McKinsey's Three Horizons Framework Could Help Businesses Survive and Even Thrive in Pandemic

The reality created by the Covid-19 pandemic for businesses is simply brutal. Surviving has become everyone's concern. The best laid out plans of companies for 2020 have never anticipated the global pandemic scenario that left everyone shocked. Yet business is about thriving in the most challenging times. And history is replete with businesses that started, survived, and thrived during trying times. Here we shall explore the famous Three Horizons Framework by McKinsey's to see how it can help your business survive and perhaps thrive.

The Three Horizons Framework is featured in the book “The Alchemy of Growth,” which provides a structure for companies to assess potential opportunities for growth without neglecting its current business and performance.

In McKinsey Co.’s formulation Horizon One represents those core businesses most readily identified with the company name, those that provide the greatest profits and cash flow. The focus of Horizon One is on improving performance to maximize the remaining value.

Horizon Two encompasses emerging opportunities, including rising entrepreneurial ventures likely to generate substantial profits in the future but that could require considerable investment.

And Horizon Three contains ideas for profitable growth down the road – for instance, small ventures such as research projects, pilot programs or minority stakes in new business.

Horizon One is clearly the domain of experienced managers able to consistently deliver on maximizing value of the organization’s core businesses. Horizon Two is the domain of strategists able to see opportunities where they emerge and likely to generate substantial profits in the future. And Horizon Three is the domain of futurists who know what ideas contain profitable growth in the more distant future.

The advent of the Covid-19 pandemic has disrupted the core businesses of organizations with some being forced to shut down operations because of the sudden disappearance of clients or markets where they derive their biggest source of cash flow. This disruption could force organizations to look for ideas that could provide them profits by temporarily leaving their core businesses.

Automobile makers in the US shifting production for mechanical ventilators, facemasks, and other medical personal protective equipment (PPEs) in response to the massive disruption caused by the pandemic is a case in point . The shortage in mechanical ventilators, facemasks, and other PPEs for healthcare personnel became so acute across the world that prices of these items have skyrocketed. The urgency of the matter is both a business opportunity and a serious national security and societal concerns. In normal times, the Three Horizons Framework would have to be followed in their order. However, the challenge posed by the pandemic could justify the reordering or modification of the framework. So, we may assign the Third Horizon to become the First Horizon and the First Horizon becoming the Third Horizon, while the Second Horizon stays where it is. Or Horizon Two becomes Horizon One and Horizon Three becoming Horizon Two with Horizon One becoming Horizon Three. Much of the arrangement would depend on where opportunities for the business exists and whether it can make good revenue for these opportunities. There are many strategic tools that business leaders could use to help them navigate the perilous times of the pandemic. The Three Horizons Framework of the McKinsey can be among the most effective and helpful tool for now.

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