TLDR The mid-sized telecom provider faced stagnation in its core business and sought new growth avenues through the McKinsey 3 Horizons Model, struggling with resource reallocation and organizational resistance. The initiative successfully increased Horizon 2 revenues by 20% and strengthened the innovation pipeline for Horizon 3, highlighting the importance of a balanced investment strategy for sustained growth.
TABLE OF CONTENTS
1. Background 2. Strategic Analysis and Execution 3. Implementation Challenges & Considerations 4. Implementation KPIs 5. McKinsey 3 Horizons Model Best Practices 6. Key Takeaways 7. Deliverables 8. McKinsey 3 Horizons Model Case Studies 9. Additional Resources 10. Key Findings and Results
Consider this scenario: The organization is a mid-sized telecom provider specializing in direct-to-consumer services, facing stagnation in its core business and seeking to identify new growth avenues.
It aims to leverage the McKinsey 3 Horizons Model to balance maintaining current operations, while simultaneously investing in innovative technologies and exploring untapped market segments. With market saturation in its primary services, the company is experiencing diminishing returns and is in urgent need of diversification to sustain long-term growth.
Initial assessments suggest that the telecom firm's stagnation may stem from an overemphasis on Horizon 1 activities, potentially at the expense of Horizon 2 and Horizon 3 opportunities. Another hypothesis is that there is a misalignment between the company's investment strategies and the rapidly evolving consumer expectations in the telecom sector. Additionally, it is possible that the organization lacks a systematic approach to identifying and scaling new ventures that could drive future growth.
Strategic Analysis and Execution
The methodology proposed is a structured 5-phase approach to applying the McKinsey 3 Horizons Model effectively, designed to ensure a balanced portfolio of growth initiatives across all three horizons.
- Current Portfolio Evaluation: Assess the current distribution of resources and initiatives across the three horizons. This phase involves:
- Identifying key revenue generators and their potential lifespan.
- Evaluating ongoing investments and their alignment with consumer trends.
- Conducting a competitive benchmarking analysis.
- Horizon 2 Opportunity Identification: Focus on identifying emerging opportunities that can scale rapidly and contribute to future earnings. Key activities include:
- Market analysis to pinpoint growth areas.
- Internal ideation workshops to foster innovative thinking.
- Feasibility studies to assess the potential of new ideas.
- Horizon 3 Visioning: Envision long-term future growth areas by:
- Exploring disruptive technologies and business models.
- Establishing partnerships for co-innovation.
- Creating a strategic roadmap for transformative initiatives.
- Resource Reallocation: Rebalance investments to support initiatives across all horizons by:
- Developing a financial model to optimize resource allocation.
- Implementing governance structures to support dynamic investment shifting.
- Setting up cross-functional teams to enable agile execution.
- Monitoring and Adjustment: Establish a review mechanism to track progress and make necessary adjustments by:
- Defining clear KPIs for each horizon.
- Regularly reviewing the portfolio to ensure strategic alignment.
- Adapting the strategy based on market feedback and internal performance.
For effective implementation, take a look at these McKinsey 3 Horizons Model best practices:
Implementation Challenges & Considerations
Concerns may arise regarding the balance between short-term profitability and long-term investments. It is vital to communicate that while Horizon 1 activities are necessary for immediate revenue, Horizons 2 and 3 are essential for future-proofing the business against industry disruptions and maintaining competitive advantage.
The expected outcomes after full implementation include a diversified revenue stream, a more robust innovation pipeline, and increased organizational agility. A financial uplift of 20% in Horizon 2 activities within the first two years is a realistic target, given similar case benchmarks.
One potential challenge is organizational resistance to change, particularly when reallocating resources to less proven ventures. Building a culture that values experimentation and learning can mitigate this risk.
Implementation KPIs
KPIS are crucial throughout the implementation process. They provide quantifiable checkpoints to validate the alignment of operational activities with our strategic goals, ensuring that execution is not just activity-driven, but results-oriented. Further, these KPIs act as early indicators of progress or deviation, enabling agile decision-making and course correction if needed.
In God we trust. All others must bring data.
- Revenue Percentage by Horizon: to ensure balanced growth and investment.
- Innovation Pipeline Strength: to measure the potential of Horizon 3 ventures.
- Time-to-Market for Horizon 2 Products: to gauge the agility of the innovation process.
For more KPIs, take a look at the Flevy KPI Library, one of the most comprehensive databases of KPIs available. Having a centralized library of KPIs saves you significant time and effort in researching and developing metrics, allowing you to focus more on analysis, implementation of strategies, and other more value-added activities.
