that investors “love” so much a company with virtually no profit?

You’ll understand it with the 3rd Horizon.

Tesla not only plans to design electric cars.

Their ultimate goal is to change the way we move .

They have invested heavily in self-driving technology .

• And that’s what can become “the next big thing.”

Imagine: Self-driving Trucks, Taxis, etc.

The economic potential is incalculable .

Google - McKinsey's 3 horizons example

What can we say about Google that you don’t know yet?

• Where would we be without Google?

Let’s take a look at the beginning of this impressive company and what its 3 Horizon could be like:

When Google started, its 1st Horizon was surely to become a successful Search Engine .

• We do not know how far they intended to grow… And if they hoped to be so successful.

Some years later, Google started offering new and successful services .

• Google Earth.
• Google Maps.
• Google Drive.

They used all these applications to collect as much valuable data as they could .

Finally, Google began to process all this data to offer the most accurate solutions to its users .

Google no longer offers a common answer for everyone :

• Each user receives a personalized and adjusted response that best suits their needs.

With this accuracy, Google has become much more than a Search Engine:

• It is a “solution environment” where people can solve virtually all their information related problems .

Summarizing

McKinsey’s 3 Horizons is a framework that helps companies planning their strategy by settings different priorities over time .

• Its ultimate goal is to maximize long-term profit.

It establishes 3 Main Horizons and Goals :

We suggest using McKinsey’s 3 Horizons as soon as a Business has defined its Main economic activity.

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McKinsey Three Horizons of Growth: A Strategic Framework for Business Expansion

Master business expansion with our McKinsey Three Horizons guide and free PowerPoint template for effective growth planning.

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Discover the secrets to driving business growth with our comprehensive blog post exploring the McKinsey Three Horizons Framework .

Don't miss the free, easy-to-use PowerPoint template available at the end of the post , perfect for strategizing your company's unstoppable expansion.

Introduction

In today's fast-paced business environment, organizations need a systematic approach to identifying and exploiting growth opportunities. McKinsey's Three Horizons of Growth model offers a strategic framework to help companies see beyond their immediate challenges and invest in long-term, sustainable growth.

The model categorizes growth opportunities into three horizons with distinctive characteristics and objectives. Horizon 1 focuses on optimizing core business activities to generate cash and maintain market position. Horizon 2 encourages organizations to explore new market segments and innovative offerings while preparing to scale them. Finally, Horizon 3 is about scouting and nurturing future growth opportunities that could fundamentally alter the company's competitive landscape.

Through the successful implementation of this framework, organizations can balance short-term performance and long-term value creation, enabling them to navigate the complexities of growth and maintain a competitive edge in their industry.

What are the Three Horizons of Growth?

The Three Horizons of Growth is a strategic framework developed by McKinsey & Company to help businesses map out their long-term growth strategy. This model focuses on planning for sustainable growth by dividing business initiatives into three interconnected horizons. Each horizon represents a different stage of growth and has unique characteristics, objectives, and challenges. They are:

Horizon 1: Core Business

Horizon 1 is the core of the business, representing current products, services, and markets. The primary focus in this stage is to optimize performance, maintain market share, and generate revenue. Common activities include refining operations, enhancing customer relationships, and maximizing profitability. It is a stable and relatively predictable environment, but it requires constant attention to avoid stagnation and decline.

Horizon 2: Emerging Opportunities

Horizon 2 centers on emerging opportunities; these are typically new products, services, markets, or business models that have the potential to generate new revenue streams in the mid-term. This horizon involves foresight, experimentation, and risk-taking. To succeed, businesses should cultivate a culture of innovation and flexibility, while ensuring that they have the necessary resources and commitment to develop these opportunities.

Horizon 3: Future Growth Engines

Finally, Horizon 3 encompasses future growth engines. These are disruptive ideas or technologies that have the potential to revolutionize the industry or create entirely new markets. This stage is the most uncertain and demands a long-term, visionary approach. To thrive in Horizon 3, organizations should foster a culture of curiosity and exploration, engage in strategic partnerships, and maintain a systematic approach to scanning and monitoring potential game-changers in their industry.

By understanding and effectively managing the three horizons, c ompanies can balance their efforts across the different stages of growth and ensure long-term success.

Horizon 1: Existing Market and Mature Technology

Horizon 1 focuses on established markets and mature technologies. In this stage, companies prioritize optimizing efficiency in their current business operations. This allows them to maintain a competitive advantage and generate steady returns on investments.

One aspect of Horizon 1 is the continuous improvement of existing products and services. This involves:

• Refining product features and capabilities
• Enhancing operational processes
• Strengthening customer relationships

Another aspect is identifying opportunities for cost reduction and optimizatio n. Companies can achieve this by:

• Streamlining supply chains
• Reducing production waste
• Automating repetitive tasks

By focusing on these elements, organizations can effectively maintain their market position and ensure a strong foundation for future growth opportunities within the existing market and technological landscape.

Horizon 2: Emerging Market and Emerging Technology

In the McKinsey Three Horizons of Growth framework, Horizon 2 represents the bridge between the current core business and the new areas of growth. This stage is characterized by the emergence of disruptive innovations and the acceleration of their adoption in the market.

Emerging markets are regions or industries that have a high growth potential. They can be newly industrializing countries, or innovative sectors where change occurs at a rapid pace. These opportunities often come with risks, as the competition increases and organizations must adapt to fluctuating market demands.

Emerging technologies, on the other hand, refer to advances and innovations that disrupt existing industries and create entirely new business models. Examples of such technologies include artificial intelligence, augmented reality, and blockchain.

At Horizon 2, organizations should focus on:

• Identifying potential markets and technologies that match their long-term strategic goals.
• Conducting research and development efforts to explore and create viable products or services based on emerging innovations.
• Investing in partnerships and acquisitions to leverage external expertise and access new capabilities.

During this stage, organizations must have the flexibility to adapt their strategies and tactics, as they may face setbacks or unforeseen challenges in their pursuit of growth. They should be prepared to modify their plans according to market demands and allocate resources accordingly.

In summary, Horizon 2 represents a key transitional phase in the Three Horizons of Growth, wherein companies explore new market and technological opportunities. This stage demands agility, experimentation, and a willingness to navigate uncertainties, in pursuit of sustainable growth.

Horizon 3: New Market and New Technology

Horizon 3 represents the most uncertain and long-term layer of the Three Horizons of Growth framework. This horizon largely focuses on new markets and emerging technologies that have the potential to revolutionize industries or create entirely new ones.

As industries progress through constant change and technological advancements, organizations need to explore and embrace nascent possibilities to sustain their competitive edge. In Horizon 3, companies actively seek opportunities for growth beyond their core business, envisioning and investing in innovative ideas that are farther ahead in the development pipeline.

Some of the key aspects of Horizon 3 include :

• Fostering a culture of innovation and experimentation
• Collaborating with research institutions and start-ups
• Allocating resources to uncharted areas and riskier projects
• Developing strategic partnerships with external players

One of the main challenges of Horizon 3 is the uncertainty associated with predicting the outcomes of these new ventures. Companies need to prepare for setbacks and be flexible in their approach, as every development at this stage involves a certain level of risk.

To navigate Horizon 3 effectively, organizations should prioritize learning, adaptability, and collaboration. Encouraging the flow of information between different departments or even collaborating with external partners can facilitate the discovery and development of new, disruptive technologies.

How do you use the Three Horizons of Growth?

The Three Horizons of Growth framework can be applied effectively to foster business growth and innovation. The process involves streamlining the allocation of resources (like time, money, and talent) across the three interconnected horizons of growth. By applying this framework, it becomes possible for organizations to identify and address the most important opportunities at every stage. Below are some steps to effectively utilize the Three Horizons of Growth:

Step 1: Define your horizons Begin by clearly defining the three horizons for your organization. Each horizon should correspond to a different aspect of growth or innovation:

• Horizon 1: Core business activities and strategies aimed at sustaining and growing the current organization.
• Horizon 2: Emerging ideas and projects that have the potential to generate future growth and revenue streams.
• Horizon 3: Long-term opportunities that may disrupt and transform the business landscape.

Step 2: Assess the current state of your organization Analyze your organization's existing strategy, strengths, and weaknesses across the three horizons. Evaluate resources, initiatives, and potential risks within each. This step helps in identifying areas where adjustments might be required to better allocate resources and effort to achieve balanced growth.

Step 3: Prioritize Once the current state of the organization has been assessed, prioritize key initiatives within each horizon. Consider each initiative's potential impact and resource requirements, as well as the extent to which it aligns with the organization's strategic goals.

Step 4: Allocate resources With priorities established, allocate resources (financial, human, and time) to the most important initiatives on each horizon. Ensuring a proper balance of resources is crucial to the long-term success of the organization, as it helps maintain focus on both short-term growth and long-term innovation.

Step 5: Monitor and adjust Regularly monitor progress across the three horizons, adjusting the allocation of resources and priorities as needed. This will ensure that the organization remains agile and adaptable to changes in its industry and the larger business environment.

What is the 70-20-10 McKinsey Rule?

The 70-20-10 McKinsey rule is a widely known framework within the world of innovation management. This helpful guideline for businesses aims to prioritize and allocate resources effectively for innovation projects. By adhering to the 70-20-10 rule, a company can successfully focus on core, adjacent, and breakthrough innovation simultaneously, ensuring long-term success and resilience.

The 70-20-10 rule is broken down into three parts, distributing efforts across three innovation horizons as follows:

• 70% - Core: This covers the company's primary focus, dedicating 70% of resources to safeguard and grow its current operations, products, and services. This concentration on the core business helps maintain a solid foundation to build future innovations.
• 20% - Adjacent: About 20% of the company's innovation efforts should be directed toward expanding existing products, services, or solutions into new markets. Adjacent growth allows for manageable risks and potential for increased revenue.
• 10% - Breakthrough: The remaining 10% of resources should be allocated to ambitious and transformative projects that may disrupt the industry or create game-changing innovations. Breakthrough innovations, though typically high-risk, could provide a significant competitive advantage if successful.

