McKinsey's three levels of theory

The McKinsey 3 Horizons Of Growth Theory

The Three Horizons of Growth (3HOG) Theory is a model developed by McKinsey & Company to help organizations plan for long term success. The 3HOG Theory focuses on three different types of activities required for long-term growth. They are: horizon 1, horizon 2, and horizon 3.

The model creates a timeline-based approach where different development activities take place throughout the lifecycle of a project. Horizon 1 focuses on core activities that drive the business today, while horizon 2 focuses on activities that are required as the business evolves, and horizon 3 focuses on activities that will develop capabilities for the future.

The 3HOG Theory was created to help companies focus their efforts and resources on activities that will have the most impact over time. It helps companies understand that different activities have different impacts at different points in time. Companies can use the model to strategically plan for their long-term success.

Horizon 1

Horizon 1 is focused on the core activities that will drive immediate value. These activities are usually todays cash cows, where the focus is on maintaining and enhancing the current product or service offerings. These activities are relatively low risk and provide income in the near term.

Horizon 1 activities also focus on operational excellence and efficiency. This includes identifying and reducing operational costs, improving process efficiency, and optimizing customer service. It also focuses on increasing sales and market share through activities such as marketing, sales promotion, and customer retention programs.

Horizon 2

Horizon 2 explores opportunities to evolve. This tasks the company with moving beyond current offerings to explore and develop new products, services, and markets. It also involves increasing the organizations agility and speed to respond to changing customer needs.

Activities in horizon 2 include adjacency growth, market discovery, and experimentation. These activities identify new opportunities for growth, test new ideas in the market, and explore opportunities for expanding the business.

Horizon 3

Horizon 3 is the future space, where organizations look to develop capabilities that will set them up for success in the coming years. These activities focus on innovation, customer-centricity, agility, and scalability.

Horizon 3 activities are more speculative and require more experimentation, but often have the potential for large returns. Horizon 3 activities include developing new ideas and concepts, creating new technologies, building customer relationships, and conducting research and development.

Conclusion

The 3HOG Theory is a valuable model for helping organizations focus on the activities that will have the most impact on their long term success. It helps organizations plan for the future and focus their efforts on activities that are most likely to provide value over time.

By separating activities into horizons, organizations can focus their resources on the activities that are most likely to deliver value in the short, medium, and long terms. This helps organizations stay agile, reduce risk, and identify areas of growth more quickly.

Mckinseys 3 Horizons of Growth theory is a framework that helps companies identify and prioritize growth opportunities. Companies can use it to focus on short-term opportunities for growth, as well as long-term initiatives that can help them better position themselves for growth in the future.

The three horizons of growth are organized by timeframe: Horizon 1 is short term, Horizon 2 is medium term, and Horizon 3 is long term. Each horizon represents different strategies that enable a company to grow and develop. The three horizons are designed to enable companies to think strategically about how to use their resources most effectively and efficiently to reach their desired growth.

Horizon 1 focuses on short-term opportunities for immediate return on investment, such as improving the existing products and services, launching new products and services, or entering into new markets. Companies can also use Horizon 1 to refine their current strategies and processes to maximize efficiency and profitability.

Horizon 2 focuses on medium-term opportunities and initiatives that can help companies create a distinct advantage in the market. Companies can use Horizon 2 to develop new technology, establish new channels of distribution, or explore new markets.

Finally, Horizon 3 focuses on what the company can do to position itself for long-term growth and sustainability. Companies can use Horizon 3 to invest in innovative technologies, enter into strategic partnerships, or develop distinctive capabilities that can give them a competitive edge in their industry.

Mckinseys 3 Horizons of Growth framework can be an invaluable tool for companies looking to grow and develop over time. By implementing Horizon 1 activities, companies can take advantage of short-term opportunities, while simultaneously investing in Horizon 3 initiatives to set them up for long-term success. By clearly identifying their strategies and tactics for each horizon, companies can ensure that they are using their resources most effectively to achieve their desired growth and profitability.