Use a framework to transform your business

Are you so busy working in the business of today that you don't have time and energy to focus on building the business of tomorrow? The Three Horizons model can help.

The Three Horizons model

The Three Horizons model (Baghai et al. 2000) provides a framework to support you to grow your business in a way that balances the competing demands of focusing on the present while investing for the future.

The Three Horizons growth model

Horizon 1 - Defend and extend core business

Horizon 1 contains the business that generates profits and cash flow today - that is, your day-to-day, 'bread and butter' business activities. This business may still have some growth potential, but, eventually, it will flatten out or decline. Horizon 1 includes activities that provide the skills and resources for growth, such as staff training.

Innovation in Horizon 1 business is about finding better ways to deliver the current business. Aim to secure your competitive position and unlock the remaining potential.

Aim to limit your spending on Horizon 1 activities to around 85% of your business budget. This frees up resources to invest in future growth activities.

Horizon 2 - Build momentum of emerging new business

Horizon 2 contains activities that are designed to enhance or grow your business over the medium term, but may or may not generate any revenue in the short term. It includes fast-moving, entrepreneurial ventures that need continuing investment to finance rollouts. They are expected to become significant profit generators over the medium term.

Innovation in Horizon 2 business is about bringing new ideas to fruition. You should aim to build capabilities and fuel growth in new business.

Businesses typically spend about 12.5% of business resources on Horizon 2 activities.

Horizon 3 - Create options for future business

Horizon 3 is about seeding options today for the future, some of which will prove successful and contribute significant profits in the long term. This may involve undertaking or partnering in research activities, pilot projects and possibly startups.

Innovation in Horizon 3 is about identifying and nurturing options for the future. Businesses typically spend around 2.5% of resources on Horizon 3 activities.

References

Baghai, M, Coley, S & White, D. 2000, The alchemy of growth: practical insights for building the enduring enterprise. Basic Books, [n.p.].

Also consider...