Companies that adopt the 70-20-10 McKinsey rule can achieve a balance between maintaining existing operations and exploring new opportunities. Such a strategic approach encourages growth and minimizes the risk of stagnation, all while optimizing the allocation of resources for an innovative and forward-looking organization.

In summary, the McKinsey's Three Horizons of Growth framework offers a structured approach for companies to balance their focus and resources on long-term sustainable growth. The model emphasizes the importance of simultaneously investing in the core business (Horizon 1), emerging growth areas (Horizon 2), and creating new opportunities for the future (Horizon 3).

By adopting this strategic framework, organizations can:

• Maintain a healthy mix of short-term and long-term priorities
• Maximize the growth potential in existing markets and businesses
• Explore new opportunities and areas for future growth

Successful implementation of the Three Horizons of Growth requires effective communication, clear alignment of resources and timings, and strong governance to achieve a balanced portfolio of growth projects. Leaders must drive the process with vision and commitment, ensuring that the organization remains agile and responsive to changes in the business landscape.

Ultimately, the Three Horizons of Growth model serves as a valuable strategic planning tool for companies to create a sustainable growth trajectory, fostering innovation and ensuring long-term success.

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The Three Horizons of Growth Model For Successful Innovation Strategy

The UNITE Horizons of Growth are a breakthrough model that allows organizations to understand the three levels on which growth happens. Uniquely, this model demonstrates not only the “what,” but also the “how” and “where.”

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Table of Contents

While many businesses claim to be interested in innovation, actually charting a roadmap for progress can be challenging. Without tangible targets and practices, innovation strategy turns into a lot of “running in place.” Building a strategic framework for innovation helps ensure that efforts are not wasted. The three horizons methodology helps focus innovation efforts so your entire organization has a clear understanding of the processes and key activities behind your strategy.

The Three Horizon Model is a powerful way to conceptualize transformative innovation. While many businesses claim to prioritize innovation, formulating a roadmap for progress can be difficult, resulting in a stagnant innovation strategy. To assist businesses in driving innovation, Digital Leadership offers an Innovation Consulting service. Through tailored strategies, the launch of new ventures, and the cultivation of positive relationships, we help businesses identify industry gaps. We offer an Innovation blueprint as a starting point for businesses to guide them through the innovation journey and set the stage for the development of groundbreaking ideas, products, and services.

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Three Horizons Model Definition: What is The Three Horizon Framework

The 3 Horizons model , developed by McKinsey, serves as a business growth strategy framework to envision the future trajectory of a company. This model is instrumental in orchestrating coordinated growth efforts. It is important to note that some individuals mistakenly associate it with an innovation strategy framework. However, this is inaccurate. The primary purpose of the 3 Horizons model is to establish or question a growth strategy, subsequently informing an innovation strategy. The innovation strategy, in reciprocity, plays a pivotal role in influencing or questioning the business growth strategy. It is the harmonious interplay between these two strategies that propels a company forward in the ever-evolving business landscape.

The Three Horizons Model framework helps conceptualize and focus your efforts to push your business forward. Think of it as a roadmap to help guide your strategy, the Three Horizons are Improving an existing business, Transforming an existing business, and Innovating an entirely new business.

The Unite three horizons of growth provides organizations with a strategic framework to navigate different timeframes for growth. In the first horizon, the focus is on optimizing existing core business activities, emphasizing incremental improvements and operational efficiency to generate short-term profits. Moving into the second horizon, attention shifts to emerging opportunities that promise growth in the medium term. This involves exploring new products, services, or markets, balancing calculated risks with the potential for substantial returns.

Finally, the third horizon is dedicated to innovative disruption and long-term growth. Here, organizations venture into entirely new business models , technologies, or markets, acknowledging the higher degree of uncertainty and risk associated with these forward-thinking initiatives. By comprehensively addressing each horizon, businesses can maintain a balanced and sustainable approach to growth, aligning short-term objectives with a visionary outlook for the future.

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The UNITE Horizons Of Growth

As we’ll see, each horizon requires a different commitment and approach that’s unique to your plans and situation.

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Understanding The Three Horizons of Growth Model

The Three Horizons of Growth model, pioneered by McKinsey & Company, offers a comprehensive strategy for organizations to navigate the complexities of both immediate priorities and long-term vision.

• Horizon 1 , the focus is on optimizing existing core business operations, ensuring short-term success through incremental improvements and cost efficiencies.
• Horizon 2 extends the strategic vision into the medium term, exploring emerging opportunities such as new products, services, or markets. Here, organizations seek growth beyond their current operations, investing in innovations and new ventures.
• Horizon 3 is dedicated to the pursuit of long-term, transformative initiatives. Organizations operating on this horizon engage in disruptive innovations, exploring entirely new business models or technologies.

The Three Horizons model provides a structured framework for organizations to allocate resources effectively, balancing the demands of immediate profitability with the imperative of sustained innovation for future success. Regular evaluation and adaptation of activities in each horizon enable businesses to stay agile in response to evolving market conditions and maintain a dynamic approach to growth.

Download the complete 3 Horizons Portfolio Allocation Package, including instructions for putting it to work for you today.

The UNITE Approach To Portfolio Allocation Across The 3 Horizons

Horizon 1 execute and incrementally improve an existing business.

Horizon 1, in the context of the Three Horizons of Growth model, refers to the first timeframe or category of activities within an organization’s growth strategy. This horizon is focused on the immediate and current business operations.

Here your organization executes its existing business model (composed of the six domains: the service , revenue stream , cost structure , operating model, value proposition, and performance model). It uses existing assets and capabilities mapping and has a low risk of getting the next product out the door. Management focuses its efforts on this horizon by building repeatable and scalable processes, procedures, incentives and KPIs to execute and continuously improve the existing business model (and if they’re smart, they’ll teach their teams to operate with mission and intent, not just processes and procedures).

Innovation and improvement occur on this horizon on the level of processes, procedures, and costs. Product management in this horizon uses existing product management tools, such as StageGate® or its equivalents.

The risks in this first horizon are typically low: organizations and management, in general, know how to approach such incremental changes since they are part of everyday business.

Horizon 2: Transform and Make a Step-Change improvement to an existing business

On this horizon, an organization looks for new opportunities within the realms of its existing business model. To do so, you will change at least one of the six domains (service, revenue, cost, operating, value, and performance model) in a more significant way. This is the moment to be very cautious: changing one of the domains in this horizon typically has quite severe effects on other horizons and domains! These effects are often overlooked and underestimated.

Developing an existing business is often done on an ad hoc basis based on a particular insight. But it can also be done systematically, through Business Model innovation practices.

Since this horizon uses mostly existing capabilities augmented with new ones, it has a moderate risk of successfully developing new products.

Horizon 3: Radically innovate a new business model

In this third horizon , an organization is essentially really incubating something novel, similar in purpose to a start-up. A start-up, in contrast to an established business that is executing its current business, is in the (sometimes desperate) search for a new business model. These types of innovations are new and could potentially lead to disruptive business models.

This type of initiative is substantially different in nature compared to operating and developing an existing business, so it typically makes sense to physically separate the creation of new business from operating divisions (in a corporate incubator, or their own facility). They need their specific approaches, procedures, policies, incentives, and KPIs different from those that you use when executing an existing business.

How to Use The Three Horizons Framework

Utilizing the Three Horizons Framework involves a strategic approach to balance short-term goals with long-term vision for sustained growth and innovation.

The “What” and “Where” of Transformation: Ways of Thinking

Understanding the “what” and “where” is the quintessential prerequisite to any successful innovation and transformation initiative. The best way to frame and understand the different types of innovation might be through the “Innovation Ambition Matrix.”

Our research suggests that a company clearly differentiates its innovations across three categories called “horizons” and allocates its resources in line with those. Each horizon is defined by whether it is working to improve an existing business model or whether it deals with changing (innovating) or searching and creating entirely new business models.

Deals with executing and incrementally improving an existing business model. This is well understood; this is what most people work on every day when they recognize and solve short-term problems.

Transforming and making a step-change improvement to an existing business model is focused on evolving your existing business in new ways. You will bring change to at least one of the six domains (the service, revenue, cost, operating, value proposition , or performance model) in a more significant way. A step change is measurable, focused, and gives particular thought to new customers, new markets, or new products.

Innovating a new business model is focused on radical innovation; you venture beyond and explore unknown business models through a process of searching.

This distinction may sound trivial, but an understanding of the three horizons has severe implications: a different purpose requires a different context, tools, resources, and approaches.

That’s why understanding which horizon you work on is incredibly useful. The problem: in practice, most organizations treat the 3 horizons in a very undifferentiated way. Often the approaches from horizon 1, “executing and incrementally improving the existing business model,” are applied everywhere! The result is a misappropriation of a considerable investment.

The Innovation Ambition Matrix

The Innovation Ambition Matrix maps the three horizons (existing/transform/innovate) against the Market or customer segment and the Value Proposition:

• Horizon 1: Are you working on your existing Value Proposition (and/or your market/customer segment)?
• Horizon 2: Do you want to transform your Value Proposition (and/or your market/customer segment)?
• Horizon 3: Are you hoping to radically innovate your Value Proposition (and/or your market/customer segment)?

The Three Horizons Model Way of Thinking

Leading an innovation and transformation initiative requires clearly differentiating between an exploitative business with the strategic intent of managing cost and profit through operations management and efficiency increasing measures with incremental innovation and more exploratory types of innovations with the strategic intent of innovation and growth with critical tasks being adaptability, new products and the development of breakthrough innovations (O’Reilly III and Tushman, 2017).

The following table provides an overview of the way of thinking of the Three Horizons Model:

What Does the Horizons of Growth Matrix Imply for My Organization?

