Toolkit Strategy 4 min read

Translated from the Vietnamese original

McKinsey’s Three Horizons model offers a practical strategic framework for allocating resources and identifying growth opportunities across three stages.

The three horizons

↑ Value

Horizon 1Today’s core business, generating most of the revenue and profit.

Horizon 2Emerging businesses with growth potential in the near future.

Horizon 3Breakthrough ideas that could shape the company’s long-term future.

Time →

1. Horizon 1Maintain and optimize the current business to secure efficiency and short-term profit. The company improves processes and raises product and service quality to hold its share.
2. Horizon 2Expand into new opportunities built on existing strengths, such as entering new markets or developing new products and services to meet more varied customer needs.
3. Horizon 3Explore and create entirely new, breakthrough businesses. The company invests in research and development and tracks technology and market trends to prepare for the long term.

Putting the model to work

To use the model, a company has to manage all three horizons at once, balancing today’s operations with investment in the future. Allocating resources sensibly, setting up dedicated teams for each horizon and tracking progress are the key steps.

Example: Microsoft

Microsoft is one example. In Horizon 1, it maintains and improves core products such as Windows and Office. In Horizon 2, it expanded into cloud services with Azure, meeting rising demand for online storage and data processing. In Horizon 3, it invests in artificial intelligence and virtual reality research to prepare for future opportunities.

Applying the Three Horizons model gives a company a complete view of its growth strategy, balancing present and future to achieve sustainable growth and stay competitive.