Why 2nd Horizon? In the 1980's McKinsey's developed their three horizon strategy model:
- Horizon 1 is the battleground of the near term competitive strategy ... how do we win the competitive battle over the next 12-18 months
- Horizon 2 is the growth and renewal strategy ... bringing the next major revenue and profit stream to fruition over the next 2-5 years, it must also overcome organisational entropy
- And Horizon 3 is the longer term 'options plays' that seed potential future businesses beyond the next 5 years
Our focus is on Horizon 2 which presents unique challenges for business and organisational strategies:
- the investment is usually material and irreversible
- it is not always clear exactly how the strategy will unfold, an inevitable consequence of investing in new activities
- the organisation architecture has to create the pathway to the future
And all the while the executive team have to maintain the delivery of the short term results.
By contrast Horizon 1 strategies have a more immediate action/reaction time horizon. It is quickly apparent if the strategies are working.
And Horizon 3 strategies are typically option plays. By their nature option plays are low cost investments that allow the organisation to pull back if the option does not look like delivering value.