Source: McKinsey
Published: December 2009

The Three Horizons Framework

Circulated: October 3, 2019

High-level Amazon examples:

Horizon 1: Retail (.com)
Horizon 2: Marketplace
Horizon 3: Amazon Web Services (AWS)

• Horizon 1 ideas provide continuous innovation to a company’s existing business model and core capabilities in the short-term. (e.g. the Amazon App, Returns at Kohl’s)

• Horizon 2 ideas extend a company’s existing business model and core capabilities to new customers, markets, or targets. (e.g. Amazon Advertising, Fulfillment by Amazon)

• Horizon 3 is the creation of new capabilities and new business to take advantage of or respond to disruptive opportunities or to counter disruption. (e.g. Project Kuiper, Deliveroo investment)

McKinsey suggests that to remain competitive in the long run, a company must allocate its research and development dollars and resources across all three horizons.