Before we cover all aspects of the way of working, let’s wrap our heads again around the basic properties of the three horizons:

Like any initiative, risk and reward need to be in balance. The three horizons offer very different risk/reward structures.

• Organizational structure

Which organizational structure do we need to apply to run each initiative successfully?

• Approach and feedback mechanisms

Which fundamental approach is most adequate and how do we learn whether we are on track?

Leadership & Team

What kind of people does it take? And how to lead them?

Who is your target group? How do you reach them? What steps will lead to market development?

Horizon 2 is often very difficult to manage. We believe we know it well, but in practice, it often develops in unexpected ways. In practice, we often find it is actually most adequate to market a product or service to a new customer group! This is because a slightly tweaked service, revenue, value, operating, cost, or performance model often results in a slightly different audience!

• Managing risks

What is the risk involved? How connected are we to the status quo? What is the view on managing failures? And how do we manage the risk involved?

In Horizon 3, we often hold on too long to an idea instead of putting it to a customer test early and quickly with the intent to learn and adjust the course: doing a “pivot.” If despite several pivots, a start-up does not seem to gain traction, it is critical to kill it and use the resources for other better-placed initiatives.

• Working together with others

If you decide to partner, who is it that you partner with and how do you manage the relationship? Is everyone involved on the same page?

What is the most suited approach to technology and development?

What Can Enterprises Learn from Working with the Three Horizons Model?

The trap many organizations fall into.

Whenever organizations work on innovation, they typically do what they are good at (and what typically works very well!) : they apply their processes from their existing business, designed for managing and improving the existing business model, to the innovation setting. This lack of differentiation between the three horizons is a fundamental mistake of many organizations: most organizations use similar approaches for the exploitative and explorative horizons. As a result, most innovation initiatives inevitably fail, since the patterns required are fundamentally different.

As we have seen, your selected horizon deeply influences your choices. Recognizing and understanding your setting is a prerequisite to success.

In the worst cases, enterprises are applying their large-scale waterfall or other heavy-type of planning approaches to their pilot programs. These orchestrated efforts demonstrate dramatic overconfidence in planning and judgment in the context of an innovation setting, which has by its very nature a high likelihood of failure. This leads to large-scale programs with a focus on building (as opposed to learning), consequently high investments, and a long time-to-market, without a chance to find proof of concept.

This type of approach systematically fails (too expensive, too heavy-loaded, no customer feedback), never reaches its potential should it ever go live (due to a lack of pivoting among other factors), and should, quite frankly, not exist anymore. They are fundamentally linear approaches designed for managing the existing business and do not work in a non-linear, change-driven setting.

The Success Pattern

The success pattern is critical to understand: consider what you have to do. Do you want to execute and incrementally improve your existing business, transform and make a step-change to your existing business, or (radically) innovate entirely new business models? Create the required context in the function of the same – our discussion will provide you with the key perspectives to consider.

Do not compromise: the risk of failure is too great to start off with the wrong structure. Particularly more radical types of innovations will not survive against the fierce competition in case you compromise in any significant way.

Stay also clear for doing “a bit of this and a bit of that” type of settings: either you want to go for it, in which case you design the appropriate prerequisites, or you do not go for it. No half measures.

The entire organization must be incentivized to value and embrace not only continuous incremental innovation as part of the current core business but more transformational and innovation initiatives. With the Three Horizons Framework, you can best understand your organization’s core capabilities, leverage its strengths and ensure that all levels have the same focus.

We will finish with an example of the challenges an organization might face if they’re not completely prepared to utilize Three Horizons Model Thinking. As you’ll see, only partially using the Horizon Model invites disaster.

Case Study: an organization wants to “only” change its target customer

The typical assumption is that “the rest” remains the same.

In practice, however, changing the target customer has severe implications:

• Changing the service model: way to serve, customer care procedures
• Changing the cost model: new billing procedures, different customer sales approach, and after-sales processes
• Changing the revenue model: new pricing structure, labour-intensive price changes applied to the ERP system
• Changing the operating model: different cost model and different revenue models changes the operating model significantly

When you dive at change without a roadmap, you risk entirely missing out on the benefits of looking back on both successful and failed initiatives. To prevent this from happening, adapting a business has to be approached and tested largely in similar ways as a radical business idea, to optimize its structure and really make it work. The Horizon Model is useful in directing your innovation strategy to best achieve your business’s future potential.

Connecting The Dots: The UNITE Business Model Framework

How to Create Innovation  includes a number of canvases that focus on value creation and finding the right business model to meet your   customer segment and customer needs.  The framework is built to inspire drastic changes that help you find a competitive advantage. Our hope is that your company grows through business model innovation, and so we again encourage you to look deeper into our website and the book.

Here is a summary of the key ingredients of the framework:

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How to use McKinsey’s three horizons of growth to find balance for your business

Reading time: about 8 min

It may seem odd, but some companies are content to keep doing what they’ve been doing because it’s been successful so far. Their customers are happy, their employees are happy, they’re meeting their goals, and they see no reason to change. They may add a few employees from time to time to keep up with demand, but the base operation remains the same.

But if the industry shifts, the company might not be prepared. If they keep doing business the way they’ve always done it, they can stagnate, lose the ability to innovate and grow, and lose their customers.

The last couple of decades have taught us that industries will change, and the change is rapid. Companies that can’t innovate or grow to address industry shifts could be doomed to fail. For example, the rapid growth and development of the internet and web browsers in the 1990s caught the newspaper industry off guard. Thousands of newspapers have closed permanently since 2004, and thousands of jobs have been lost. The newspapers that still survive are those that could see beyond print media and found innovative ways to work with the internet. 

This is where McKinsey’s three horizons of growth come in. The ideas presented in this model can help companies to find a balance between current working operations, and growing in new directions.

What is the three horizon framework?

The three horizons model was first introduced by McKinsey consultants Mehrdad Baghai, Stephen Coley, and David White in their 1999 book, The Alchemy of Growth . It is a growth strategy framework that is designed to keep you focused on innovation and sustained growth. It is a structured approach that helps you look at and evaluate potential growth opportunities while ensuring that current operations are not neglected.

With this framework, you manage business and growth using three horizons that represent short-term building and maintaining current core business, medium-term expansion and exploration into new opportunities, and research and ideas for future growth and new business opportunities.

Each horizon has a different focus, so you will need a different management style for each one. For example, horizon one has a short-term focus that can be managed by team leads looking at current trends and analysis of what’s working and what needs to be fixed. Horizon one is where the bulk of your company’s business is done. At the same time, horizon two and horizon three require the attention from senior management and executives as they plan out the company’s long-term strategic goals and determine in which direction to go next.  

Horizon one: Core business

This horizon generally gets a lot of attention because it represents the current business. Here is where you analyze what is currently working, what may have peaked, what your strengths and weaknesses are, and what you might need to abandon. This is a short term horizon (six months to three years) that has the goal of defending the core business and understanding current value.

While you are looking at ways to grow, you can’t simply abandon what you are currently doing. Horizon one keeps you focused on satisfying current customers while you make tactical improvements so you can extend the business to new customers. 

For example, adding security measures to fix a potential threat can add value to a current app and possibly get you more customers. But any competitive advantages tend to be short-lived. 

A large portion of your resources are funneled into this horizon to support current innovations. But at the same time, you’ll want to funnel some of your resources to be used in horizons two and three.

Horizon two: Emerging opportunities

Here you take what you have and extend it to new business opportunities within the next two to five years. Your job now is to identify the opportunities that most likely will bring success when they’re added to your company’s portfolio. You should look at things that align well with or extend your current business model. Explore opportunities that will bring in new customers, expand into new markets, or help you to reach new goals.

Then you’ll need to figure out how these new businesses will be supported—assets you’ll need, specific skill sets when hiring new talent, acquiring new technology, merging business resources, and so on.

This might require a large initial investment. But if what you choose to do is a logical extension of your current business model, you should see some reliable returns on your investments. Examples might include launching a new product line or expanding your business geographically.

Horizon three: Long-term goals

Your company’s value has grown and now it’s time to think of what you will do in the next five to twelve years. Horizon three is where you think about creating completely new opportunities. This could include focusing on new markets or starting new businesses. It can also include long-term research projects and pilot programs. You might set up new divisions within your organization, or you might start up entirely new business units through acquisitions and mergers.

This type of expansion will require a large amount of money. And it’s possible that some of your ideas are unproven and won’t be profitable for a significant amount of time. But when done well, these costs are offset by new income sources. 

Benefits of using the three horizons of growth 

In large companies it’s not unusual for different departments, managers, and teams to have differing visions of the company’s future path. The three growth horizons model can benefit you in the following ways:   

• It helps you to align varying visions of the company’s future growth by showing everybody the innovation plan and the goals you’ll need to accomplish in that plan.  
• It gives you a common language from top to bottom in the organization that is easy to understand, and that can be used to describe how the company is planning and investing for growth.  
• It helps you to communicate the timeline for each horizon, including when you expect to see positive results and a return on your investment.  
• It helps you to visualize your company’s future so you can more easily manage your company’s portfolio and growth strategy.

How to use the three horizons model

Whether you use an existing template or creating your own, your three horizons template should look similar to this:

• The horizontal axis (the x-axis) represents the approximate amount of time it might take before you begin to see results from the efforts you put into the activities in each horizon. You should not look at these times in terms of “we’ll do this, then we’ll do that.” Instead, you need to remember that successful implementation of the three horizons requires that all three are managed concurrently.  
• The vertical axis (the y-axis) represents value creation or the profits you get from your various business activities within each growth horizon. 

