You might have seen too many leaders make the same mistake: they’re so busy fighting today’s fires that they forget to build tomorrow’s business.

A few months back, I spoke with a startup founder during a mentorship session who was frustrated. His company was profitable, the team was executing well, and customers were happy. But he couldn’t shake the feeling that they were running in place. “We’re great at what we do today,” he told me, “but what about three years from now?”

This is where the 3 Horizons Model becomes your strategic compass.

One Topic: 3 Horizons Model

What Are the 3 Horizons Model?

Think of your business like a garden. You need to harvest today’s crops (Horizon 1), nurture plants that are still growing (Horizon 2), and plant seeds for future harvests (Horizon 3). All at the same time.

McKinsey developed this framework back in 1999, and it’s still relevant because it solves a fundamental problem: how do you manage what’s working today while building what you’ll need tomorrow?

Here’s how it breaks down:

Horizon 1: Your Core Business (0-3 years)

This is your bread and butter. The products and services that pay the bills right now. For most companies, this generates 80-90% of revenue.

I call this “defending and extending.” You’re protecting market share, improving efficiency, and making incremental improvements. Think of Apple’s iPhone or Google’s search engine.

The challenge? Horizon 1 is loud. It demands attention because it’s urgent and measurable. It’s easy to spend all your energy here.

Horizon 2: Emerging Opportunities (2-5 years)

These are your growth bets. The projects that aren’t fully profitable yet but show real promise. They need investment and patience.

This is where you’re “building and scaling.” You’re expanding into new markets, launching new product lines, or testing adjacent business models.

Apple Watch started as Horizon 2. So did Amazon Prime. They required resources without immediate returns, but look at them now.

Research shows that 50-70% of Horizon 2 ventures hit their growth targets. That’s pretty good odds if you commit to them.

Horizon 3: Future Options (5-12+ years)

This is your moonshot territory. Experiments that might completely transform your business—or might fail entirely.

Here, you’re “creating and exploring.” These are R&D projects, disruptive innovations, and business model experiments. They consume resources without generating revenue, which makes them vulnerable to budget cuts.

Only 10-30% of Horizon 3 experiments become viable businesses. But when they work? They change everything. Amazon started exploring cloud computing years before AWS became profitable. Google invested in autonomous vehicles knowing it would take a decade or more.

The 70-20-10 Rule

Here’s the resource allocation that works: 70% to Horizon 1, 20% to Horizon 2, and 10% to Horizon 3.

But here’s what I’ve learned: most companies don’t follow this. They spend 90% or more on Horizon 1 and wonder why they have no pipeline when their core business starts declining.

I worked with a manufacturing company that spent 95% of their resources optimising current operations. They were incredibly efficient – until a competitor introduced a new technology that made their entire product line obsolete. They had no Horizon 2 or 3 projects ready to pivot to.

Don’t let that happen to you.

Managing All Three Simultaneously

The secret isn’t choosing between horizons. It’s managing all three at once.

This requires different skills for each horizon:

• Horizon 1 needs operational excellence. Your leaders here focus on efficiency, cost reduction, and process improvement.
• Horizon 2 needs entrepreneurial thinking. These leaders must build businesses from scratch, comfortable with ambiguity and rapid iteration.
• Horizon 3 needs visionary explorers. People who can test hypotheses, learn from failure, and manage high uncertainty.

I’ve seen companies fail because they put the wrong people in the wrong horizons. Your best H1 operator might kill your H3 experiments by applying the wrong metrics.

The Biggest Mistakes to Avoid

• Mistake #1: Treating horizons as sequential phases – Don’t think “we’ll focus on H1 this year, H2 next year.” All three must run in parallel.
• Mistake #2: Applying H1 metrics to H2 and H3 – Stop asking “what’s the ROI?” on your five-year moonshots. Ask “what did we learn?” instead.
• Mistake #3: Letting H1 cannibalise everything – Set mandatory budgets for H2 and H3. Protect them from quarterly pressure. Your board needs to understand this isn’t optional—it’s strategic insurance.

Making It Work for You

Start by asking yourself three questions:

1. What percentage of my resources goes to each horizon today?
2. Do I have the right leaders managing each horizon?
3. Am I measuring success appropriately for each time frame?

Then audit your portfolio. Write down every major initiative your company is working on. Assign each one to a horizon. If everything is in H1, you have a problem.

The 3 Horizons Model isn’t about perfect execution. It’s about maintaining strategic balance. You need today’s performance to fund tomorrow’s growth. But you also need tomorrow’s growth to survive today’s disruption.

Remember: your Horizon 3 experiments might feel like expensive distractions right now. But in five years, one of them might be the core business keeping you alive.

The question isn’t whether you can afford to invest in all three horizons. It’s whether you can afford not to.

Interested in travel, read last week’s LensLetter newsletter about 3 Lightroom Slides to Edit Black and White Photo.

Read last week’s JustDraft about Conflict Resolution using TKI Model.

Two Quotes to Inspire

Strategic balance isn’t found in perfect execution, it’s found in managing three futures simultaneously while most competitors only see one.

Growth demands a temporary surrender of security.

One Passage From My Bookshelf

The challenge of sustaining momentum in growth is one of the most pressing concerns for senior managers. Yet for most large companies, as we have seen, the odds are against them. Performance declines over time for many reasons: markets mature, technologies change, competitors multiply, regulations change, tastes change. But if growth is so difficult to sustain, and if the odds are so stacked against companies that wish to grow, why do some companies succeed? How do they manage to maintain their momentum over the long term? What is the essence of their approach to growth that makes them different? The answer lies in the way these companies manage the tension between the present and the future. They have learned to do two things at once: exploit the full potential of their core business while investing in new areas that will fuel future growth.

📚 From “The Alchemy of Growth” by Mehrdad Baghai, Stephen Coley, and David White.