Week 30, 2022—Issue #214
The Three Horizons: Improve, Scale, and Explore for Corporate Longevity
Each week: three ideas to help you build better organizations. This week: three ideas to help you continuously sense and respond to change.
We’ve heard the stories and seen the statistics. Corporate longevity is in decline and organizations are finding it harder than ever to stay relevant over the long term.
We also know why it’s happening. In a world of constant change, longevity demands that organizations do what most can’t, namely to continuously sense and respond to change.
Enter the Three Horizons model — a framework that helps us explore the type of “reflexive and emergent pathways” that I described in last week’s newsletter.
Three pathways, to be precise:
1. Improve
Horizon 1 represents the status quo and business as usual. This is where we find our cash cows; mature and established lines of business that we must maintain and defend for as long as possible. Note the emphasis. We can and should continuously improve such business, but we know that the clock is ticking and that we can’t do so indefinitely.
2. Scale
Next up is Horizon 2, representing new opportunities and tomorrow’s cash flow. This is where we experiment with ways to capitalize on new and emergent pathways. Think LeanStartup or new product innovation — opportunities that we want to demonstrate and scale. This is the horizon for dealing with high-risk/high-growth businesses.
3. Explore
Last but not least is Horizon 3 which represents trends and long-term cash flow. I call this the sense-making horizon because it’s where we explore tomorrow’s growth opportunities. Think greenfield, blue ocean, blue sky, etcetera. These are the opportunities that will define business-as-usual five or ten years down the line.
“The future is already here, it’s just not evenly distributed”, wrote author William Gibson. The Three Horizons model is built on the same premise. Explains futurist Bill Sharpe below: “The critical idea of [the model is that it recognizes] three qualities of the future in the present moment”:
The trick, then, is to use the model to build ambidextrous organizations able to continuously improve, validate, and explore emergent pathways across all three horizons at the same time. That’s easier said than done, obviously. But the stakes couldn’t be higher. Anything less and we risk our organizations becoming another statistic.
That’s all for this week.
Until next time: Make it matter.
/Andreas
PS1: The three horizons are sometimes associated with a specific time frame (e.g., 0–12, 12–36, and 36–72 for H1, H2, and H3, respectively). But as Steve Blank makes clear, that’s probably not a good idea given the pace of technological development. It’s better to define each horizon by pattern or quality.
PS2: The model is often attributed to McKinsey and the book The Alchemy of Growth (Baghai et al, 2000). But I’ve also found citations identifying Bill Sharpe as the creator. I’m a bit confused. But I’ll go with Sharpe for now given that it’s his version of the model that I’ve been referring to in the past two posts.
How can we build better organizations? That’s the question I’ve been trying to answer for the past 10 years. Each week, I share some of what I’ve learned in a weekly newsletter called WorkMatters. Subscription is free. Back-issues are published to Medium after three months.
