McKinsey's Three Horizons of Growth

© iStockphoto
chicano

What do you see on the horizon for your business?

Over time, many organizations go through distinct stages of growth and decline. They're born, they mature and then – seemingly inevitably – they fade away.

However, some organizations avoid the downturn. They manage to sustain their growth over decades, and continue to surprise customers with their innovation and creativity.

They do this by devoting time, energy and resources to developing new ideas. These then mature and become profitable, replacing older products and businesses as they fall away.

In this article, we'll look at McKinsey's Three Horizons of Growth, a model that organizations can use to focus their energy and resources on projects that sustain their growth over the long term.

About the Model

Mehrdad Baghai, Stephen Coley and David White, partners at McKinsey & Company, published the Three Horizons of Growth model in their 2000 book, "The Alchemy of Growth."

The model, shown in figure 1 below, outlines three different types of innovation that need to go on in parallel for a business to be successful. Organizations must invest in each one, and meet the specific management challenges that accompany them, to sustain long-term growth.

The framework focuses your organization on developing future revenue streams and business opportunities, so that, when existing products have run their course, new ones are ready to take their place. ...