Apply the the 70/20/10 rule

This is a simple rule that helps you to determine the proportion of time and resources that should be applied to each growth horizon. The 70/20/10 rule is a guideline that says you should:

• Use 70% of your resources and time on the core businesses in horizon one. You want to use the majority of your resources in this area because these are the businesses that have been successful and proven to win against your competition. The work in this horizon is important because you are always looking for ways to get as much value as possible from proven activities.  
• Use 20% on emerging businesses that show great promise and that could give you an advantage over your competitors. These ventures have the potential to add a significant amount of value to your business, and the potential for increasing your revenue streams. Some of the businesses and activities in horizon two may fail, so you’ll want to make sure you have enough resources to ensure that there are successes to carry you to horizon three.  
• 10% of your resources are assigned to horizon three. If you don’t ensure that you have resources assigned here, you might lose sight of your company’s ultimate goals. When that happens, you could end up spinning your wheels in horizon two without making any progress. Most of the work here will focus on research and experimentation. A lot of the ideas here are visionary and will be new to the world when they are released. Executives and senior managers are best suited for managing the long-term goals of horizon three.  

Planning for the future with care—and an eye toward innovation

Bring balance to your business—use Lucidspark’s 3 horizons of growth template.

About Lucidspark

Lucidspark, a cloud-based virtual whiteboard, is a core component of Lucid Software's Visual Collaboration Suite. This cutting-edge digital canvas brings teams together to brainstorm, collaborate, and consolidate collective thinking into actionable next steps—all in real time. Lucid is proud to serve top businesses around the world, including customers such as Google, GE, and NBC Universal, and 99% of the Fortune 500. Lucid partners with industry leaders, including Google, Atlassian, and Microsoft. Since its founding, Lucid has received numerous awards for its products, business, and workplace culture. For more information, visit lucidspark.com.

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How to Focus Innovation Strategy with the Three Horizons Model

Before, we discussed strategy map as a framework for the articulation of the innovation strategy . What about other popular frameworks? They certainly help to organize high-level thoughts about innovations and formulate a bird’s-eye view on a company’s innovation strategy.

In this article, I suggest to discuss:

• McKinsey’s Three Horizons Model, and
• Dual Transformation Framework

Three Horizons Model

McKinsey’s Three Horizons Model defines three perspectives (horizons) to look at. The model underlines that all three horizons should exist in the organization at the same time.

Decades after its creation, the model was widely analyzed by business experts, who found some challenges that you would need to address when adopting this framework.

Challenge 1 – Shifting time bounds

The initial idea 1 presented in 1999 was that the horizons should be defined by time bounds:

• A shorter time frame for incremental improvements (horizon 1) and
• A longer time frame (years) for developing disruptive technologies (horizon 3).

As noticed by Steve Blank 2 , today’s examples of disruptive businesses show that it’s no longer about time. Respectively, we cannot say for sure if today’s initiatives are focused on one horizon only. The product’s function that you are working on right now might be a minor improvement or become a strategic, disruptive change for your organization.

Challenge 2 – Resource Distribution

The Three Horizons Model helps to visualize a top view over the resources allocation . The classical diagram is presented with horizons of equal sizes, while the more realistic approach is to apply a 70-20-10 rule, where 70% of time/resources is spent on Horizon 1, 20% on Horizon 2 and 10% on Horizon 3, respectively.

Another helpful tool in this context is VRIO analysis . It can be used to understand the importance of developing certain resources and capabilities.

Challenge 3 – Horizon 2 Vacuum

Another known difficulty of applying the Horizons model in practice is the so-called vacuum of horizon 2 3 . Compared to Horizon 1 with well-defined processes and Horizon 3 with all the hype and business experts around, the Horizon 2 ideas are often under-presented in board meetings.

The Three Horizons Model in BSC Designer

The Three Horizons Model is available as one of the frameworks in the pre-installed templates in BSC Designer.

You will find there the perspectives (horizons) with their corresponding questions:

• Horizon 1. How do we maintain and strengthen core business?
• Horizon 2. How do we develop new opportunities and grow business?
• Horizon 3. How do we prepare for disruptive challenges?

We have added examples of the goals to the template:

• H1 goal : Improve the company’s core activities
• H2 goal : Explore opportunities to reach new customers
• H3 goal : Analyze changing customer habits, test waters

Validating business achievements by performance measurement is one of the pillars of the McKinsey horizon model methodology. Respectively, the goals from the horizons should be quantified and measured by adequate metrics.

In the template, we used common metrics like:

• “Resource allocation metrics” and “Effectiveness metrics” for the H1 goal
• “Market analysis metrics” and “Market penetration metrics” for the H2 goal
• “Innovative culture awareness” and “Successful prototypes and startups” for the H3 goal

You can find more examples of common KPIs in the examples section on our website, we also discussed the specific examples of metrics for innovations .

Alternatives to the Three Horizon Model

A modern (respective book published in 2017) Dual Transformation Framework 4 , suggests a different approach to thinking about innovations. This framework suggests focusing on A and B of innovation, where:

• A is keeping today’s business running
• B is focusing on the challenges of tomorrow

These two are glued by a Capabilities Links – a set of unique skills and resources.

Another modification of the Three Horizons model was presented by Christian Terwiesch and Karl Ulrich in Innovation Tournaments. 5 The diagram has changed to have “market” and “technology” on axes, but the core idea remained the same.

A simpler, yet powerful alternative to the Three Horizons framework is a tool called Strategic Change Agenda . In contrast to Three Horizons, it focuses on a single “horizon” – future. Having a change agenda document is an excellent way to make the goals on the strategy map more contextual and achieve better acceptance by the stakeholders .

Match Innovation Frameworks with Strategy Map

The results of these frameworks can be reflected on the strategy map:

• The Horizon 1 and Horizon 2 goals, as well as the ideas from the A category (Dual framework), will probably go to the “Internal perspective.”
• The goals from Horizon 3 and the B category from the Dual framework will most likely correspond to the “Learning and Growth” perspectives on the strategy map.

What innovation frameworks are used in your organization? What are your findings of the successful application of those frameworks?

• Automate strategic planning with BSC Designer by organizing goals, initiatives, risks, and KPIs into scorecards.

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More About Strategic Planning

Comparative Table of Strategic Planning Frameworks

• Strategy execution frameworks. Such as the Balanced Scorecard for the overall strategy and the more lightweight OKR framework for specific challenges.
• Strategy formulation frameworks. SWOT, Three Horizons, Constraints Analysis, PESTEL, Gap Analysis, etc. that help organizations to generate new ideas.

• The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise , Mehrdad Baghai, Steve Coley, David White, Stephen Coley, Basic Books, 2000 ↩
• McKinsey’s Three Horizons Model Defined Innovation for Years. Here’s Why It No Longer Applies , Steve Blank, 2019, Harvard Business Review ↩
• To Succeed in the Long Term, Focus on the Middle Term , Geoffrey Moore, Harvard Business Review, July–August 2007 Issue ↩
• Dual Transformation: How to Reposition Today’s Business While Creating the Future , Scott Anthony, Clark Gilbert, Mark Johnson, Harvard Business Review Press, 2017 ↩
• Innovation Tournaments: Creating and Selecting Exceptional Opportunities , Harvard Business Review Press, 2009 ↩

BSC Designer is strategy execution software that enhances strategy formulation and execution through tangible KPIs. Our proprietary strategy implementation system reflects our practical experience in the strategy domain.

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Master Your 3 Business Planning Horizons

As a manager you can break up your planning horizons into time frames as broad or narrow as you see fit. Often, these horizons are defined by both the business units and sales.  For instance, in the US retail sales world, retailers set ads 4-8 weeks ahead; this means most sellers into that market have a natural delineation of the short-term planning horizon at eight weeks.  The mid-term planning horizon is less defined in most cases (and highly variable between companies) but is often thought of as 9-24 weeks, with some 9-52 week exceptions.  Finally, the long term planning horizon is usually 1-3 years ahead.  For this discussion we will focus on the different needs and challenges of these different time horizons.

Short Term Planning Horizon

The short term planning horizon is the most active, time consuming, and problematic as it is very tactical in nature.  From a sales and pricing perspective, the short term horizon is mostly about supply clearing in the most profitable way possible.  I find it best to break it up into the first few weeks (the week you are in and following week), and the weeks that are further out, but still within the short term.  

Let’s start out with weeks three through eight. Those weeks tend to have much less production planning going on.  Critical components of weeks three through eight include getting as detailed as you can with your demand and supply plans so you can tell your sales team what they have left to sell with the greatest accuracy possible.  Once your pricing and sales teams have a clear view of product available to sell, they must be realistic about forward pricing.  

Here is where so many inexperienced pricing managers get in trouble.  They are laser focused on selling for the highest prices, which means they end up not selling enough in this window. That inevitably leads to terrible sales as we get closer to the production date. Yes, there seems to be less risk if you sell closer to the production date, but you must remember that the cheapest, most challenging, and most price-sensitive buyers are all that are left when you sell product during the week of production. Therefore, in most cases the “sell it when you see it” strategy can be a great way to lose money.  

If your entire team has done a great job of forward selling, then you should have a great sold position for the two weeks closest to production.  This is where things get very tactical.  Now is when the actual production planning becomes more important.  Watching your actual sales in comparison to the forecast demand is critical; if you have been calculating a product availability based on forecasts and they are severely wrong, you are in either a very long or short position without knowing it.  Walking into the office on a Monday morning thinking you are in a great sold position based on the demand plan provided then being asked by a scheduler what they should produce today because they have no orders is a miserable way to start a week.

Short term planning horizon needs: Production planning optimization, demand planning vs actual sales reporting, price lists optimized to reflect target vs actual sold position, and an accurate forecast of product available to sell.

Mid Term Planning Horizon 

A well-managed mid-term pricing and sales planning horizon leverages the fact that the more you sell in the mid-term, especially with flexible shipment dates (thus flexible production dates), the less pricing, and volume pressure you will feel as a pricing manager. 

