What is the three horizon framework?
A) The three horizon framework is a performance plan that enables you to see the best and worst performers on your team.
B) The three horizon framework is a way to allocate stock in your business’ investment portfolio.
C) The three horizon framework is the sun’s relative position to the earth at any point of day.
D) The three horizon framework is a way to conceptualize what your business wants to accomplish in the short-term, mid-term, and long-term.
Correct Answer is D) The three horizon framework is a way to conceptualize what your business wants to accomplish in the short-term, mid-term, and long-term.
Explanation:
The Three Horizon Framework is a strategic planning tool that helps organizations to manage their innovation efforts and balance short-term and long-term goals. Developed by McKinsey & Company, the Three Horizon Framework divides a company’s innovation efforts into three horizons or timeframes, each with its own focus and goals. Here’s a breakdown of the Three Horizon Framework:
Horizon 1: Core Business
The first horizon, Horizon 1, is the core business of the company. This horizon focuses on the current products, services, and processes that generate the majority of the company’s revenue and profit. The goal of Horizon 1 is to improve and optimize the existing business model, products, and services to maintain market share and profitability. In other words, Horizon 1 is about “managing the present.”
To achieve this goal, companies should focus on incremental improvements, cost optimization, and operational efficiency. They should invest in R&D to enhance the quality and performance of existing products and services, streamline processes, and reduce waste. This horizon is about protecting and defending the company’s core business while making it more competitive and resilient.
Horizon 2: Emerging Business
The second horizon, Horizon 2, is the emerging business of the company. This horizon focuses on developing new products, services, and markets that have the potential to become the next core business. The goal of Horizon 2 is to identify and invest in emerging opportunities that can generate growth and create new revenue streams. In other words, Horizon 2 is about “building the future.”
To achieve this goal, companies should focus on exploring new markets, technologies, and customer needs. They should invest in R&D to develop new products and services that leverage their core competencies and capabilities. This horizon is about exploring and experimenting with new ideas and innovations that can become the foundation of the company’s future growth.
Horizon 3: Disruptive Business
The third horizon, Horizon 3, is the disruptive business of the company. This horizon focuses on exploring and developing new business models, technologies, and markets that have the potential to disrupt the industry and create entirely new markets. The goal of Horizon 3 is to create a portfolio of options for the company’s future growth and survival. In other words, Horizon 3 is about “creating the future.”
To achieve this goal, companies should focus on developing new and radical innovations that challenge the status quo and disrupt the industry. They should invest in R&D to explore new technologies, business models, and market opportunities that can transform the industry. This horizon is about creating a culture of innovation and experimentation that can help the company stay ahead of the curve and adapt to the changing market dynamics.
Key Benefits of the Three Horizon Framework
The Three Horizon Framework provides several key benefits for organizations:
- Balancing short-term and long-term goals: The Three Horizon Framework helps companies balance their short-term and long-term goals by allocating resources and investments to each horizon based on their strategic importance and growth potential.
- Focusing on innovation: The Three Horizon Framework encourages companies to focus on innovation and develop a culture of experimentation and learning that can lead to new business opportunities and growth.
- Aligning stakeholders: The Three Horizon Framework helps align stakeholders around a shared vision of the company’s future and priorities, which can improve communication and collaboration across departments and functions.
- Improving strategic agility: The Three Horizon Framework helps companies improve their strategic agility by anticipating and adapting to the changing market dynamics and industry trends.
- Creating a portfolio of options: The Three Horizon Framework helps companies create a portfolio of options for their future growth and survival, which can reduce the risk of relying on a single product, service, or market for their success.
Conclusion
In conclusion, the Three Horizon Framework is a powerful strategic planning tool that can help organizations manage