How do you develop a future-growth business culture?

How do you develop a future-growth business culture? Management consulting firm McKinsey’s three horizons of growth framework is a pragmatic template from which to plan sustainable business growth.

Most businesses talk about sustainable growth and the need for this growth to be oriented towards innovation. That’s great, but how does a leader or leadership team ensure the core business is operating as well as it should, that it’s lean, efficient and disciplined, while still investing enough resources into a medium- and long-term growth plan that’s innovation-led?

As businesses mature, there is a risk that they find themselves in a holding pattern when they instead should be pioneering, pushing the envelope and innovating, while keeping their grip firmly on the core business. While there are a number of strategic approaches that work for various organisations, McKinsey’s three horizons of growth framework provides a pragmatic template from which to plan a sustainable growth plan for a business.

Broadly speaking, using this methodology there are three horizons a leadership team should be fixing their gaze upon. Horizon one is the “here and now”. This is the core business, and this horizon focuses on how to drive growth and maximise the remaining value within the current business.

Horizon two involves the entrepreneurial opportunities that could generate good profit in some time, but likely still need considerable investment. It’s a bridge between horizons one and three.

The third horizon deals with emerging topics and concept − these are the innovative ideas that will drive the next level and generation of growth. To put a percentage focus on each: horizon one takes 70% of time and resources, horizon two uses up 20%, and 10% is invested into horizon three.

It sounds great, but how would this work in a real-world scenario for a company that, at its core, sells software, for instance? The focus on horizon one ensures it bolsters the core business and has the discipline to drive it efficiently; it looks for areas to fix or tweak; it pursues tactics to improve the profitability and ensures the right incentives are in place, among much more.

Horizon three, in this scenario, would be about bundling new, emerging ideas and technologies into the current stack with a view of competing in, and winning, in new markets and territories. Horizon two would be running proof of concepts in smaller territories or new focus areas and getting these entrepreneurial endeavours to start contributing positively to the business’s profitability.

It ensures it is always focused on the future and building sustainability, as opposed to being lured into a holding pattern while the world around the organisation evolves.

Horizon one is run by the business maintainers, horizon two by the business builders and horizon three is driven by the business champions and visionaries. Horizon one is focused on return on invested capital, horizon two on net present value, and horizon three’s scopes are firmly set on driving option value.

It’s important to understand this all happens concurrently or in parallel. As the company spends time and resources on the various horizons, some topics or points of focus shift between horizons as time passes and the business evolves.

In essence, then, it ensures it is always focused on the future and building sustainability, as opposed to being lured into a holding pattern while the world around the organisation evolves. In a decade, what was a horizon three topic today may well be the core business, and so the business must then find new areas of focus for horizons two and three. This is a pragmatic way of always orienteering the business for growth and relevance.

Let’s go back to the software or technology company example. The metaverse is a horizon three topic for most technology businesses today. What does the metaverse mean? How does it fit into the business? What are some of the probes and experiments we can run to figure out what it means and how do we build some initiatives around this?

Simplistically speaking, the metaverse is a collection of different pieces of technology, like augmented reality, that brings them together to curate user experiences that go beyond the physical world, creating space for people to collaborate in the virtual world. Facebook, Microsoft and Amazon are betting on it.

So, what could the software and technology company in our previous example do? It could use the metaverse to ground its horizon three while ensuring it is still delivering good enterprise resource planning solutions – or whatever business it is in – today. It is then sure it has grounded horizon one, but that it has the building blocks and horizon two projects – a solid roadmap – to take its customers and partners to the horizon three vision.

As I write, the three horizons framework is just one of many strategic approaches, but it is pragmatic and easy to disseminate throughout an organisation. It’s a useful way to develop a future-growth mindset and business culture. Without that, the company will stagnate while others innovate.

This article was first published on IT Web

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