In the mid-term you are working on large packages of products that can be shipped over long periods of time.  Food service, international and deli sales are fixed volume (and usually fixed price) and tend to be important. Industrial and retail customers require you to focus on weekly formula business (where prices are based on the current market at the time).  All of these channels are important and getting as much of your supply allocated here is critical to your profits.  

Of particular importance to mid-term sales is risk management, which often, but not always, consists of hedging where there are correlated markets, freezing or drying product for long shelf life, and more accurate forecasting.  This last point is not just about forecasting the market, but also forecasting when you will be able to produce within the production window to put the most down at the lowest market while still filling orders.  By selling product that has flexible production windows you do two things that are amazing for your margins.  First, you have created a buffer, so you don’t need to produce product with no sales if/when markets get weak.  Second, when market prices are weak, that inherently means there is limited demand and what better time is there to not have anything to sell because you sold the supply months ago?  In short, you insulate your pricing from the lowest points of the market with sales that have flexible production dates, which gives your team pricing courage.

Mid term horizon needs: Robust demand and supply planning software to create an accurate forward picture of product available to sell.  Consensus market forecasting and pricing so managers of pricing and sales can sell confidently with an executive approved plan.  

Long Term Planning Horizon

The long term planning horizon is where the company sets a strategy to capitalize on their current strengths or to open new avenues.  Often you hear terms like Integrated Business Planning (IBP) used which is simply to say, “everyone needs to sit down and come together on a plan based on the best information we have”. 

You can read entire books about the details regarding IBP, but based on my years in the trenches, there are some key components to pay attention to.  First ,and seemingly most difficult, is that everyone involved needs to tell the truth .  There is tremendous pressure felt by everyone involved to exaggerate what can be achieved.  Executives often feel compelled to “challenge” their teams, and mid-level managers seem to be stuck between forecasting what they think can be achieved and forecasting what they believe will be “expected” of them, regardless of the viability of those expectations.    

This process is terribly counterproductive if it is not undertaken with some guidelines around improvement.  For instance, there should be some basic guidelines set around improvement percentages based on maturity of the product line.  For instance, if we are talking about a commodity product that all market participants make, then anything over “x” percentage change year over year will need an explanation for the major change.  However, there should be places where major changes and improvements are forecast, and those should be backed up by a plan.  Things like new equipment, a change in supply, a new brand strategy, product line, customer, etc.  

Managers should have guidance on where their management expects them to focus their improvements, and security in understanding that reductions in profits are not always bad. Remember, honesty matters. 

Second, the IBP process will be much more successful if there is a software solution not named Excel supporting it.  Countless hours of your most important managers’ time will be consumed without a system designed to support this process.  However, if you do have a system this process becomes one that can be undertaken much more often and updated with minimal effort.  

I have been involved in this process with and without a properly built solution and I can tell you that without it, we made a plan after hundreds of hours of work, then we ignored the plan until it was time to do it again the next year because the work to maintain it and glean useful information from the actual vs forecast was too consuming.  With the support of a well-built solution this process can become part of the weekly/monthly/quarterly meetings and further tie the three planning horizons together for greater company cohesion and profit.

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McKinsey’s 3 Horizons Model

What is mckinsey’s 3 horizons model .

Businesses that are looking to achieve and maintain long-term growth must give due attention to existing products while also not overlooking innovation. The 3 Horizons framework by the international management consulting firm McKinsey provides some help on how to be effective at this.

What is the 3 Horizons Model?

First presented in The Alchemy of Growth, this model provides a method for thinking strategically about a company’s future. The framework aims to help manage present performance while also making the most of potential future opportunities for growth. It identifies three horizons across which organizations should share out its investments.

The 3 Horizons model was the result of years of research into how successful businesses sustain long-term growth. It is a favorite of many professionals and executives that have an interest in innovation for growth. Although developed in the 20th Century, the framework remains relevant today, especially when faced with uncertainty.

The Model Explained

Sometimes also referred to simply as the ‘Horizon Model’, this framework features Time on the x-axis and Value on the y-axis. It categorizes business goals, ventures, or activities into horizons in a step-like fashion, with movement from one to another over time. McKinsey notes that the Time axis does not indicate when to give attention to each horizon but instead implies the cycle in which businesses operate. The Value axis suggests the growth in value that may be achieved by giving attention to all horizons.

What does each of these horizons relate to?

Horizon One – This has to do with the core business of a company at present. It focuses on ideas that help to improve an existing business model and key capabilities in the short term. The goal is to maximize performance and improve cash flow and profits.

Horizon Two – The innovations here relate to emerging opportunities for a business. The aim in this horizon is to extend your core business into new areas or to new targets. It requires a shift of focus to promising projects or initiatives that require significant investment but are capable of delivering sizeable returns along the line.

Horizon Three – Here you have innovation ideas that entail creating a new business model or new capabilities. These ideas are usually unproven and potentially disruptive. If not disruptive, they may be a response to opportunities that are. These innovations typically take 5-12 years to return a profit.

How Does the 3 Horizons Model Help?

This McKinsey framework suggests how a company cannot afford to ignore either existing businesses or the need for innovation in its growth efforts. It helps you to strike a balance between focusing on today and the future. You can find the tool greatly useful for working out the strategies that can help ensure sustainable long-term growth.

While most companies realize the importance of innovation, they often fail to give it due attention. It is easy for organizations to become overly engrossed with Horizon One businesses with little thought for the future. The 3 Horizons model can help to deal with this issue.

The framework is perfect for promoting team alignment. It helps to make sure everything is clear to stakeholders and ensure that everyone is on the same page. Discussions on what growth strategies to pursue can become easier with the model. It may especially be beneficial in large organizations in which there is a greater tendency for disparate opinions and visions.

McKinsey’s 3 Horizons may not only be ideal for growth strategy but also portfolio management. It offers a simple approach for conveying the plans a company has for its today and future.

How to Use the Framework

The 3 Horizons model provides you with a great structure for managing both current and future opportunities simultaneously for growth. Executive-level managers can use it as a blueprint for doing this effectively. What’s the best way to use this framework for sustainable long-term growth?

You need to start by determining the horizons which the projects in your growth strategy match. What’s the estimated length of time it will take to see results? What are your best-performing products or businesses at present?

It helps for a company to have an idea of what would be needed in the future to maintain growth. This means putting things in place to ensure that it does not go under if the existing businesses were to go awry. It entails identifying profitable future ideas and opportunities to work towards – Horizon Three ideas.

With the above already taken care of, you need to work out your transition from one horizon to the other in due course.  Investments should be spread across the three horizons without leaving out anyone. The recommendation is to devote the largest share to Horizon One innovations, which are critical for survival. Projects or activities in Horizon Two take the second-largest share while the remainder goes to Horizon Three initiatives.

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Strategic Planning Horizon: How far out should you plan?

By Robert W. Bradford, President/CEO 

Strategic Planning Expert Robert Bradford

To determine your strategic planning horizon, you need to have some sense of how clearly you can see the future environment in which your organization will be operating.   There are three critical elements to consider here:

1.       How much information is available in our environment?

2.       How quickly does the environment change?

3.       How well do we gather and understand information about the future of our environment?

The first question – how much information is available – usually varies with two factors:   the size of your industry , and the amount of government regulation involved in what you do.   The bigger the market – and the more regulation – the more likely it is that there will be good data available for your planning, and some of that data will be well-researched forward-looking data.

The second question is trickier.   In general, strategic environments may change rapidly due to technology and regulation, but other forces, such as economics, may cause your strategic environment to mutate even more quickly than you thought possible.   As a rule, the more your activities are predicated on technology or a specific economic relationship, the more likely it is that change will affect your strategy quickly and unpredictably.

The third question revolves around how you approach information about the future.   If you can, and do, spend a good deal of time and money researching where your environment is heading, you can have some confidence in the information used in your planning – at least to the time horizon that your research can adequately address.   If you do not, but you have very good forecast data available to you from, for example, a trade association, you also can have greater confidence in a longer-term plan.

If you feel you can see trends unfolding pretty well five years into the future, it would not be unreasonable to do your strategic planning with a five-year horizon.   However, if the future gets very murky just a few months out, you should consider a different approach.   There are three workable approaches to strategic planning in a highly uncertain environment:

1.       Use a very short planning cycle – revising your plan every 3 months, 6 months or 1 year.

2.       Have shorter strategic planning meetings quarterly , and constantly update and revise your strategies.

3.       In situations where there is high uncertainly about a possibly catastrophic outcome (ie. Health care reform in the medical insurance industry), create scenarios of the 2-3 most likely outcomes and plan around each.

Obviously, how you approach planning in a highly uncertain environment depends quite a bit on the resources you have at your disposal.   A 100 person organization cannot afford to spend as much time and money on planning as a 10,000 person organization, so you will want to assess your ability to use any of the three approaches listed above.  

If you have questions about these, and would like an expert opinion on which approach would work best for your unique situation, please contact me at [email protected] . 

Robert Bradford is President/CEO of the Center for Simplified Strategic Planning, Inc .  He can be reached at [email protected] .

© Copyright 2011 by Center for Simplified Strategic Planning, Inc., Ann Arbor, MI — Reprint permission granted with full attribution.

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Much of your advice would tend to be improvements on most strategic planning efforts. Yet the fact remains most strategic plans fail for a host of reasons cited. Shortening the cycle and working in smaller chunks might make it more palatable but may not produce the expected returns.

The options outlined above strike me as a strategic orientation that is somewhat passive and tentative.

I also see a place where you take that stance that you will work to create the future (will be a longer term view) you want and use this goal as a navigation end point that is used to make periodic adjustments. My sense is those organizations who have a clear picture about what the future should be (Apple is an excellent example of this orientation) when your competitors (and soon to be competitors) don’t or won’t is very powerful in that you create the uncertainty and surprises for them. In this circumstance having a long term view makes perfect sense.

The other concern is that some strategies just take five to tn years to pull off (especially capital investments) so if you are going to make these strategic choices then you take a longer view regardless of the uncertainties discussed above.

