McKinsey’s Three Horizons Model, a framework for managing innovation, has long been a favourite among business leaders. The model suggests dividing business opportunities into three categories: Horizon 1 for core businesses, Horizon 2 for emerging opportunities, and Horizon 3 for long-term possibilities. However, the model’s relevance is now being questioned. Critics argue that the model is inadequate for the current pace of technological change and that it encourages companies to focus too much on today’s profits rather than future growth.
The model’s limitations are especially apparent in the tech industry, where companies need to constantly innovate to stay competitive. The Three Horizons Model tends to sideline Horizon 3 opportunities, which are crucial for long-term survival. A new approach, the Innovation Ambition Matrix, is suggested as an alternative. This model encourages companies to simultaneously pursue all three horizons and to balance short-term profits with long-term growth. It also emphasises the importance of disruptive innovation, which can create entirely new markets and opportunities.
Despite its limitations, the Three Horizons Model has not completely lost its value. It can still be a useful tool for companies that operate in stable industries or that are dealing with incremental, rather than disruptive, innovation. However, for companies that need to constantly innovate and adapt, the Innovation Ambition Matrix may be a more suitable approach.
Go to source article: https://hbr.org/2019/02/mckinseys-three-horizons-model-defined-innovation-for-years-heres-why-it-no-longer-applies