by: James Young
Using the Three Horizon Model to Guide Your Association’s Growth
The Three Horizons Model is a versatile tool to help guide an association’s growth strategy. This article outlines the model, offers insight on how to effectively implement it to steer a growth journey, and provides implications for associations.
This article is less about board governance than it is about the importance of successive board chairs committing to – and sticking with – a single, transformative strategy to position an association for growth.
The Three Horizons Model is widely used and fairly simple to implement. It was developed in 2000 by McKinsey researchers Mehrdad Baghai, Stephen Coley, and David White.
According to Steve Blank in the 2019 Harvard Business Review, the model describes innovation as occurring in three, overlapping time horizons:
- Horizon 1 ideas provide continuous innovation to an organization’s existing business model and core capabilities in the short-term.
- Horizon 2 ideas extend an organization’s existing business model and core capabilities to new customers, markets, or targets.
- Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption.
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Definition and How It Works
“Our thinking about growth and decay is dominated by the image of a single lifespan, animal or vegetable. Seedling, full flower and death. The flower that once has bloomed forever dies. But for an ever-renewing society the appropriate image is a total garden, a balanced aquarium or other ecological system. Some things are being born, other things are flourishing, still other things are dying – but the system lives on.”
Three Horizons is a growth framework that helps guide association planning; it emphasizes strategic investment, overlapping goal setting, horizontal alignment, and the ongoing commitment and collaboration of consecutive board chairs (sometimes over a period of upwards of ten years).
Each horizon requires different focus, management, tools, and goals. The grounding assumption is that remaining competitive in the long run requires us to allocate resources, capabilities, and investments simultaneously across all three horizons.
Three Horizons helps balance short-term goals with long-term innovation.
Most associations, however, live largely in horizon one: running and defending its core business. Not only do we dwell in the current, our strategic plans reinforce short-term revenue, quarterly goals, the current board chair’s immediate vision, and day-to-day activities.
- Is this necessarily bad? No.
- Is it enough? No.
- Is growth an option? No.
To stay relevant and to anticipate our members’ needs in a rapidly changing and unpredictable world, we are required to grow (see my free ebook Unlocking Growth for background on positioning your association for growth). And it’s vital that we think vastly more strategically (and creatively) about how we approach growth in our associations.
Three Horizons relies on the simple premise that our vision drives how we focus our short-term attention. The future should drive our current behavior (not the other way around).
Take, for instance, an association for marketing professionals. Three Horizons helps the association manage current portfolio, capabilities, and performance while also focusing on maximizing future growth. Here’s how it works:
- Horizon 1: Manage the Present (Core Business). In Horizon 1, we focus on managing current operations and ensuring that our association’s core activities run smoothly. This is where we concentrate on maintaining existing services, programs, and initiatives that members rely on. This can involve: organizing networking events, offering professional development, and providing resources like articles and webinars about current marketing trends. Our main goal in this horizon is to deliver value to current members while maintaining current performance.
- Horizon 2: Explore New Opportunities (Adjacent Innovations). In Horizon 2, we look for new opportunities that are related to our core business but extend beyond it. This involves exploring adjacent areas to our current portfolio. This could mean identifying emerging marketing trends, such as the rise of AI-driven marketing strategies or the integration of sustainability into marketing practices. We could start experimenting with new initiatives that align with these trends, like offering specialized courses on AI in marketing or creating a task force to explore sustainable marketing practices. The goal in this horizon is to find ways to grow and innovate beyond our current offerings.
- Horizon 3: Envision the Future (Disruptive Innovations). In Horizon 3, we envision and prepare for the distant future. Here we explore disruptive innovations that might drastically change the industry landscape. This could involve thinking about how marketing might evolve over the next decade or beyond. Maybe we’re considering how virtual reality could transform consumer experiences or how blockchain technology could revolutionize advertising transparency. In Horizon 3, we’re not necessarily implementing these ideas, but we’re keeping an eye on them and thinking about how our association could position itself for these future changes.
