19 Oct, 2017
With today’s fast-changing business models, competition can come from any direction not just the same business vertical, but other business vertical can compete with your business. The business lines are now blurred like never before. If you look at Amazon, which started from selling online books, is now into entertainment services, food services, cloud services, etc. Likewise, if you look at Google, Facebook, Uber, all of them have entered the market from one vertical and diversified business model, into another vertical model and breaking the norm of traditional business models.
Many mature and traditional companies see declining growth or moving in the direction of decline, as they are in the inertia stage and without any innovation to respond to changing needs of the market and customers.
In order for companies to sustain growth, be competitive, and achieve consistent growth all times, they need to make sure they are managing the current performance and continuously maximizing future opportunities. The three horizons framework from The Alchemy of Growth provides a great structure for companies to maximize their opportunities for growth without neglecting present performance.
This framework is useful in uncertain times, such as the present time, where technology is in its most transformative stage. Companies instead focus on immediate needs and concerns of present business, which can overwhelm and distract focus on the future of the company.
Horizon one involves implementing innovations that improve, extend, and defend the existing core businesses that provide the greatest profits and cash flow. In this horizon, the focus is on exploiting, optimizing, and improving performance to maximize the remaining value of the core business. It is working on existing markets with existing solutions.
Horizon two involves innovations that extend the current competencies into new and related markets that would likely generate substantial profits in the future. This is expanding the core business model through new markets and new solutions
Horizon three involves innovations that will change the nature of the business with new business models and will bring on new competencies. It is working on new, breakthrough platforms to build new, or disruptive, business models. It should contain ideas for profitable growth down the road like explore options, placing small investments on emerging opportunities, and looking at disruptive models. It is going into new markets with new-to-world solutions. This is where the transformative growth is.
Companies should simultaneously manage businesses across all the three Horizons. Companies should identify a time to move ventures from Horizon two to Horizon one and from Horizon three to Horizon two.
Every company need to have this framework; if not, there is a strong possibility your business might suffer losses and may not exist in future.
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