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McKinsey’s Three Horizons Model Defined Innovation for Years. Here’s Why It No Longer Applies.

• Steve Blank

It assumes that breakthrough innovations will take years to develop.

In the 20th century McKinsey created a model called the Three Horizons to explain how businesses must invest in current products, incremental innovations, and breakthrough innovations. The framework relied on time as a guiding factor; it assumes that truly breakthrough innovations will take years to develop. Technology has made that assumption incorrect: Today innovations like Uber and Airbnb can be rolled out extremely quickly. Because established companies tend to move slowly and must invest resources in existing products, this means that unlike in the 20th century, attacking disruptors now have the advantage.

I’m a big fan of McKinsey’s Three Horizons Model of innovation.

• SB Steve Blank is an adjunct professor at Stanford University, a senior fellow at Columbia University, and a lecturer at the University of California, Berkeley. He has been either a cofounder or an early employee at eight high-tech start-ups, and he helped start the National Science Foundation Innovation Corps and the Hacking for Defense and Hacking for Diplomacy programs. He blogs at www.steveblank.com .

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Encyclopedia of Production and Manufacturing Management pp 523–524 Cite as

PLANNING HORIZON

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A planning horizon is the length of time (i.e., the number of weeks or months) into the future for which plans are made. An optimal plan should take into consideration all the information relevant to future events. However, this is not only impossible but also unnecessary. Employing a finite horizon in plans is justified partly on the supposition that far distant events have negligible effect on the current decisions and partly on the realization that the forecasted data far into the future tend to be inaccurate. In other words, if the time horizon for a planning model is too long, the amount of required input data–most of which often may be guesswork—tend to be very high and incur high computational costs. To spend large amount of time and money using data of questionable reliability could result in unnecessary expense and unsatisfactory results. If, on the other hand, the planner chooses too short a planning horizon, he or she may have ignored important events just past the horizon...

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(2000). PLANNING HORIZON . In: Swamidass, P.M. (eds) Encyclopedia of Production and Manufacturing Management. Springer, Boston, MA . https://doi.org/10.1007/1-4020-0612-8_691

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A better way to drive your business

Managing the availability of supply to meet volatile demand has never been easy. Even before the unprecedented challenges created by the COVID-19 pandemic and the war in Ukraine, synchronizing supply and demand was a perennial struggle for most businesses. In a survey of 54 senior executives, only about one in four believed that the processes of their companies balanced cross-functional trade-offs effectively or facilitated decision making to help the P&L of the full business.

That’s not because of a lack of effort. Most companies have made strides to strengthen their planning capabilities in recent years. Many have replaced their processes for sales and operations planning (S&OP) with the more sophisticated approach of integrated business planning (IBP), which shows great promise, a conclusion based on an in-depth view of the processes used by many leading companies around the world (see sidebar “Understanding IBP”). Assessments of more than 170 companies, collected over five years, provide insights into the value created by IBP implementations that work well—and the reasons many IBP implementations don’t.

Understanding IBP

Integrated business planning is a powerful process that could become central to how a company runs its business. It is one generation beyond sales and operations planning. Three essential differentiators add up to a unique business-steering capability:

• Full business scope. Beyond balancing sales and operations planning, integrated business planning (IBP) synchronizes all of a company’s mid- and long-term plans, including the management of revenues, product pipelines and portfolios, strategic projects and capital investments, inventory policies and deployment, procurement strategies, and joint capacity plans with external partners. It does this in all relevant parts of the organization, from the site level through regions and business units and often up to a corporate-level plan for the full business.
• Risk management, alongside strategy and performance reviews. Best-practice IBP uses scenario planning to drive decisions. In every stage of the process, there are varying degrees of confidence about how the future will play out—how much revenue is reasonably certain as a result of consistent consumption patterns, how much additional demand might emerge if certain events happen, and how much unusual or extreme occurrences might affect that additional demand. These layers are assessed against business targets, and options for mitigating actions and potential gap closures are evaluated and chosen.
• Real-time financials. To ensure consistency between volume-based planning and financial projections (that is, value-based planning), IBP promotes strong links between operational and financial planning. This helps to eliminate surprises that may otherwise become apparent only in quarterly or year-end reviews.

An effective IBP process consists of five essential building blocks: a business-backed design; high-quality process management, including inputs and outputs; accountability and performance management; the effective use of data, analytics, and technology; and specialized organizational roles and capabilities (Exhibit 1). Our research finds that mature IBP processes can significantly improve coordination and reduce the number of surprises. Compared with companies that lack a well-functioning IBP process, the average mature IBP practitioner realizes one or two additional percentage points in EBIT. Service levels are five to 20 percentage points higher. Freight costs and capital intensity are 10 to 15 percent lower—and customer delivery penalties and missed sales are 40 to 50 percent lower. IBP technology and process discipline can also make planners 10 to 20 percent more productive.

When IBP processes are set up correctly, they help companies to make and execute plans and to monitor, simulate, and adapt their strategic assumptions and choices to succeed in their markets. However, leaders must treat IBP not just as a planning-process upgrade but also as a company-wide business initiative (see sidebar “IBP in action” for a best-in-class example).

IBP in action

One global manufacturer set up its integrated business planning (IBP) system as the sole way it ran its entire business, creating a standardized, integrated process for strategic, tactical, and operational planning. Although the company had previously had a sales and operations planning (S&OP) process, it had been owned and led solely by the supply chain function. Beyond S&OP, the sales function forecast demand in aggregate dollar value at the category level and over short time horizons. Finance did its own projections of the quarterly P&L, and data from day-by-day execution fed back into S&OP only at the start of a new monthly cycle.

The CEO endorsed a new way of running regional P&Ls and rolling up plans to the global level. The company designed its IBP process so that all regional general managers owned the regional IBP by sponsoring the integrated decision cycles (following a global design) and by ensuring functional ownership of the decision meetings. At the global level, the COO served as tiebreaker whenever decisions—such as procurement strategies for global commodities, investments in new facilities for global product launches, or the reconfiguration of a product’s supply chain—cut across regional interests.

To enable IBP to deliver its impact, the company conducted a structured process assessment to evaluate the maturity of all inputs into IBP. It then set out to redesign, in detail, its processes for planning demand and supply, inventory strategies, parametrization, and target setting, so that IBP would work with best-practice inputs. To encourage collaboration, leaders also started to redefine the performance management system so that it included clear accountability for not only the metrics that each function controlled but also shared metrics. Finally, digital dashboards were developed to track and monitor the realization of benefits for individual functions, regional leaders, and the global IBP team.

A critical component of the IBP rollout was creating a company-wide awareness of its benefits and the leaders’ expectations for the quality of managers’ contributions and decision-making discipline. To educate and show commitment from the CEO down, this information was rolled out in a campaign of town halls and media communications to all employees. The company also set up a formal capability-building program for the leaders and participants in the IBP decision cycle.

Rolled out in every region, the new training helps people learn how to run an effective IBP cycle, to recognize the signs of good process management, and to internalize decision authority, thresholds, and escalation paths. Within a few months, the new process, led by a confident and motivated leadership team, enabled closer company-wide collaboration during tumultuous market conditions. That offset price inflation for materials (which adversely affected peers) and maintained the company’s EBITDA performance.

Our research shows that these high-maturity IBP examples are in the minority. In practice, few companies use the IBP process to support effective decision making (Exhibit 2). For two-thirds of the organizations in our data set, IBP meetings are periodic business reviews rather than an integral part of the continuous cycle of decisions and adjustments needed to keep organizations aligned with their strategic and tactical goals. Some companies delegate IBP to junior staff. The frequency of meetings averages one a month. That can make these processes especially ineffective—lacking either the senior-level participation for making consequential strategic decisions or the frequency for timely operational reactions.

Finally, most companies struggle to turn their plans into effective actions: critical metrics and responsibilities are not aligned across functions, so it’s hard to steer the business in a collaborative way. Who is responsible for the accuracy of forecasts? What steps will be taken to improve it? How about adherence to the plan? Are functions incentivized to hold excess inventory? Less than 10 percent of all companies have a performance management system that encourages the right behavior across the organization.

By contrast, at the most effective organizations, IBP meetings are all about decisions and their impact on the P&L—an impact enabled by focused metrics and incentives for collaboration. Relevant inputs (data, insights, and decision scenarios) are diligently prepared and syndicated before meetings to help decision makers make the right choices quickly and effectively. These companies support IBP by managing their short-term planning decisions prescriptively, specifying thresholds to distinguish changes immediately integrated into existing plans from day-to-day noise. Within such boundaries, real-time daily decisions are made in accordance with the objectives of the entire business, not siloed frontline functions. This responsive execution is tightly linked with the IBP process, so that the fact base is always up-to-date for the next planning iteration.

A better plan for IBP

In our experience, integrated business planning can help a business succeed in a sustainable way if three conditions are met. First, the process must be designed for the P&L owner, not individual functions in the business. Second, processes are built for purpose, not from generic best-practice templates. Finally, the people involved in the process have the authority, skills, and confidence to make relevant, consequential decisions.

Design for the P&L owner

IBP gives leaders a systematic opportunity to unlock P&L performance by coordinating strategies and tactics across traditional business functions. This doesn’t mean that IBP won’t function as a business review process, but it is more effective when focused on decisions in the interest of the whole business. An IBP process designed to help P&L owners make effective decisions as they run the company creates requirements different from those of a process owned by individual functions, such as supply chain or manufacturing.

One fundamental requirement is senior-level participation from all stakeholder functions and business areas, so that decisions can be made in every meeting. The design of the IBP cycle, including preparatory work preceding decision-making meetings, should help leaders make general decisions or resolve minor issues outside of formal milestone meetings. It should also focus the attention of P&L leaders on the most important and pressing issues. These goals can be achieved with disciplined approaches to evaluating the impact of decisions and with financial thresholds that determine what is brought to the attention of the P&L leader.

