Strategize for success with the horizons model.

Navigating business growth can be challenging, but the Horizons Model offers a strategic framework to achieve sustainable success. Explore how to leverage this model to expand your market reach, enhance profitability, and ensure scalability. Discover actionable insights and proven strategies to drive innovation across three key horizons, from optimizing current operations to pioneering future business opportunities. Join us in transforming your growth journey with a robust, future-focused approach.

Identifying growth drivers.

When strategizing for growth and setting targets, it is essential to ask: “What are the sources of our growth?".

Currently, the mature business segment represents the largest share in terms of revenue, customer base, and profit. Typically, such businesses exhibit growth rates between 2-5%, or in some cases, stagnation. Conversely, younger businesses with established product-market fit experience double-digit growth. These emerging segments have the potential to replace or surpass mature segments in the foreseeable future.

As a leadership team, it is imperative to anticipate future growth trajectories. This foresight is crucial for making informed investment decisions, ensuring the robustness and expansion of your business portfolio.

Beyond financial growth.

In addition to focusing on financial growth, it is advisable to consider the broader impact of your business activities. Future portfolios should include businesses that not only minimize negative socio-environmental effects (footprint) but also actively contribute positively (handprint). Businesses that achieve both financial success and positive impact are poised to lead in the future.

Three Horizons growth framework.

The Three Horizons framework, developed by McKinsey and detailed in “The Alchemy of Growth,” provides essential guidance for investment decisions concerning portfolio growth. This framework categorizes growth into three horizons based on time and profit/value potential. The core principle is to enhance future profit and value by looking beyond current core businesses.

• Horizon 1 focuses on extending and defending core businesses.

• Horizon 2 encompasses emerging businesses under development.

• Horizon 3 involves creating future viable options.

Let's explore the model.

Leveraging Business Model Innovation for Growth

Achieving business growth can be done in multiple ways, including mergers, acquisitions, start-up investments, capability building, or adapting existing business models. Among these, business model innovation stands out as an important driver of growth across all three horizons. By innovating your business model, you can adapt to changing markets, embrace new technologies, and meet evolving customer needs. This approach can unlock new revenue streams, reduce costs, and provide a competitive edge in your industry.

To successfully implement business model innovation, your company should define growth opportunities across all horizons and assign them to a dedicated team committed to driving change.

Horizon 1.

Teams responsible for current business operations focus on execution and optimization, driving incremental innovation within existing business models. Growth initiatives encompass sales programs, product development, marketing and distribution, and cost reduction through innovation. The goal is to maximize value and profit from the current business, with expected returns within a 0-36 month timeframe.

Horizon 2.

Teams dedicated to building and growing new businesses focus on innovation and validation, continuously developing new business models. Growth initiatives target adjacent business opportunities, aiming to establish scalable models that generate new revenue and profit streams. These efforts typically yield returns within an 18-36 month timeframe.

Horizon 3.

Teams focused on exploring new business opportunities operate in highly uncertain environments. These teams experiment and pivot, developing radical, entirely new business models and are evaluated using innovation metrics. Expected returns are long-term, typically beyond 36 months.

Do you want to scale up innovation?

In our playbook, we share how to start building your future (circular) business, whilst successfully growing the one you have today.

Download our playbook here.

Analyzing Apple's growth horizons.

Horizon 1: Short-Term Growth

Apple drives growth in Horizon 1 through product development, market expansion via partnerships and distribution (e.g., new Apple stores), and enhancing supply chain resilience by relocating factories. These initiatives operate within the current product business model, yielding short-term growth.

Horizon 2: Mid-Term Growth

Apple’s Horizon 2 growth focuses on services like Apple Music, Apple TV+, iCloud, and Apple Pay. This involves creating new business models, offerings, revenue streams, and partnerships. These initiatives require substantial investment and can boost revenue despite competitive challenges.

Horizon 3: Long-Term Growth

In Horizon 3, Apple invests in the healthcare sector, aiming to empower users with wearables and collaborations with the medical community. This involves building an extensive ecosystem, leveraging hardware (iPhones, Apple Watch) and services (App Store, developer community). These initiatives require significant long-term investment and are challenging to implement.

Defining your growth horizons.

Curious about your potential growth horizons? Whether focusing on Horizon 1, 2, or 3, crafting a comprehensive growth strategy is crucial. Our strategy designers are ready to facilitate co-creation within your team, helping you design and implement effective growth strategies. Contact us to start your journey towards sustainable business growth.

Do you want to talk horizons?

Meet Jan-Maarten. He is ready to spot opportunities.

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