Exploring the third horizon

Exploring the third horizon

McKinsey’s three horizons of growth approach demonstrated the unsurprising fact that research has shown less than 3% of executive time is spent actually exploring the third horizon. Yet this is the one most relevant to the longer term survival and growth of an organisation.

In many cases business and association conferences engage a speaker, known as a ‘futurist’, to present some insights as to what the future might hold. Such people often deliver interesting and engaging talks, mostly about where technology is taking us and the gizmos of the future, fascinating as they may be.

However, the direct relevance of this to your business may be somewhat obscure, so perhaps an alternative approach could be considered. This alternative is somewhat more rigorous than the abstraction of futurism and is based on the known mathematical methodology of extrapolation.

In short, one of the best ways to explore horizon three and envisage where your business is heading, or perhaps just as importantly where your industry sector is heading, is to plot a trajectory curve of the past and extrapolate that to the future. This approach leads to outcomes far more precise than the abstraction of futurism and allows you to make plans to position yourself precisely at the future way point.

How can we do this?

The starting point is to first decide what represents your core offering.

McDonald’s is an excellent example. Their core offering is not gourmet or adventurous food, but standardised and safe food at an affordable price. Most of all, McDonald’s offers a minimum of queuing time (i.e. convenience).

As competition emerged to challenge McDonald’s, the company rose to the occasion by expanding their range to match their competitors. Most of all, they leveraged their core offering of convenience by providing customers with a drive-through service. An extrapolation of this core offering of fast, convenient food would have revealed the need to migrate the drive-through service well in advance of its initial introduction. McDonald’s has now so firmly embraced this convenience offering that it is in fact usually much faster to use the drive-through service than to enter the shop and get served at the counter.

An extrapolation of the present convenience at McDonald’s may now be to offer even faster service, if that’s possible. One wonders how long it may be before an iPhone app will be developed to allow ‘pre-ordering’ and collection via a rapid drive through ‘e-queue’, possibly with payment being made via direct debit from an app before you even get to the store.

Another example of this extrapolation approach may be to look at convenience store businesses. What is the core offering of a convenience store, certainly not low price, but convenience of course! Based on an extrapolation of that we would look to offer even greater convenience, and what would that be? Drive-through convenience stores, again maybe with a pre-ordering app and even pre-payment?

Use this extrapolation approach to foresee the future

This type of extrapolation approach can be done in many industries. The only requirement is for your management team to be able to agree on your core offering(s) before applying extrapolation as a means to forecast the longer term position of your industry and to thus make plans to address this new horizon.

This is far more likely to provide accurate outcomes than the abstraction of futurism and can be done with your senior team at your next management getaway. You may be amazed at the outcome, an outcome that reveals horizon three and sets you apart from the competition.

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