By implementing Three Horizons, we balance our current performance (Horizon 1) while exploring adjacent growth opportunities (Horizon 2), and prepare for potential disruptive changes (Horizon 3). This helps us stay relevant, innovative, and adaptable in a constantly evolving field like marketing while ensuring that we deliver value to our members both now and in the years to come.
It also creates a powerful through line for successive board chairs, who are chosen for many reasons – long-term dedication, service to cause, authority in the field, talent, ambition, political maneuvering, etc. – but not necessarily their strategy chops or ability to navigate a modern, complex association in a fast-moving world.
Think about this: It takes most new employees (at any level) a year to learn a new job! A board chair will be nearly finished with their tenure by time they have the context to understand the role or landscape, no less achieve success.
This is what makes Three Horizons a compelling choice for associations. In part, because it helps us identify and navigate different types of strategic initiatives that take differing time horizons to successfully complete.
- Horizon 1. These are quick initiatives that might take 1 to 3 years. They’re like making small changes to what we already do to make it better. Some other examples of Horizon 1 initiatives could include product upgrades, new features, or adding new services to existing products. Or introducing a subscription model for existing products or launching new services such as customer service, technical support, or digital marketing. Goals in Horizon 1 should be focused on improving margins, improving current business processes, and increasing short-term profits.
- Horizon 2. These projects take longer, like 2 to 5 years. They’re about trying things we see working in other places and making them work for us. Horizon two focuses on extending current offerings into new areas of revenue-driving activity. It’s about trying out new approaches as a response to the shifts in the market, focusing on creating new innovations in the existing market, or exploring new markets. There may be an initial cost associated with your Horizon 2 activities, but these investments should return fairly reliably. Examples of Horizon 2 strategic initiatives include launching new product lines or expanding your business geographically.
- Horizon 3. These are big projects that might take 5 to 12 years. They’re about making completely new things or big changes. This horizon is the third and most distant of the planning horizons. It’s typically characterized by long-term goals and investments that have unprecedented strategic or competitive implications. The third horizon can encompass up to ten years or more and focuses on creating opportunities, exploring new markets, and making discretionary investments to capitalize on those opportunities. For example, your organization could invest in the development of new products, the research and development of AI, or the development of new technologies or services. This could also involve things like research projects, pilot programs, or the start up of completely new business units through mergers and acquisitions.
Three Horizons doesn’t (or can’t) do everything.
- It doesn’t tell us what kind of new things to make.
- It doesn’t help us understand if our idea is good.
Three Horizons helps us think about when things will happen, not what things to make. So if we want to know what people like, we’ll need to use a different tool (see my articles on rapid product development and measuring the performance of association products).
Keeping Successive Board Chairs Aligned
“Good leaders organize and align people around what the team needs to do. Great leaders motivate and inspire people with why they’re doing it. That’s purpose. And that’s the key to achieving something truly transformational.”
Maintaining a consistent strategy over successive board chairs’ one-year terms can be challenging due to potential shifts in leadership priorities. However, there are several practices that can help ensure we achieve focused coherence over multiple board chair’s tenures. These practices can be used in conjunction with Three Horizons.
- Create an Executive Committee. A fairly common practice in associations is creating a five person executive committee that combines the past board chair, the current board chair, the previous board chair, the finance chair, and the staff executive director. This can provide the basis for strategic continuity.
- Base the Strategy in Clear Choices. Most association strategic plans are laundry lists of aspirations, not clear focused choices about a share winning aspiration, how to win, and where to play, no less the capabilities and investments needed to get there. Read my article Playing to Win for an overview of Roger Martin’s approach to great strategy.
- Clear Communication of Strategic Priorities. The outgoing board chair should communicate the current strategic priorities and the rationale behind them to the incoming chair. This ensures that the new leader understands the context and significance of the ongoing strategy.
- Documented Strategy. The association’s strategy should be well-documented and easily accessible. This includes not only the overarching goals but also the specific initiatives and projects that align with the strategy. This documentation serves as a reference point for all future leaders.
- Strategic Planning Process. Implement a robust strategy process that involves input from diverse stakeholders, including board members, staff, and members of the association. This collaborative approach helps build consensus around the strategy and reduces the likelihood of pet projects taking precedence.
