In 1998, as a result of a two-year study, the findings of McKinsey's Growth Special Initiative were published in a book entitled, The Alchemy of Growth. Predictably, it became the bedrock of many a large corporation's growth strategies. Still relied upon today, The Three Horizons is the framework for transformational change used by corporations, as well as initiatives like conservation and community development. At its core, The Three Horizons gives us a way to think about and plan for the future.
Micro-business owners and startups may not be as aware of this globally popular framework since it addresses the use of resources more typical to large organizations. However, I believe it can be viewed differently, yet effectively, through the eye of a small business owner or solopreneur. For any sized business, allowing innovation and growth to give way to inertia can be a deadly mistake. Especially in today's world where disruption and rapid action have taken the place of growth models once designed to evolve cautiously over a span of many years.
You can find learn more about McKinsey's complete framework on this podcast. Meanwhile, here is Harvard Business Review's basic summary, along with my simple interpretation for micro-business owners.
HBR's summary: Ideas and improvements that provide continuous innovation to a company's existing business model and core capabilities in the short-term.
What this means to you: The first horizon is where you want to use the majority of your resources: time, talent, and money. What are the things you are already doing well--your core strengths? Use your proven concepts and improve and optimize them to continue to grow. Here's where you want to squeeze out every ounce of profitability with efficient operation and improved margins.
Let's say that you invented a blow dryer using your new, patented technology to remove the risk of damage to the scalp and hair. And, it dries hair at twice the speed. (Will someone please invent this?) Your product sells well to consumers. On horizon one, you find ways to make it more streamlined, snazzier-looking, and cost-effective to manufacture. You penetrate the market by increasing your advertising, gaining placement on retail sites with a larger audience, and creating popular YouTube videos. You may even develop attachments or other accessories for your blow dryer.
HBR's summary: Ideas that extend a company's existing business model and core capabilities to new customers, markets, or targets.
What this means to you: The second horizon is deserving of your time and resources but to a lesser degree. This is where you expand your thinking to make improvements and changes so you can develop something new but related to your current technology or offerings.
Now that your innovative blow dryer has gained popularity in the consumer market, it's time to develop a version for professional use. Horizon two would include the research and development of a product that solves a problem for hair salons. It's ergonomically friendly to the hands of stylists who hold it in their hands for eight hours a day. It allows them to style more people since it cuts styling time in half. You may break into wholesale at this point.
HBR's summary: The creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption.
What this means to you: In a race to space Elon Musk used everything that Tesla knew about automobile technology and translated it to space travel. This is the horizon of gigantic leaps. The third horizon is where you contemplate everything you know, and much of what you don't know, and use innovative methods to create a new, and probably unrelated market.
In horizon 3 you explore the idea that your blow dryer technology could be used in an entirely new way. Who knows? It could make Musk's space travel more economical, safer, and faster.
A small amount of time is spent here, thinking beyond what's currently possible for your organization. Ideas are evaluated and explored to make sure that it solves a need (even if people don't know they need it yet), is technically possible (think big here), and that the funding is out there somewhere.
While horizon 3 is not where you will put much of your attention, be sure to spend time here and consider what direction you could go when you see changes to your industry. Large organizations use the 70/30/10 rule, with 10 percent of their time and resources spent on horizon three. For micro-business owners it may be less; just don't ignore horizon 3. Your business could become obsolete someday--you'll need a game plan for that.