The three horizons are strategies that are implemented for business growth that will take 10 years to be implemented or more using business innovations and long-term goals.
In the first horizon, a business concentrates on what they know and try to generate more revenue. This will take from the first year to the third year, so 2 years will be spent on this horizon.
On the second horizon, the business will concentrate on creating something new for them and try to generate a profit using that new concept they are working on. The duration of this horizon will be from the third year to the fifth year, so another 2 years.
On the final horizon, the third one the business will create something new to them and the world and try to take over the market they are in. This horizon can take from the fifth year to the tenth year, so 5 years will be spent on this horizon.
Each company can implement different strategies for their horizons and different SMART goals that can help them implement their business plan.
To explore the three horizons further we are going to use the famous story between AMD and Intel.
AMD and Intel were competing for the same market of CPUs and intel were the dominant company, so AMD decided to use the three horizons to create CPUs that can compete with Intel but b lowered in price.
So AMD’s strategy was to first create CPUs that were 15% lower in price than the ones Intel was producing. They managed in 2019 to stop Intel’s supremacy by disrupting the market of CPUs with their Ryzen series. At that time, they managed to get 80% of the market share surprising everyone in the industry.
As we can see from this story the 3 horizons model can be a very powerful tool for business growth that can help companies achieve their long-time goals in a structured manner.
The three horizons are a framework for business innovations created by Bill Sharpe that enables companies to create business growth using a structured framework for long-term business goals.
This framework can enable any business to create a growth strategy in the long term using SMART goals.
Now that we saw how each horizon looks and what duration of time, they need let’s see how to implement each of them for our business growth.
Implementing the three horizons
In the first phase, Horizon 1 needs to take 70% of the business concentration and keep the revenue flowing in so that the business will survive.
Horizon 2 will take 20% of the business focus and will have some resources to be developed in this phase so that something new for the business can be created.
Horizon 3 at this stage will be very unimportant so it will have only 10% of the attention and the least number of resources.
The first phase will take from 1 to 3 years to be implemented.
The second stage begins with a shift of priorities.
The first horizon will only get 20% of the business’s attention and resources.
The second one will now get the 70% of the resources and the focus will move almost completely to it.
Meanwhile, the third one will still be with 10% of the resources and is not yet very important.
The second phase will be between 2-5 years to be implemented.
The last phase or the third stage will switch all the priorities and will concentrate on the long term-goals now.
The first horizon will get 10% resources now and will become the least important of them all.
The second horizon now will receive only 20% of the business strategies and innovations.
The third horizon will now become the most important with 70% of the resources and all expectations that the new business or product will awe the world and take the market share.
The theory is nice and helps us understand the why but let’s now concentrate on practical examples using a story to illustrate all this.
Our story begins with a business that sells ice cream on the street in a nice crowded place and this business owner wants to grow using the 3 horizons.
So, for the first horizon, our business owner will still concentrate on selling normal ice cream to keep the revenue coming.
For the second horizon, the plan is to create affordable smoothies that can be sold more during all seasons.
As for the third horizon a new product that can be sold no matter the season.
Now that we have our first horizon with goals defined it’s time to go to our second horizon.
Our first horizon right now is going to get less attention so the selling ice cream will be reduced and kept just for 20% of the revenue.
Now the second horizon will be used by selling smoothies with ice during the hot seasons and normal smoothies during the rest of the seasons.
The third horizon will still have only 10% of the attention and the new product that is developed.
Going towards our last horizon
The first horizon will only get 10% of the attention and become almost unnoticeable.
The second horizon will only be 20% of the revenue and become just an afterthought.
The third horizon will have the full attention now with 70% of the efforts being directed towards it where the selling of tea will take over the ice cream and the smoothies.
Obviously, this is just an example and the third horizon needs to be new to the world and for our owner.
But I wanted to keep everything simple and not invent a new dessert that will shake the world by becoming hot in winter and cold in summer.
Now it’s time my dear readers to implement these three horizon strategies in your own business and enjoy business growth.
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