McKinsey’s Three Horizons Model Defined Innovation for Years. Here’s Why It No Longer Applies.

When first articulated in 2000, in The Alchemy of Growth, the Three Horizons model was a breakthrough as it allowed senior management to visualize what an ambidextrous organization would look like. However, in the 21st century the Three Horizons model has a fatal flaw that risks making companies lag behind competitors — or even putting them out of business.

The model described innovation occurring on three time horizons and McKinsey suggested that to remain competitive in the long run, a company allocate its research and development dollars and resources across all three horizons:

- Horizon 1 ideas provide continuous innovation to a company’s existing business model and core capabilities in the short-term.

- Horizon 2 ideas extend a company’s existing business model and core capabilities to new customers, markets, or targets.

- Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption.

However, the trap of the Three Horizon model is not recognizing that today many disruptions can be rapidly implemented by repurposing existing Horizon 1 technologies into new business models — and that speed of deployment is disruptive and asymmetric by itself. In the 21st century the attackers have the advantage, as the incumbents are burdened with legacy.

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