🟢 Hacking McKinsey's three horizons for chaotic markets
McKinsey's three-horizon model gives a useful common vocabulary for innovation strategy. But it was built for a stable planning environment, and it doesn't explain either how to navigate and transition from H1 to H3 or how much an incubation structure's real capacity sits in H1, H2, and H3.
The collapse of the planning horizon
Back in 1999, the McKinsey three-horizon model came from a very practical realization: incumbent industries kept optimizing their core business while starving the emerging opportunities and future options that would eventually have to replace it. In a nutshell, H1 is the current foreseeable horizon with known knowns and few known unknowns, which should be defended and extended with the core business; H2 is the frontier horizon populated by known unknowns and rising unknown unknowns, where emerging positions should be built (even if profitability cannot yet be perfectly computed); and lastly, H3 is the mostly unknown horizon where genuinely new options could be created.
These H1, H2, and H3 end up mapping the classic innovator's dilemma pattern: current H1 performance is overinvested because it's somehow legible, while H2/H3 future growth opportunities, inherently less profitable, are shafted. On paper, the McKinsey framework accounts for this and promotes a strategic arbitrage across these 3 horizons with a typical 70/20/10 resource allocation model. This feels good. Allocating 30% of resources (20+10) to uncertainties and optionality is a reasonable, strategic commitment for any executive committee.
It's also where this framework falls apart. Because at the core of the McKinsey model is a very simple assumption. H1 is safe.