The aggregated output of the IBP process would be a full, risk-evaluated business plan covering a midterm planning horizon. This plan then becomes the only accepted and executed plan across the organization. The objective isn’t a single hard number. It is an accepted, unified view of which new products will come online and when, and how they will affect the performance of the overall portfolio. The plan will also take into account the variabilities and uncertainties of the business: demand expectations, how the company will respond to supply constraints, and so on. Layered risks and opportunities and aligned actions across stakeholders indicate how to execute the plan.

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Trade-offs arising from risks and opportunities in realizing revenues, margins, or cost objectives are determined by the P&L owner at the level where those trade-offs arise—local for local, global for global. To make this possible, data visible in real time and support for decision making in meetings are essential. This approach works best in companies with strong data governance processes and tools, which increase confidence in the objectivity of the IBP process and support for implementing the resulting decisions. In addition, senior leaders can demonstrate their commitment to the value and the standards of IBP by participating in the process, sponsoring capability-building efforts for the teams that contribute inputs to the IBP, and owning decisions and outcomes.

Fit-for-purpose process design and frequency

To make IBP a value-adding capability, the business will probably need to redesign its planning processes from a clean sheet.

First, clean sheeting IBP means that it should be considered and designed from the decision maker’s perspective. What information does a P&L owner need to make a decision on a given topic? What possible scenarios should that leader consider, and what would be their monetary and nonmonetary impact? The IBP process can standardize this information—for example, by summarizing it in templates so that the responsible parties know, up front, which data, analytics, and impact information to provide.

Second, essential inputs into IBP determine its quality. These inputs include consistency in the way planners use data, methods, and systems to make accurate forecasts, manage constraints, simulate scenarios, and close the loop from planning to the production shopfloor by optimizing schedules, monitoring adherence, and using incentives to manufacture according to plan.

Determining the frequency of the IBP cycle, and its timely integration with tactical execution processes, would also be part of this redesign. Big items—such as capacity investments and divestments, new-product introductions, and line extensions—should be reviewed regularly. Monthly reviews are typical, but a quarterly cadence may also be appropriate in situations with less frequent changes. Weekly iterations then optimize the plan in response to confirmed orders, short-term capacity constraints, or other unpredictable events. The bidirectional link between planning and execution must be strong, and investments in technology may be required to better connect them, so that they use the same data repository and have continuous-feedback loops.

Authorize consequential decision making

Finally, every IBP process step needs autonomous decision making for the problems in its scope, as well as a clear path to escalate, if necessary. The design of the process must therefore include decision-type authority, decision thresholds, and escalation paths. Capability-building interventions should support teams to ensure disciplined and effective decision making—and that means enforcing participation discipline, as well. The failure of a few key stakeholders to prioritize participation can undermine the whole process.

Decision-making autonomy is also relevant for short-term planning and execution. Success in tactical execution depends on how early a problem is identified and how quickly and effectively it is resolved. A good execution framework includes, for example, a classification of possible events, along with resolution guidelines based on root cause methodology. It should also specify the thresholds, in scope and scale of impact, for operational decision making and the escalation path if those thresholds are met.

Transforming supply chains: Do you have the skills to accelerate your capabilities?

In addition to guidelines for decision making, the cross-functional team in charge of executing the plan needs autonomy to decide on a course of action for events outside the original plan, as well as the authority to see those actions implemented. Clear integration points between tactical execution and the IBP process protect the latter’s focus on midterm decision making and help tactical teams execute in response to immediate market needs.

An opportunity, but no ‘silver bullet’

With all the elements described above, IBP has a solid foundation to create value for a business. But IBP is no silver bullet. To achieve a top-performing supply chain combining timely and complete customer service with optimal cost and capital expenditures, companies also need mature planning and fulfillment processes using advanced systems and tools. That would include robust planning discipline and a collaboration culture covering all time horizons with appropriate processes while integrating commercial, planning, manufacturing, logistics, and sourcing organizations at all relevant levels.

As more companies implement advanced planning systems and nerve centers , the typical monthly IBP frequency might no longer be appropriate. Some companies may need to spend more time on short-term execution by increasing the frequency of planning and replanning. Others may be able to retain a quarterly IBP process, along with a robust autonomous-planning or exception engine. Already, advanced planning systems not only direct the valuable time of experts to the most critical demand and supply imbalances but also aggregate and disaggregate large volumes of data on the back end. These targeted reactions are part of a critical learning mechanism for the supply chain.

Over time, with root cause analyses and cross-functional collaboration on systemic fixes, the supply chain’s nerve center can get smarter at executing plans, separating noise from real issues, and proactively managing deviations. All this can eventually shorten IBP cycles, without the risk of overreacting to noise, and give P&L owners real-time transparency into how their decisions might affect performance.

P&L owners thinking about upgrading their S&OP or IBP processes can’t rely on textbook checklists. Instead, they can assume leadership of IBP and help their organizations turn strategies and plans into effective actions. To do so, they must sponsor IBP as a cross-functional driver of business decisions, fed by thoughtfully designed processes and aligned decision rights, as well as a performance management and capability-building system that encourages the right behavior and learning mechanisms across the organization. As integrated planning matures, supported by appropriate technology and maturing supply chain–management practices, it could shorten decision times and accelerate its impact on the business.

Elena Dumitrescu is a senior knowledge expert in McKinsey’s Toronto office, Matt Jochim is a partner in the London office, and Ali Sankur is a senior expert and associate partner in the Chicago office, where Ketan Shah is a partner.

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Planning Horizon in Procurement – Your Ultimate Guide for 2024

Table of content

• Planning Horizon in Procurement
• Optimization
• Long-term vs. Short-term

Frequently asked questions

Key take-aways

• Planning Horizons in procurement guide activities align with the company’s goals and objectives, ensuring an effective operation.
• It helps foster timely collaboration and encourages proactive decision-making from buyers and suppliers.
• Additionally, it encourages modern and timely procurement advancements, ensuring companies are with the current market trends.

Planning Horizon is a crucial guide for procurement teams to organize activities and sourcing opportunities in a set time frame. It helps shape the direction of the company’s procurement process and resource management.

This horizon helps recognize potential risks and support procurement activities such as identifying supply chain disruptions. Moreover, it helps extend procurement perspectives to opportunities the company can only achieve through meticulous planning. 

In this article, we’ll discuss what Planning Horizon is in Procurement. Additionally, we’ll elaborate on its importance, how its length can affect specific procurement activities, and match the rapidly changing market trends.

What is Planning Horizon in Procurement?

A planning horizon in procurement refers to the period for an organization where they strategize their procurement activities. This process is a vital procurement management aspect, as it helps streamline the business’s procurement process, sourcing, purchasing, and supply chain. 

The horizon’s length depends on numerous factors, external and internal. These factors include industrial specifications, the product life cycle, market trends, and potential risks. 

In some situations, a shorter planning horizon can adapt to rapidly changing markets. On the other hand, longer horizons are more familiar in organizations that require longer cycles or possess stable productions.

Managing the planning horizon in procurement helps companies streamline and organize their operations. It helps them forecast trends, negotiate better terms, minimize potential risks, and align procurement goals. 

Why is a Planning Horizon Important?

Planning horizons in procurement is crucial for numerous reasons. It helps organizations have a plotline of the factors they must consider in pursuing an activity.

Moreover, it helps them anticipate sudden changes and movements within the market. 

It also helps them discuss vital negotiation terms with their suppliers. A planning horizon helps procurement teams strategically align their procurement goals, manage inventory , and make robust supply chain planning. 

Planning Horizons also manages data for resource availability, especially with resources that are scarce or unavailable most of the time. The horizon helps companies forecast needs for specific resources and monitor market trends. It helps them effectively manage risks and reduce decision uncertainties. 

Additionally, horizons help companies maintain supplier relationships and manage negotiation timelines. It provides the procurement team with a clear representation of supplier collaborative discussion timeframes. This activity helps them maintain a strong relationship with the suppliers while ensuring procurement activities can meet the deadline.

Overall, Planning Horizons helps companies and organizations maintain an efficient procurement process. It provides them with a broader objective while improving existing supply chain conditions and procurement activities. This streamlining activity leads to customer satisfaction, delay reduction, and supply chain optimization.

Planning Horizon and Supply Chain Optimization

Supply chains use planning horizon as a crucial element to streamline their processes. The horizon helps the supply chain by opening opportunities to reduce costs and improve sourcing activities. 

Moreover, the horizon provides a timeframe for a procurement team to implement their actions in an orderly manner.

Planning horizons also help supply chains optimize processes by immediately responding to sudden demand spikes by providing a timeframe that can help pre-empt their activities.

It also helps them make decisions in expanding their resources and managing supplier relationships. Reducing uncertainties through the horizon helps procurement teams maximize activity and address potential disruptions.

Combining the planning horizons and supply chain optimizations enhances response time, minimizes risk occurrence, and maintains a smooth and efficient supply chain. 

Strategies for Effective Planning Horizon

Establishing an effective horizon in procurement helps ensure a smooth operation. This process guides procurement activities to avoid overlapping with the company’s business goals.

Additionally, it fosters a direct and proactive approach towards deadlines.

It also helps companies plot their actions and opportunities when implementing their strategies. Below are four effective strategies to follow in planning a horizon in procurement:

1. Demand Forecasting and Collaboration

Clear forecasting plans can help anticipate potential procurement needs. This process requires close collaboration with vital finance departments in the company.

It can help them gather information on market movement, preferences, and demand trends. Consequently, the approach ensures better and more accurate procurement data for teams to plan efficiently. 

2. Supplier Relationship Management (SRM)

Robust supplier relationships can foster better opportunity exploration for both parties. Communication and transparency help companies gather insights from supplier perspectives.