- Long-Term Vision. Emphasize the long-term vision or winning aspiration. Successive board chairs should understand that their term is part of a continuum, and their role is to advance the association’s goals within that broader context.
- Succession Planning. Ensure a smooth transition of leadership by having a well-defined succession plan. Incoming board chairs should be selected based on their alignment with the association’s strategic direction and their commitment to its long-term outcomes and impact.
- Performance Metrics and Accountability. Develop clear performance metrics tied to the strategic goals. These metrics should be regularly reviewed by the board and leadership to ensure progress is being made. A focus on accountability can discourage deviation from the established strategy.
- Institutional Memory. Implement mechanisms to preserve institutional memory. This might involve maintaining detailed records of decisions, rationales, and outcomes related to the strategy. This way, incoming leaders can learn from the past and build upon existing efforts in a way that serves the strategy and deepens commitment.
- Ongoing Education and Orientation. Provide continuous education and orientation to board members and chairs about the association’s strategy. This helps maintain a shared understanding and commitment to the strategy throughout leadership transitions.
- Flexibility within Boundaries. While there should be steadfast allegiance to the strategy, there should also be room for flexibility to adapt to changing circumstances. The strategy should be comprehensive and specific enough to accommodate shifts without completely derailing the association’s overarching goals.
- Conflict Resolution Mechanisms. Establish a process for resolving conflicts between successive board chairs or between individual projects and the overarching strategy. This process can help address disagreements in a constructive manner.
- Leadership Training. Provide leadership training to incoming board chairs that emphasizes their role in stewarding the association’s strategy. This training can instill a sense of responsibility and commitment to the long-term vision.
- Engage Leadership in Strategy Development. Involve incoming board chairs in the development or refinement of the strategy before they assume their roles. This participation can help them take ownership of the strategy from the outset
By aligning these strategies to Three Horizons, we can enhance the likelihood of successive board chairs staying committed to and carrying out a single strategy while minimizing the influence of individual pet projects.
Implications for Associations
“As revenue streams mature, we must have others to take their place.
If continued growth is the goal, the pace of replenishment must be faster than the pace of decline.”
Mehrdad Baghai, Stephen Coley, David White
Thriving associations rely on compelling, focused choices that position us for vibrancy and growth. This relies on executing great strategy by a committed team of successive volunteer leaders (though some board chairs are compensated).
There are plenty of frameworks to guide association or nonprofit strategic planning. Three Horizons is lightweight, easy to understand, and can be readily used with approaches that I covered in previous articles:
- Integrated Cascade of Choices (from Roger Martin’s book Playing to Win)
- The Ansoff Matrix
- Build Measure Learn and Rapid Prototyping
- The Growth Readiness Framework
- Product Extensions
Here are some reasons why Three Horizons could be useful to our associations:
- It is based on the assumption that to survive, we need to grow.
- It provides a common language to address growth.
- It focuses on balanced investment in the short-term and the long-term.
- It allows for quick adjustments to help navigate the unforeseen.
- It helps keep everyone aligned to the same vision.
- It helps align succeeding one-year board chair terms.
- It can be used as a tool to keep boards disciplined (while allowing latitude).
- It keeps us focused on diversification and steady, incremental growth.
- It can guide the effectiveness of our product portfolio.
- It can be used as a way to assess the lifecycle of individual products.
Overall, Three Horizons keeps us focused on a single, bold north star.
In doing so, it helps reduce discrepancies by steering discussions to a singular, grand innovation blueprint with corresponding milestones. These milestones help predict outcomes, ROI, revenue diversification, and a healthy balance sheet.
In this way our portfolio remains relevant, we have a clear picture of our shared vision, and a common, focused strategy to grow.
We’re in this together.
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About the Author
James Young is founder and chief learning officer of the Product Community®. Jim is an engaging trainer and leading thinker in the worlds of associations, learning communities, and product development. Prior to starting the Product Community®, Jim served as Chief Learning Officer at both the American College of Chest Physicians and the Society of College and University Planning.