Strategic Horizons

Three Horizons splits growth investment into managing today's core business, building tomorrow's emerging one, and planting seeds for a business that does not exist yet, so a company does not starve its future by over-funding its present.

Curves overlap across a timeline, one falling as the next rises beneath it.

Three horizons of growth, running in parallel over time rather than in sequence.

Reach for this when…

Every investment decision defaults to the current core business because it is the one with numbers to point to.
You have no idea what proportion of budget is actually going to genuinely new ideas versus the existing product line with a new name.
A promising early bet keeps getting starved because it does not yet show core-business margins.

How to run it

List everything the business currently invests in.
Sort each item into Horizon 1 (core, defend and extend), Horizon 2 (emerging, build), or Horizon 3 (seeds, explore).
Check the split against intent: most companies over-invest in Horizon 1 by default.
Set different success measures for each horizon; a Horizon 3 bet judged on this quarter's margin will always lose.
Rebalance investment deliberately, and revisit the sort every year as Horizon 2 bets mature into Horizon 1.

A worked example

Situation. Liam Hughes ran Hughes Robotics, an industrial automation firm in Adelaide, Australia, where every budget round funnelled money into the conveyor-arm product line because it was the one with a sales forecast.

Applied. He sorted the full R&D budget into the three horizons and found Horizon 3 spend at under two percent, despite two engineers quietly prototyping a warehouse-navigation system with real customer interest.

Result. He ring-fenced a small, separately measured Horizon 3 budget for the navigation prototype; eighteen months later it became the firm's fastest-growing Horizon 2 line.

Park Robotics ring-fenced early funding for what became its fastest-growing Horizon 2 line.

The catch

The horizons blur in practice - an 'emerging' bet can look indistinguishable from a 'core' one depending on who is arguing for its budget. Judging Horizon 3 work by Horizon 1 metrics kills it before it has a chance, and the reverse temptation, protecting a dying core because it funds the seeds, is just as real. It needs someone senior enough to defend the split when quarterly pressure hits.

A Horizon 3 project that has to justify itself in this year's numbers is not a Horizon 3 project, it is Horizon 1 wearing a disguise.

Origin: Baghai, Coley and White (McKinsey)

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