These insights include risk areas, potential demand trends, and supplier adaptive capabilities. Considering the suppliers in the Planning horizon helps the company plot their approach with their partners, ensuring success.

3. Risk Management and Contingency Planning 

Risk assessments in the Planning horizon help reduce potential disruptions and activity misalignment in the supply chain.

It considers numerous risks like area-specific issues, environmental considerations, and previous supply chain life cycles.

Moreover, it helps procurement activities be adaptive and resilient against uncertainties in the business environment. This process enhances company function without worrying about delays.

4. Technology Integration 

Using technology in procurement helps maintain a strong position in ensuring a smooth procurement activity. It improves flexibility, accuracy, and fast service delivery.

Using tech like predictive analytics, the evolving AI in procurement, and software to maintain a steady market position.

This tech integration helps companies meet deadlines and incorporate other crucial procurement activities without the risk of rushing projects.

Long-term Planning Horizon vs. Short-Term Planning Horizon

Planning horizons need to consider the length of time that a project needs. Knowing the difference between a short-term and a long-term project can guide procurement teams in decision-making.

This process can help them manage activities and ensure a workable timeline for the company. Below is a table to further clarify the difference between a short-term and a long-term planning horizon.

Planning Horizon Examples

In implementing planning horizons, companies consider the industry trends, their needs, and unique considerations.

It helps them manage their goals and expectations with their procurement activities.

Below are three examples of Companies maximizing the planning horizon. 

Amazon uses a long-term horizon, focusing on enhancing services, innovating products, and expanding activities for long periods. The founder, Jeff Bezos, prioritizes the long-term rewards of activities against relying on short-term gains.

Amazon emphasizes this action by prompting initiatives to invest in upcoming technologies and advancements. These activities include artificial intelligence in procurement, experimental drone delivery, and cloud software. 

Zara focuses on short-term responses, strengthening their rapid response activities in line with current fashion trends.

Their success focuses on quick design and production and ably distributing it to the market within a short timeframe.

This process helps them respond to customer preferences and the volatile market demand. 

Tesla uses a mix of short-term and long-term planning horizons, depending on the business scenario. It wants to focus on current production issues while maintaining positive and forward-thinking with research and development.

Elon Musk, the founder, wants to maximize the company’s procurement activities while plotting out potential innovations in the future.

His plan includes mainstream sustainable energy activities. This action showcases his creativity by blending short-term operational activity and long-term environmental transformations.

In conclusion, a Planning Horizon in procurement helps teams focus their activities within a set time frame. This activity helps them avoid overlapping their goals and streamline their objectives toward satisfactory results. 

Moreover, this approach helps them manage resources effectively and minimize potential risks. It can also help them measure the length in which activities should be. A horizon also helps procurement teams shape their actions to achieve either short-term goals or long-term visions. 

Successful procurement, as exemplified by companies like Amazon, Zara, and Tesla, relies on a judicious blend of short-term responsiveness and long-term vision.

A successful horizon provides the best results, as shown by big-shot companies like Amazon, Zara, and Tesla. These companies exhibit how to use planning horizons to their best effect. It helps them navigate market complexities, avoid pitfalls, and ensure the consumer’s satisfaction.

What is a Planning Horizon?

A planning horizon in procurement refers to the period for an organization where they strategize their procurement activities.

What are effective strategies for a Planning Horizon?

The effective strategies for a Planning Horizon are Demand Forecasting and Collaboration, Supplier Relationship Management, Risk Management and Contingency Planning, and Technology Integration.

About the author

"> "> My name is Marijn Overvest, I’m the founder of Procurement Tactics. I have a deep passion for procurement, and I’ve upskilled over 200 procurement teams from all over the world. When I’m not working, I love running and cycling.

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Kevin Costner's 12-hour 'Horizon' binge plan is PT Barnum-like showmanship that could be ‘big winner’: expert

Kevin costner's 'horizon: an american saga' part one will release in theaters june 28.

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Kevin Costner has big dreams for his "Horizon" movie saga.

According to the Hollywood Reporter, Costner teased at CinemaCon that once all four "Horizon" films are made, he hopes fans will be able to go to a movie theater and binge all the films at once. 

"Maybe a year and a half, two years from now, they will come (to theaters) for 12 hours," Costner said before sharing details about the first two films. "Horizon: An American Saga" part one debuts in theaters June 28 and the second film shortly after Aug. 16.

Kevin Costner's "Horizon: An American Saga" debuts part one June 28. (Getty Images / Getty Images)

Business and finance expert Eric Schiffer told FOX Business it's highly unlikely fans will go to a movie theater for 12 straight hours. 

KEVIN COSTNER IS EAGER FOR ‘HORIZON’ DEBUT: ‘THIS TIME HAS COME’  

"When you think of binging, and you do it perhaps at the house, you're alone. You have privacy, you have perhaps your loved ones and the ability to break and do other things," he explained. "To sit in a movie theater, even if there's a small intermission, it sounds like Costner needs to be paying people to go."

Schiffer said it would be "lethally stupid" for fans to attend the movie theater for that long. 

"It's wacky, it's crazed, and it's inconsistent with modern-day reality," Schiffer said.

Kevin Costner's wish to have fans binge all four "Horizon" films is the "financial kiss of death," according to one expert. (Jerod Harris/Getty Images for CinemaCon / Getty Images)

Whether this is a good or bad financial decision for the movie star, Schiffer added, "it's a threat to the estate of Kevin Costner. It's the financial kiss of death."

Meanwhile, Doug Eldridge of Achilles Public Relations, told FOX Business, "If Costner solely intended to release this in one half-day marathon format, it simply wouldn't survive; more accurately, it would likely never be cleared for takeoff, much less crash and burn."

Eldridge noted that if Costner's plan is to release the movies separately and then an option for a movie marathon in theaters, "it will likely be met with success."

"This level of P.T. Barnum showmanship will certainly appeal to a portion of the viewing audience who would love the sheer audacity (and awesomeness) of a 12-hour movie," Eldridge told FOX Business. "It's not for everyone, but if Costner times it right, he'll reach the broader audience as well as the niche audience and come away the big winner.​"

Eldridge noted that Costner has an advantage because "the hunger for Westerns is seeing a surge in popularity that it hasn't enjoyed since the 1960s.

The Kevin Costner-led "Yellowstone" was a "key driver" in the revival of Westerns, public relations expert Doug Eldridge told FOX Business. (Getty Images / Getty Images)

"'Yellowstone' was a key driver in that revival, and Costner was at the heart of the hit series," he continued. "He is doubling-down on that popularity — both for himself and for the genre — in ​the creation of ‘Horizon.’ I predict it will be a monster hit, and Costner will cash in, commercially and critically."

According to the Hollywood Reporter, Costner has only addressed two films that have been made, but plans for his "Horizon" franchise consist of four films.

"When I think about the promise of America, there was a promise out here, if you could go. If you were tough enough, if you were mean enough, if you were resourceful enough, if you were lucky enough, you could take what you wanted in America," Costner said at CinemaCon. 

"That promise meant that we step on a whole group of people who had been here for thousands of years. But that’s what happened in America. … I don’t pass judgment because I don’t want to look down on people’s resourcefulness."

Kevin Costner spoke about his film "Horizon: An American Saga" onstage during CinemaCon 2024 in Las Vegas April 9, 2024. (Valerie Macon/AFP via Getty Images / Getty Images)

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Costner co-wrote the script, stars in the film and serves as the director, his first time taking on that role since his 2003 film, "Open Range." Costner's "Horizon: An American Saga" will have its world premiere at the Cannes Film Festival May 19.

The last time Costner attended the famed film festival was for the premiere of "The Matrix Reloaded" in 2003.

Kevin Costner leveraged millions to ensure the "Horizon" film saga was made. (Getty Images / Getty Images)

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"I’ve been waiting for the right time to return, and I’m proud to say that this time has come," Costner said of the Cannes Film Festival, according to the Hollywood Reporter. 

"'Horizon: An American Saga' is a story that began 35 years ago, and I can’t think of a better place than Cannes to reveal to the world the result of such a wonderful adventure. The French have always supported films and believed deeply in filmmaking. Just as I believe deeply in my film."

Some Tesla employees worry that layoffs are coming

• Tesla employees fear potential layoffs may begin as early as this weekend.
• This follows earlier rumors in February when Tesla temporarily delayed performance reviews.
• Tesla's deliveries dropped below Wall Street expectations during its first quarter.

Some Tesla employees are concerned that layoffs are imminent, possibly as soon as this weekend.

Rumors are circling at Tesla's offices that cuts are on the horizon, seven engineers — including from the Austin gigafactory and the Fremont factory — told Business Insider. While there has not been any official communication to teams, some workers said they'd heard cuts could begin as soon as Sunday.

Two other workers said they hadn't heard the chatter about layoffs, while others said they weren't taking them too seriously.

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"There've been some whispers and some people are concerned, but you know how fast false rumors can spread at a company this big," one engineer said.

A spokesperson for Tesla did not immediately respond to a request for comment.

This is the second time in a matter of months that anxiety over possible layoffs has set in at Tesla. In February, the carmaker reportedly called for managers to begin identifying the most vital roles for the company. At the same time, Tesla also delayed some workers' performance reviews, Bloomberg reported . The reviews were later rescheduled, three sources told Business Insider.

Workers across the tech industry are likely on high alert for any sign of a potential layoff. Several Big Tech companies, including Google and Microsoft, have already made cuts this year . EV rivals like Rivian and Fisker have also laid off staff in 2024.

And Tesla has faced some strong headwinds recently.

Tesla's first-quarter delivery numbers revealed a slump in sales , for instance. The carmaker's deliveries fell 20% from the previous quarter and over 8% from the same time the previous year, marking the company's first year-on-year sales decline since 2020.

Do you work for Tesla or a tip? Reach out to the reporter via a non-work email and device at [email protected]

Watch: How tech layoffs could affect the economy

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