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Futures · Explore, Plan

Three Horizons

Splits activity into defending today, building the next thing, and seeding what comes after. Its value is that it makes the collapse into horizon one visible, because that collapse is always happening.

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Stage
02 Explore, 04 Plan
Works at
Corporate, Business
Maturity
Established SME → Large organisation
Time
Half a day

What it is

A McKinsey framework separating a business's activity into three horizons by maturity rather than by calendar. Its purpose is to stop the current business consuming all the attention and capital, which it does naturally, because horizon one always has the more urgent argument.

Horizon one — defend and extend the core
The business generating cash today. Improvement, efficiency, defence. Usually 70 to 90 per cent of investment and rightly so, but rarely deliberately.
Horizon two — build emerging businesses
Ventures with real customers and growing revenue that are not yet profitable. They need investment and patience, and they are what horizon one becomes.
Horizon three — create viable options
Experiments, pilots and research. Cheap individually, mostly failures, and the only source of horizon two in five years.
The investment split
How money, people and management attention are actually divided across the three. Almost always more concentrated in horizon one than anyone intends.
Governance separation
Each horizon needs different metrics and different decision rights. Judging horizon three on horizon one metrics kills it within two quarters.
The mistake people makeApplied to a business in genuine trouble, the three horizons is a distraction — fix horizon one first. It is a framework for the solvent, and using it to avoid a difficult core problem is a well-established way to run out of money slowly.
What it’s forYou need to balance defending today against building tomorrow, and the split keeps collapsing into today.
What it’s not forThe core business is in crisis. Fix H1 first — horizon thinking is a luxury of solvency.

How you run it

  1. Place existing activity before planning newMap what you already do onto the three horizons. The distribution is usually the finding, and it is usually 95/4/1.
  2. Define the horizons by maturity, not by dateHorizon one is the core producing cash now. Horizon two is emerging and demands investment. Horizon three is optionality. Time ranges vary by industry.
  3. Be honest about which is whichExtensions of the core get labelled horizon two because it flatters them. If it serves existing customers with an existing model, it is horizon one.
  4. Set the intended split, then compareDecide the split of investment you want across the three, and compare it with the actual. The gap is the decision.
  5. Protect two and three structurallyThey will lose every resource argument against horizon one on a bad quarter unless the funding is ring-fenced and separately governed.

The prompt

Two ways to run it

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Your playbook

It lands in the earliest stage this tool suits. Move it on the Playbook page.

You’ll need

  • Current initiatives and where investment actually goes
  • A view of what is maturing and what is declining
  • Someone able to protect horizon two and three funding

You’ll end up with

  • Every initiative placed on a horizon
  • The actual split of money and attention across the three
  • A governance decision about protecting the later horizons

Runs well with

Acquisition screen and synergy thesisAdjacency mapAI operating model optionsAI risk classification and governance