three-horizons

name	three-horizons
description	Tags every bet in a portfolio with a growth horizon — H1 defend-and-extend the core, H2 build emerging businesses, H3 create options for the future — and holds each to the evidence bar its horizon deserves, exposing a portfolio starved at one horizon. Use when several investments are proposed together — "three horizons for this portfolio", "which of these bets are core versus exploratory?", "is the investment mix balanced?", "H1/H2/H3 tagging for the roadmap". Not for placing one technology on a maturity curve (use `evolution-stage`) or for a single dated prediction (use `foresight`).
license	MIT
metadata	{"category":"decision-strategy","method":"Three Horizons of Growth (McKinsey)","origin":"Mehrdad Baghai, Stephen Coley and David White, 1999 (The Alchemy of Growth)","version":"2.0.0"}

Three Horizons

Three Horizons is a portfolio-balance framework: growth needs businesses defended today (H1), built for tomorrow (H2), and seeded as options for the day after (H3) — all managed concurrently. Baghai, Coley and White set it out in The Alchemy of Growth (1999). Its core principle: each horizon earns a different evidence bar and method — an H3 option judged on H1's hard-ROI threshold dies before it teaches anything, an H1 extension given H3's patience wastes a year. It prevents the undeclared portfolio — bets that look comparable, justified with the same numbers, hiding that nothing is being built beyond this year.

When to invoke

Invoke when:

• Several investments or product bets are proposed together and the reader must allocate capital or attention across them.
• A roadmap mixes core optimisations with speculative bets and demands the same business case of both.

Do NOT invoke when:

• One technology's maturity is the question — evolution-stage for its stage, apply-hype-cycle for the hype curve.
• A single dated, falsifiable prediction is wanted — use foresight.
• A single bet needs validating rather than a portfolio classifying — use cheapest-experiment.
• The choice is between options on weighted criteria — use decision-matrix-mcda.
• The question is how the environment could unfold over years — use scenario-planning.

Procedure — tag, evidence, balance

1 — Tag every bet with one horizon

For each named investment ask which description fits. H1: the core businesses most readily identified with the company, providing the greatest profits and cash flow; the work is defending and extending performance. H2: emerging opportunities — rising ventures likely to generate substantial profits later but requiring considerable investment now. H3: ideas for profitable growth further out — research projects, pilot programmes, minority stakes; options, not plans. Pick one horizon per bet — refusing to choose is what the framework exists to stop; a straddling bet is split into its parts.

2 — Attach a time-to-impact estimate with confidence

State when the bet first produces measurable revenue or cost impact, with units and confidence: high where pilot data exists, medium where a comparable reference exists, low where reasoned from priors. "H2, 18–24 months, medium confidence (one lighthouse pilot, no second comparable)" is usable; "H2, a few years" is not — re-scope or drop the bet rather than ship a vague range. As indicative guidance only (the source fixes no time bands), practitioners commonly read H1 as roughly 0–12 months, H2 as 1–3 years, H3 as 3–5 years; horizons are defined by the state of the business, not the calendar, so state the band used.

3 — Set the evidence bar and method per horizon

Translate the horizon into what the bet must show and how it is run:

Horizon	Purpose	Evidence bar	Method
H1	Defend and extend the core	Hard ROI, validated demand, named customers	Stage-gate go/no-go
H2	Build emerging businesses	Pilot data, named early customers, leading indicators	Innovation accounting, build–measure–learn
H3	Create options	A thesis, named weak signals, optionality preserved	Probes, thesis-and-watchlist

Each bet carries an implication line naming the bar that applies, so an H3 thesis is not killed by a hurdle rate it was never meant to clear.

4 — Report the mix and flag the imbalance

Sum the bets by horizon — by capital, attention or count, saying which — and state the imbalance plainly: all-H1 means no future, all-H3 no business. Nagji and Tuff (Harvard Business Review, 2012) found better-performing firms allocated roughly 70 % core / 20 % adjacent / 10 % transformational, returns running the inverse way; that ratio is from their ambition matrix, not The Alchemy of Growth, and is a benchmark, not a target Three Horizons prescribes. Report the actual mix, the comparison, and the starved horizon.

Output template

## Three Horizons — {portfolio or roadmap}

| Bet | Horizon | Time to first impact | Confidence | Evidence bar | Method | Implication |
|---|---|---|---|---|---|---|
| {bet} | {H1/H2/H3} | {range with units} | {high/med/low} | {hard ROI / innovation accounting / weak-signal thesis} | {stage-gate / build-measure-learn / thesis-and-watchlist} | {how to judge this bet} |

**Mix:** {x}% H1 / {y}% H2 / {z}% H3 — by {capital | attention | count}
**Benchmark comparison:** {vs the 70/20/10 core/adjacent/transformational finding, Nagji & Tuff 2012}
**Imbalance flag:** {none | over-indexed on H1 | starving H3 | …}
**Split bets:** {bet — which part is H{n} and which is H{m}}

Every bet must carry a horizon, a unit-bearing time-to-impact estimate with confidence, and an evidence bar; the mix line and imbalance flag are mandatory whenever three or more bets are listed.

