McKinsey’s Three Horizons of Growth

McKinsey’s Three Horizons of Growth suggests that a firm should categorize its various goals into three different ‘horizons’ in order to effectively focus on growth as well as innovation.

Horizon 1

Current core activities – extend and defend these activities. This is about conintuing to do what a firm does best.

Horizon 2

Develop emerging activities – to generate new sources of growth and/or profit. This horizon is about expanding into related areas and new markets.

Horizon 3

Create viable strategic options for the future – higher risk activities that may take years to generate growth/profits. This is about doing R&D in innovative and risky new areas.

Here are some notes related to the chart that depicts the three horizona of growth:

• ‘Profit’ on the vertical axis may be replaced by other non-profit focused objectives
• ‘Business’ may refer to any set of activities
• ‘Time’ on the horizontal axis may refer to varying time periods (in years)

Source: Baghai M., Coley S. & While D. (2000) The Alchemy of Growth, Texere Publishers