Learn more about Flevy KPI Library KPI Management Performance Management Balanced Scorecard
McKinsey 3 Horizons Model Best Practices
To improve the effectiveness of implementation, we can leverage best practice documents in McKinsey 3 Horizons Model. These resources below were developed by management consulting firms and McKinsey 3 Horizons Model subject matter experts.
Key Takeaways
In the context of the McKinsey 3 Horizons Model, it is crucial for leaders to not only focus on the present but to actively prepare for the future. According to McKinsey, companies that allocate 70% of their investments to core business activities, 20% to emerging opportunities, and 10% to new frontiers are better positioned for sustained growth.
As digital transformation reshapes the telecom industry, firms must adapt their strategy development to include Horizon 3 initiatives that could redefine their business models. Gartner reports that 56% of CEOs have noted digital improvements have led to increased revenue.
Deliverables
- Horizon Growth Strategy Plan (PowerPoint)
- Resource Allocation Financial Model (Excel)
- Innovation Pipeline Dashboard (Excel)
- Market Analysis Report (PDF)
- Strategic Roadmap for Horizon 3 Initiatives (PowerPoint)
Explore more McKinsey 3 Horizons Model deliverables
McKinsey 3 Horizons Model Case Studies
Here are additional case studies related to McKinsey 3 Horizons Model.
Growth Strategy Redesign for Professional Services in Competitive Market
Scenario: The organization in question operates within the professional services industry, facing stagnation in its core offerings while grappling with the challenge of allocating resources effectively across the McKinsey Three Horizons of Growth framework.
Luxury Brand Diversification Strategy Development
Scenario: The organization is a well-established luxury fashion house looking to innovate and expand its portfolio.
Strategic Growth Framework for Space Technology Firm in Competitive Market
Scenario: A firm specializing in space technology is struggling to balance its current operations with innovation and new market expansion, in line with the McKinsey 3 Horizons Model.
Industrial Chemicals Growth Strategy for Specialty Materials Firm
Scenario: The organization is a specialty chemicals producer in the industrial sector, grappling with the challenge of sustaining growth while maintaining profitability.
Horizon Growth Strategy for Aerospace Manufacturer
Scenario: The organization is a leading player in the aerospace industry, grappling with the challenge of sustaining long-term growth amid rapid technological changes and competitive pressures.
E-Commerce Growth Strategy for D2C Luxury Apparel Brand
Scenario: A firm in the direct-to-consumer luxury apparel space is grappling with the challenge of balancing short-term profitability with long-term growth and innovation.
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Additional Resources Relevant to McKinsey 3 Horizons Model
Here are additional best practices relevant to McKinsey 3 Horizons Model from the Flevy Marketplace.
Key Findings and Results
Here is a summary of the key results of this case study:
- Increased Horizon 2 revenues by 20% within two years, aligning with the initial financial uplift target.
- Strengthened the innovation pipeline, significantly enhancing the potential of Horizon 3 ventures.
- Achieved a more agile time-to-market for Horizon 2 products, improving competitive positioning.
- Successfully reallocated resources to support balanced growth across all three horizons.
- Implemented a robust monitoring and adjustment framework, ensuring strategic alignment and adaptability.
The initiative's success is evident in the achievement of the targeted 20% revenue uplift in Horizon 2 activities, a testament to the effective identification and scaling of emerging opportunities. The strengthened innovation pipeline for Horizon 3 ventures indicates a solid foundation for future growth and the ability to adapt to industry disruptions. The improved agility in bringing Horizon 2 products to market has enhanced the company's competitive edge. These results underscore the importance of a balanced investment strategy across the McKinsey 3 Horizons Model for sustained growth. However, the process was not without challenges, notably organizational resistance to reallocating resources towards less proven ventures. An alternative strategy could have involved more gradual resource shifting or piloting smaller-scale projects to demonstrate potential returns, thereby easing the transition and mitigating resistance.
Given the success and lessons learned from this initiative, the recommended next steps include further exploration and investment in Horizon 3 technologies and business models, particularly those with the potential to disrupt the telecom sector. Additionally, fostering a culture of innovation and experimentation is crucial; thus, implementing more structured programs for employee ideation and engagement in Horizon 2 and 3 projects could prove beneficial. Finally, continuous monitoring and flexible reallocation of resources should be maintained to adapt to market changes and internal performance metrics.
Strategy & Operations, Digital Transformation, Management Consulting
The development of this case study was overseen by David Tang. David is the CEO and Founder of Flevy. Prior to Flevy, David worked as a management consultant for 8 years, where he served clients in North America, EMEA, and APAC. He graduated from Cornell with a BS in Electrical Engineering and MEng in Management.
To cite this article, please use:
Source: Strategic Growth Initiative for Aerospace Firm in Defense Sector, Flevy Management Insights, David Tang, 2025
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