Three Horizons Framework
Developed by McKinsey consultants Mehrdad Baghai, Stephen Coley, and David White in their 1999 book 'The Alchemy of Growth', the Three Horizons Framework helps organisations manage the tension between exploiting current business (Horizon 1), nurturing emerging opportunities (Horizon 2), and seeding future growth options (Horizon 3) — all simultaneously. Horizon 1 covers the core business that generates current revenue and profit — it needs to be optimised and defended. Horizon 2 covers fast-growing businesses that represent the next wave of growth — they require investment and operational scale-up. Horizon 3 covers emerging opportunities, experiments, and bets on future markets — they are uncertain but essential for long-term viability. The critical insight of the framework is that all three horizons must be managed at the same time, not sequentially. Organisations that only focus on H1 are milking their future. Those that only invest in H3 never build sustainable business. In workshops, Three Horizons creates a shared language for portfolio discussions and helps teams stop treating every idea as if it lives in the same time frame and risk profile.
How to run it
- 1
Set up three columns on a large wall or projected template — H1 (0–2 years, 'Manage & Extend'), H2 (2–5 years, 'Nurture & Build'), H3 (5+ years, 'Create & Seed').
- 2
Brief the team on the three horizons and their different success metrics: H1 = profit & efficiency, H2 = growth rate & market position, H3 = learnings & option value.
- 3
Individually, participants write current initiatives, projects, and ideas on sticky notes using a different colour for each horizon they believe the item belongs in.
- 4
Place items on the template. Discuss any items placed differently by different participants — these disagreements reveal strategic misalignment.
- 5
Check for imbalance: Is H1 overloaded while H2 and H3 are empty? Is the organisation over-indexing on future bets with no clear path to H2?
- 6
For each horizon, agree on the 3–5 most important items and what 'good progress' looks like in the next 12 months.
- 7
Discuss resource allocation: what percentage of budget and talent goes to each horizon? Is it intentional?
- 8
Close with a commitment: what will you start, stop, or accelerate in each horizon?
Tips
The biggest facilitation challenge is H2 — teams often can't name what they're doing to build tomorrow's business.
This is the most revealing gap.
Avoid collapsing H2 and H3 into 'innovation' — they require fundamentally different management approaches.
Use time explicitly: write the current year and estimated target years on the template to keep discussion concrete.
Variations
Run an 'Inverse Three Horizons' where you start from H3 (desired future state) and work backwards to identify what must change in H1 and H2. Combine with Scenario Planning to build different Three Horizons maps for alternative futures.
Where it fits
Frequently asked questions
When should I use Three Horizons Framework?â–¾
Use Three Horizons Framework when you want to: Innovation portfolio workshops; Executive strategy off-sites; R&D investment planning; Corporate venturing strategy; Digital transformation roadmapping.
How long does Three Horizons Framework take?â–¾
Three Horizons Framework typically takes 90–180 minutes.
How many participants does Three Horizons Framework work for?â–¾
Three Horizons Framework works best for groups of 4–25 participants.
What materials do I need for Three Horizons Framework?â–¾
To run Three Horizons Framework you will need: Three Horizons template (A1 or projected), sticky notes in three colours (one per horizon), markers, timeline (print or drawn).
How difficult is Three Horizons Framework to facilitate?â–¾
Three Horizons Framework is rated intermediate — some facilitation experience is helpful.
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Try it freeMethod descriptions on Workshop Weaver are original content written by our team, based on established facilitation practices. This method was inspired by work from Baghai, Coley & White, The Alchemy of Growth (McKinsey, 1999).