Worked example

Illustrative case (all figures invented): Kestrel Logistics, a European freight broker, brings six bets to its 2027 planning round with €48 M discretionary budget.

Bet	Horizon	Time to first impact	Confidence	Evidence bar	Method	Implication
Pricing-engine rebuild for the core brokerage	H1	6–9 months	High	Hard ROI: ≥ 4 % margin on €300 M booked freight	Stage-gate	Kill if lift under 2 % at the month-9 gate
Automated customs filing for shippers	H1	9–12 months	Medium	Named customers: 15 of the top 40 signed	Stage-gate	Judge on adoption, not story
Carrier marketplace for mid-size fleets	H2	18–24 months	Medium	Two pilots, GMV per carrier trending	Build–measure–learn	Expect validated learning at month 12, not revenue
Embedded freight insurance	H2	24–30 months	Low	One pilot, no second comparable	Build–measure–learn	Re-scope unless a second reference lands by Q3
Autonomous-yard robotics stake	H3	3–5 years	Low	Thesis plus three weak signals	Thesis-and-watchlist	Quarterly review against signposts; no ROI hurdle
Hydrogen-corridor consortium seat	H3	5+ years	Low	Optionality: a seat at the standard-setting table	Thesis-and-watchlist	Judge on option value, not revenue

Mix: 78 % H1 (€37.4 M) / 17 % H2 (€8.2 M) / 5 % H3 (€2.4 M) — by capital. Benchmark comparison: against the 70/20/10 finding (Nagji & Tuff, 2012) the portfolio is heavy at the core, thin beyond it. Imbalance flag: starving H3 — two options at 5 % of capital, both low confidence; if the H2 marketplace slips, 2030 is empty. Split bets: the pricing engine's real-time carrier-bidding module is H2 (18 months, marketplace-dependent), separated from the H1 rebuild.

Verification

Before the portfolio view ships:

• Every bet carries exactly one horizon; straddling bets were split into named parts, not tagged "H2–H3".
• Every time-to-impact estimate has units and a confidence level, and the horizon time bands are stated as indicative.
• Recompute the mix percentages from the figures; confirm they sum to 100 % and match the stated basis.
• Cross-check each evidence bar against its horizon — no hard-ROI hurdle on an H3 option, no weak-signal patience on an H1 extension.
• The 70/20/10 comparison is attributed to Nagji & Tuff (2012) as a benchmark, never as a Three Horizons target.
• The imbalance flag names the starved horizon and what breaks if the next-horizon bets slip.

Pair with adjacent skills

• evolution-stage — places one technology on its maturity axis; H1 bets rest on product or commodity components, H3 bets on novel ones.
• foresight — supplies the dated prediction and kill-signals that become an H3 bet's watchlist.
• cheapest-experiment — designs the validation for each H1 and H2 bet.
• cynefin-classification — H3 bets are almost always Complex; H1 bets Clear or Complicated.
• premortem-analysis — stress-tests the portfolio as a whole, including over-indexing on one horizon.
• Methodology counterpart: methodologies/foresight/three-horizons.md — the Curry & Hodgson futures variant (Journal of Futures Studies, 2008), a different framework sharing the name.

Anti-patterns

• Do not tag without a time-to-impact estimate; the unit-bearing number is the discipline, the letter alone decoration.
• Do not treat the horizons as a sequence — they run concurrently; "H1 this year, H2 next year" misreads the framework.
• Do not attribute 70/20/10 to The Alchemy of Growth — the ratio is Nagji & Tuff's core/adjacent/transformational finding (2012), and it is a benchmark, not a rule.
• Do not present indicative time bands as though the source fixed them; horizons describe a business's state, not calendar windows.
• Do not let H3 shelter unevidenced bets — an H3 thesis still needs named weak signals and a review cadence.
• Do not confuse this with the futures-studies Three Horizons (Curry & Hodgson) — same name, different framework.

Reference

• M. Baghai, S. Coley and D. White, The Alchemy of Growth: Practical Insights for Building the Enduring Enterprise. Reading, MA: Perseus Books, 1999. ISBN 978-0-7382-0100-9 — the McKinsey three-horizons portfolio framework.
• "Enduring Ideas: The three horizons of growth," McKinsey Quarterly, Dec. 2009. https://www.mckinsey.com/capabilities/strategy-and-corporate-finance/our-insights/enduring-ideas-the-three-horizons-of-growth — McKinsey's restatement of the horizon definitions.
• B. Nagji and G. Tuff, "Managing Your Innovation Portfolio," Harvard Business Review, vol. 90, no. 5, pp. 66–74, May 2012. https://hbr.org/2012/05/managing-your-innovation-portfolio — the 70/20/10 core/adjacent/transformational allocation finding.
• A. Curry and A. Hodgson, "Seeing in Multiple Horizons: Connecting Futures to Strategy," Journal of Futures Studies, vol. 13, no. 1, pp. 1–20, Aug. 2008 — the futures-studies framework of the same name.